Every Rose Has Its Thorn — Poison

Northwood II is speculator central. I have heard that the builder was requiring owners to have downpayments and good credit to purchase in this development. Perhaps they knew we were near a peak of the bubble and didn’t want to face lawsuits when prices crashed. There are many homes for sale in this neighborhood, and most of the properties are distressed. Some knife catcher will step up and buy this one — at least the lenders hope so. They are already looking at close to a half a million dollar loss.

Do you ever stop to ponder the massive losses the lenders are absorbing? It is difficult to get to worked up over the losses from faceless corporations who conjure money out of thin air, but these loss figures are simply staggering. I am amazed none of our major banks has declared bankruptcy yet.

Today’s featured property is a beautiful, high-end domicile. When the price gets down to $650,000, it will be a good buy. I wonder if someone will step up and take the next $300,000 loss? I think I will wait.

Asking Price: $950,000

Income Requirement: $237,500

Downpayment Needed: $190,000

Monthly Equity Burn: $7,916

Purchase Price: $1,161,000

Purchase Date: 7/19/2006

Address: 59 Fire Thorn, Irvine, CA 92620

Beds:	5
Baths:	4
Sq. Ft.:	3,070
$/Sq. Ft.:	$309
Lot Size:	5,350 Sq. Ft.
Property Type:	Single Family Residence
Style:	Contemporary/Modern
Year Built:	2004
Stories:	2 Levels
Area:	Northwood
County:	Orange
MLS#:	R806000
Source:	SoCalMLS
Status:	Active
On Redfin:	1 day
New Listing (24 hours)

That is a well-written description. There are a few sentence fragments, clichés and minor errors, but it did not pain me to read it.

This owner has already “put” this property to the lender. The property was purchased near the peak for $1,161,000. The owner took out a first mortgage for $870,478, and got a HELOC approved for $450,000 the same day. If he borrowed this money, he cashed-out $159,478 at the closing. On 4/23/2007 Chevy Chase Bank loaned him $1,065,000 and National City Bank gave him a second mortgage for $284,000 leaving a total debt of $1,349,000. The total MEW was $188,000. Not bad for a guy who bought at the peak. I wish I knew how he got his loans approved. If this property sells for its asking price, and if a 6% commission is paid, the total loss on the property will be $456,000. The brilliant lenders who made these loans just over a year ago are eating a huge loss while this owner walks away with $188,000.

I have to remember to screw the lender at the top of the next bubble California inflates…

.

We both lie silently still
in the dead of the night
Although we both lie close together
We feel miles apart inside

and now I hear you found somebody new
and that I never meant that much to you
To hear that tears me up inside
And to see you cuts me like a knife
I guess

Every Rose Has Its Thorn — Poison

Send In The Clowns — Stephen Sondheim / Frank Sinatra

This market desperately needs more knife catchers. There are just too many properties that need to be sold and too small a number of people to buy them. I suppose we aren’t helping matters any at the IHB ;).

I hope everyone is getting a laugh out