Author Archives: IrvineRenter

Gimme Shelter UPDATE 5

Update 5 — I received word that this property finally closed escrow at $1,300,000. The total loss was $529,000 after a 6% commission. They avoided a short sale, but they lost every penny of their equity. Go tell these owners that real estate always goes up…

Update 4 — The saga continues… This house was relisted again for $1,359,000. The total loss stands at $473,540. After putting $525,400 down, I imagine this seller did not think they would be risking a short sale. Their equity is all but gone…

Update 3 — The price is down to $1,499,000 and still no takers. Total loss stands at $341,940 after commissions.

Update 2 — This house was pulled from the MLS and relisted at $1,549,000. This seller must realize they are a bagholder and they are getting really motivated to save whatever they can of their equity. Right now, if they get their new asking price, they stand to lose $294,940 after a 6% commission.

Update 1 — The asking price on this house just dropped from $1,700,000 to $1,650,000. That is a motivated seller. If today’s seller gets their asking price, they stand to lose $203,000.

Oh, a storm is threat’ning
My very life today
If I don’t get some shelter
Oh yeah, I’m gonna fade away

Gimme Shelter — The Rolling Stones

Link to Video

Exhausted buyers, tightening credit, excessive inventory, foreclosures: Is the perfect storm threatening our real estate market? As far as finding shelter goes, you could do far worse than today’s property. It is a high-end house in Woodbury. So far the more expensive stuff in Woodbury has maintained its denial, but lately there have been a few properties showing a true desire for a transaction. Today’s seller has been on the market over 90 days, and they are lowering their price to try to move it.

Old Asking Price: $1,700,000

New Asking Price: $1,650,000

Purchase Price: $1,751,000

Purchase Date: 12/30/2005

Address: 33 Triple Leaf, Irvine, CA 92620

1st Loan $1,225,600
Downpayment $525,400

Beds: 4
Baths: 4.5
Sq. Ft.: 3,750
$/Sq. Ft.: $453
Lot Size: 6,348 sq. ft.
Year Built: 2005
Stories: 2
Type: Single Family Residence
View: Park or Green Belt
County: Orange
Neighborhood: Woodbury
MLS#: S472319
Status: Active
On Redfin: 215 days
Unsold in 90+ days

From Redfin, “The Jewel of Woodbury! Ready to deal. Rich woods on floor, ceilings, p aneling etc. Gorgeous paint schemes, tile designs. All Viking Kitchen, open bright floor plan typical of Juliet’s Balcony homes. Surround sound, huge master bath, all bedrooms are suites. Designer window treatments. Across from a private park. Walk to parks and 6 pools, elementary school, shopping center. Woodbury’s amenities are incredible and the lifestyle resort like.”

If today’s seller gets their asking price, they stand to lose $153,000 in less than two years. They have the equity to absorb the blow, but it must still be quite disheartening.

I like Woodbury. It is at the cutting edge of master plan community design. The amenities are first rate, the architecture and landscaping is attractive, and the community center is inviting. It would be a great place to call home — at much lower prices.

535,000 Ways to Lose Your House

Fifty Ways to Leave Your Lover — Paul Simon

There are many ways people lose their houses. Borrowing two and one-half times what you paid for it is one method unique to the Great Housing Bubble. Perhaps I am just naive, or perhaps it is because I had never lived in a bubble market prior to moving to California, buy I had never heard of mortgage equity withdrawal for anything other than necessary home repairs and improvements. The whole idea that one could or would add to a mortgage to pay off other debts, buy consumer goods, take vacations or supplement one’s lifestyle is an alien concept. In fact, I did not realize how common this behavior was until I started studying what went on during the bubble. I am still astonished every time I see a property like today’s.

7 Skipper Kitchen

Asking Price: $535,000

Income Requirement: $133,750

Downpayment Needed: $107,000

Monthly Equity Burn: $4,458

Purchase Price: $195,000

Purchase Date: 8/15/1988

Address: 7 Skipper, Irvine, CA 92604

Beds:	4
Baths:	3
Sq. Ft.:	2,000
$/Sq. Ft.:	$268
Lot Size:	2,720 Sq. Ft.
Property Type:	Single Family Residence
Style:	Contemporary
Year Built:	1976
Stories:	2 Levels
Area:	El Camino Real
County:	Orange
MLS#:	S531617
Source:	SoCalMLS
Status:	Active
On Redfin:	92 days
Unsold in 90+ days

Large Single Family Home in a Great Irvine Neighborhood. This spacious
four bedroom home is turnkey, and move-in ready! With four large
bedrooms, a formal dining room, gourmet kitchen, pool, spa and tennis
court a short walk away, this home is perfect. The oversize front porch
will be ideal for those summer barbeques. And with the great location,
you’ll be walking distance to shopping, restaurants, parks, and Irvine
High.

When I first saw this property, I was prepared to write a post on how owners with a great deal of equity are in a position to drive prices lower because there is nothing stopping them from lowering prices to find the market. Since this owner has lowered his asking price $90,000 since May, he has been behaving like an owner with a lot of room to maneuver. Little did I know…

Listing Price History

Date	Price
May 07, 2008	$625,000
Jun 12, 2008	$598,000
Jul 09, 2008	$575,000
Aug 06, 2008	$535,000

This property was purchased during the frenzy of the late 1980s. The owners paid $13,000 more than a flipper paid 8 months earlier. The property records do not show the amount of the original loan; however, it does show a refinance in 1998 for $180,800 which was probably when the values came back enough for the owners to refinance their original loan. In 2002, they refinanced with a $195,000 first mortgage and got their first taste of kool aid. It must have been good. A couple of weeks later they opened a $50,000 HELOC. They were relatively conservative borrowers until May of 2005 when they took out a $381,700 first and a $185,000 HELOC pulling out some serious cash. In December of 2005 they took out an Option ARM with a $552,000 balance. It had a 2.75% teaser rate. They also took out a $68,000 HELOC. The total debt on this property is $590,000 — which explains their initial asking price. The total mortgage equity withdrawal exceeds $395,000.

Another day, another Option ARM/HELOC implosion.

I hope you have enjoyed this week at the Irvine Housing Blog. Come back next week as we
continue chronicling ‘the seventh circle of real estate hell.’ Have a great weekend.

🙂

The problem is all inside your head, she said to me
The answer is easy if you take it logically
Id like to help you in your struggle to be free
There must be fifty ways to leave your lover

She said its really not my habit to intrude
Furthermore, I hope my meaning wont be lost or misconstrued
But Ill repeat myself at the risk of being crude
There must be fifty ways to leave your lover
Fifty ways to leave your lover

Just slip out the back, jack
Make a new plan, stan
You dont need to be coy, roy
Just get yourself free
Hop on the bus, gus
You dont need to discuss much
Just drop off the key, lee
And get yourself free

She said it grieves me so to see you in such pain
I wish there was something I could do to make you smile again
I said I appreciate that and would you please explain
About the fifty ways

She said why dont we both just sleep on it tonight
And I believe in the morning youll begin to see the light
And then she kissed me and I realized she probably was right
There must be fifty ways to leave your lover
Fifty ways to leave your lover

Fifty Ways to Leave Your Lover — Paul Simon

The Builders Will Lead Them

Swords in the Wind — Manowar

“The wolf also shall dwell with the lamb, and the leopard shall lie down with the kid; and the calf and the young lion and the fatling together; and a little child shall lead them.” Isaiah 11:16

Builders are now leading the charge in our race to the market price bottom. We have made much about the presence of REOs in the market and the downward pressure they put on prices. However, REOs are not the only form of must-sell inventory. The builders also must sell homes or go out of business. Early in the deflation of the bubble, particularly on the Irvine Ranch, builders held to peak prices and watched their sales volumes drop to near zero. Since the credit crunch signaled the end to crazy financing, the builders have been consistently lowering their prices to generate sales and liquidate their inventories. This has happened without much fanfare here on the blog because we focus on the resale market; however, since the builders are also competing with resellers for the small number of available buyers, their activities are important as they will strongly impact resale home prices.

The builders have already trashed the resale market in the Villages of Columbus. Check out 22 Honey Locust now being offered for $350,000 off the original purchase price. The price drops in VOC have little to do with the quality of the homes, the location or anything else. It is almost exclusively due to the activities of the builders trying to get out of the project. It is my opinion that VOC will be on price parity with Westpark in 5 years, and this will not happen through appreciation in VOC.

Today’s featured property is a new home being offered in Portola Springs at $275/SF. That is new construction for $275/SF. What do you think that will do to the resale market? In a normal real estate market (if such a thing exists in California,) new homes command a premium of around 10% over resale mostly because they are new. If you look at the listing price history, you can see this home has already seen a 5% haircut, and it seems likely that builders will need to drop prices further to generate sufficient sales volumes to stay in business. I believe new home sales prices will bottom between $225/SF and $250/SF while most resales will fall to $200/SF or below. Even now at $275/SF, why would someone go pay someone $350/SF or more for a used house when you can get a new for much less? The fact that the builders are at these price levels and still lowering price to generate sales speaks volumes about the future prices of resale homes.

128 Long Grass Kitchen

Asking Price: $578,880

Income Requirement: $144,720

Downpayment Needed: $115,776

Monthly Equity Burn: $4,824

Address: 128 Long Grass, Irvine, CA 92618

Beds:	3
Baths:	4
Sq. Ft.:	2,106
$/Sq. Ft.:	$275
Lot Size:	–
Property Type:	Condominium
Style:	Spanish
Year Built:	2008
Stories:	3+ Levels
Area:	Portola Springs
County:	Orange
MLS#:	S524595
Source:	SoCalMLS
Status:	Active
On Redfin:	150 days
Unsold in 90+ days

Located in the fabulous new area of Portola Springs in Irvine. This
location combines the opportunity of living near nature, adjacent to
striking Lomas Ridge but still close to the Orange County Business
District and all of the convienences of some of the best shopping and
restaurants any area has to offer. Our homes are located in the award
winning Irvine School District and are within the much acclaimed
Northwood High School attendance boundary. This 3 bdrm/3.5 bath home
comes complete w/ a very unique floorplan, fantastic kitchen w/ huge
center island that makes entertaining fun and easy. For extra privacy,
you will find a bdrm on each floor. For your convienence you will also
enjoy a 2 car attched garage and down stairs laundry room. All this
backed by the John Laing Homes reputation and very unique 3 year ‘Fit
and Finish’ warranty to accompany your 10 year stuctural warranty. All
pictures listed are of the model. Actual home soon to be under
construction.

The realtors in Irvine could learn something from John Laing Homes on how to write a description and stage a home for photography.

If you pan back in Redfin to get a broad area of homes, they will provide a summary at the bottom of the page showing the average asking prices for resale homes. Depending on where you look, this average goes from over $400/Sf down to about $360/SF. If builders are willing to provide homes for $275/SF, and they are still lowering their prices, resellers have little or no hope of achieving these asking prices. Just based on this simple analysis alone, it appears that resale prices in Irvine still have to fall 30% to 40%. Granted, the asking prices are not where the transactions are, but it is where the fantasies of resellers resides. It certainly appears these asking prices have a deep decline in front of them…

I Surrender My Soul Odin Hear My Call
One Day I’ll Sit Beside Your Throne In Valhalla’s Great Hall
Like So Many Before Me I’ll Die With Honor And Pride
The Right Of A Warrior Forever To Fight By Your Side
Send A Sign Raise The Sail Wave A Last Goodbye
Destiny Is Calling Immortality Be Mine

Call The Witch To Cast The Runes, Weave A Magic Spell
We Who Die In Battle Are Born Not For Heaven Not For Hell

We Are Sons Of Odin The Fire We Burn Inside
Is The Legacy Of Warrior Kings Who Reign Above In The Sky

I Will Lead The Charge My Sword Into The Wind
Sons Of Odin Fight To Die And Live Again
Viking Ships Cross The Sea, In Cold Wind, And Rain
Sail Into The Black Of Night Magic Stars Our Guiding Light

Today The Blood Of Battle Upon My Weapons Will Never Dry
Many I’ll Send Into The Ground Laughing As They Die.

We Are Sons Of Odin The Fire We Burn Inside
Is The Legacy Of Warrior Kings Who Reign Above In The Sky

I Will Lead The Charge My Sword Into The Wind
Sons Of Odin Fight To Die And Live Again
Viking Ships Cross The Sea, In Cold Wind, And Rain
Sail Into The Black Of Night Magic Stars Our Guiding Light

Place My Body On A Ship And Burn It In The Sea
Let My Spirit Rise Valkries Carry Me
Take Me To Valhalla Where My Brothers Wait For Me
Fire Burning To The Sky My Spirit Will Never Die

I Will Lead The Charge My Sword Into The Wind
Sons Of Odin Fight To Die And Live Again
Viking Ships Cross The Sea, In Cold Wind, And Rain
Sail Into The Black Of Night Magic Stars Our Guiding Light

Swords in the Wind — Manowar

Fun With HELOCs

Party — Boston

24 Tioga Place Theater

Not everyone who took out money on their HELOCs blew it. Some people remodeled their houses or took the money to purchase other assets. And yes, many people took that money and bought other real estate (Right now they wish they hadn’t.) When I first saw today’s featured property, I couldn’t help being drawn in to the fun the owners created. Look at that pool area. To me, it looks like a fun place. Check out the home theater. Another place for good times with family and friends. The thing that really impressed me was that these people did not break the bank creating this playground. Yes, they did add to their mortgage, but looking at the property, it becomes obvious where it went. There is no other history of serial refinancing, so even with the money they spent on improvements, they still have plenty of equity in their property. Which brings me to my last point, they also have seen the light on falling home prices and they have priced it to move in today’s market ($249/SF.) That is one of the luxuries you have when you haven’t spent all your equity.

Imagine yourself sitting on all that bubble equity. Your conservative enough not to HELOC yourself into oblivion, but you do have access to all this cash. What do you do with it? I could see me doing something like this if I were in their shoes. Maybe that’s why I find this property so interesting. Let’s party!

24 Tioga Place Front 24 Tioga Place Kitchen

Asking Price: $985,000

Income Requirement: $246,250

Downpayment Needed: $197,000

Monthly Equity Burn: $8,208

Purchase Price: $377,000

Purchase Date: 10/22/1998

Address: 24 Tioga Place, Irvine, CA 92602

Beds:	5
Baths:	4
Sq. Ft.:	3,950
$/Sq. Ft.:	$249
Lot Size:	7,549 Sq. Ft.
Property Type:	Single Family Residence
Style:	Mediterranean
Year Built:	1999
Stories:	2 Levels
View:	Pond
Area:	West Irvine
County:	Orange
MLS#:	P648693
Source:	SoCalMLS
Status:	Active
On Redfin:	11 days

This is the ULTIMATE PARTY HOUSE you’ve always dreamed of, like owning
your own resort! Fantastic rock pool with water slide, spa, outdoor
fireplace and a giant barbecue station with wine and soft drink
refrigerators and an ice maker. Sellers have added a custom media room
for movie nights and a small gym room as well as a pool-entry bath, and
upstairs there’s a HUGE bonus room with space for a pool table and even
an outside viewing deck! The big downstairs master suite offers maximum
privacy and comfort, and there’s a sense of richness with crown
moldings and heavy-guage baseboards and a stunning kitchen/family room
combo with topaz-fleck granite on the kitchen island and full
backsplash. This house was designed for maximum fun, with a rare 3-car
garage with custom doors to store all those extra toys! Sellers spared
no expense in creating this luxurious private world that now can be
yours.

Even with the discount from peak levels and the $120,000 they put into the place, if this house sells for its asking price, and if they pay a 6% commission, these owners stand to make $435,900 for living in a party house for 10 years. I could handle that…

Well you know I dont get off on workin day after day
I wanna have some fun while Im here
I play the game when its goin my way
And theres nothin like a party when its kickin into gear

Im gettin ready for a party tonight
Yes Im gettin ready to cruise
And if youve got somethin for me
Ive got somethin for you

Baby
Its a party and nobody cares
What were doin there
Baby, its a party as long as youre there
Its a party, party, party!

I cant believe it when some people say
That its a sin that way we live to die
You know, theres never been a more natural thing
Yea theres a brand new story, but its the same old lie

So come on
Get ready for the time of your life
cause Im gettin right in the groove
And if youve got somethin for me
Ive got somethin for you

Baby
Its a party and nobody cares
What were doin there
Baby, its a party as long as youre there
Its a party, party, party!

Party — Boston

Women in the Bubble

Stupid Girl — Pink

Yesterday’s post stirred up quite a controversy, and today’s probably will as well. It is politically incorrect and full of stereotypes that will make many cringe. There is a reason we have those politically incorrect stereotypes — they describe large groups of real people who exhibit stereotypical traits and behaviors. The Political Correctness crowd may not like it, and they may pressure people from expressing these stereotypes (at least to the degree that people fear the vengeful wrath of the PC police.) However, if people fit a profile, then there must be some validity to it.

One of the unique characteristics of the Great Housing Bubble was the large increase in market participation among women — sometimes single women and sometimes as married women buying property on their own. Some amount of this is to be expected as single women establish careers and put off marriage. In the past, most single women rented as did most men in their 20s. Men would often buy a house even if they were single. I suspect many viewed this as proof of their ability to be a provider and to attract a mate (I know I did.) Women more often would not buy a home when they were single. I suspect many did not because they knew they would have to deal with two houses when they got married, and the property would be a hindrance. Also, when you look at consumer demographics and personal savings, single women have not historically been big savers. Sure there are always some who are responsible from a young age, but many single women prefer to run up big credit card bills obtaining the latest fashion trends than worry about saving money (and yes, single men spend a lot on beer too.) The trend toward married women buying property as “her sole and separate property” was also a new phenomenon.

So what changed during the Great Housing Bubble? First, since saving was eliminated as a condition of ownership, many single women decided to buy and have a home of their own. Rather than a property being a hindrance, it became a great speculative asset that provided huge amounts of extra spending money. Several of the properties I have profiled with excessive HELOC abuse have been solely owned by women (not that men were any more responsible.) With the large number of women working as mortgage brokers and
realtors, it is likely that many of the purchases by married women as their sole and separate property were by those in
the business. It was all part of making a living.

Why did I pick the song Stupid Girl? Well, these purchases did not turn out to well for many. Was it stupid? I guess if you got to “live large” in your 20s from the HELOC on your house, perhaps not. The memories are great, and you still have time to recover financially. For the older singles and married women who speculated in the real estate market, there will be more serious ramifications. I don’t think anyone is going to label these purchases as a work of genius. Today’s featured property was purchased by a married woman as her sole and separate property, and now, after the foreclosure she has bad credit. Do you think this has impacted the family? It can’t be a plus.

33 Castillo Kitchen

Asking Price: $559,000

Income Requirement: $139,750

Downpayment Needed: $111,800

Monthly Equity Burn: $4,658

Purchase Price: $689,000

Purchase Date: 11/15/2006

Address: 33 Castillo, Irvine, CA 92620

Beds:	3
Baths:	3
Sq. Ft.:	1,896
$/Sq. Ft.:	$295
Lot Size:	3,420 Sq. Ft.
Property Type:	Single Family Residence
Style:	Other
Year Built:	1977
Stories:	3+ Levels
Area:	Northwood
County:	Orange
MLS#:	S525706
Source:	SoCalMLS
Status:	Active
On Redfin:	138 days
Unsold in 90+ days

French doors in living room & kitchen. Oak crown molding. Tile in
family room and kitchen. Great community & schools. Low
association.

The lender has been lowering price to move this one.

Listing Price History

Date	Price
Mar 19, 2008	$649,900
May 05, 2008	$609,900
Jun 02, 2008	$594,900
Jul 24, 2008	$559,000

This property was purchased on 11/15/2006 for $689,000. The buyer, a $551,200 first mortgage, a $137,800 second mortgage and a $0 downpayment. It went back to the bank for $560,000 on 11/14/2007, almost a year to the day. I usually smell fraud when I see them go back this quick. People will make the first two payments to get around being prosecuted for fraud, then stop payment and let it go back to the lender. The one-year timeline is just about right given the amount of time a foreclosure takes. If this had been purchased as a speculative flip (we should give the benefit of the doubt,) then this woman is really stupid. Or perhaps we should view her as a hapless victim of the unpredictable housing market? That might be an easier sell if there weren’t many people already predicting a crash by then.

If this property sells for its asking price, the total loss to the lender will be $163,540 after a 6% commission. Personally, I think this property is ugly inside and out, but then again I will not be buying for a couple more years, so my opinion doesn’t matter much right now. Perhaps someone will step up and pay that much, or perhaps they will keep renting and save their money. That wouldn’t be stupid…

Stupid girl, stupid girls, stupid girls
Maybe if I act like that, that guy will call me back
Porno Paparazzi girl, I don’t wanna be a stupid girl

Go to Fred Segal, you’ll find them there
Laughing loud so all the little people stare
Looking for a daddy to pay for the champagne
(Drop a name)
What happened to the dreams of a girl president
She’s dancing in the video next to 50 Cent
They travel in packs of two or three
With their itsy bitsy doggies and their teeny-weeny tees
Where, oh where, have the smart people gone?
Oh where, oh where could they be?

Maybe if I act like that, that guy will call me back
Porno Paparazzi girl, I don’t wanna be a stupid girl
Baby if I act like that, flipping my blond hair back
Push up my bra like that, I don’t wanna be a stupid girl

(Break it down now)
Disease’s growing, it’s epidemic
I’m scared that there ain’t a cure
The world believes it and I’m going crazy
I cannot take any more
I’m so glad that I’ll never fit in
That will never be me
Outcasts and girls with ambition
That’s what I wanna see
Disasters all around
World despaired
Their only concern
Will they **** up my hair

Maybe if I act like that, that guy will call me back
Porno Paparazzi girl, I don’t wanna be a stupid girl
Baby if I act like that, flipping my blond hair back
Push up my bra like that, I don’t wanna be a stupid girl

Stupid Girl — Pink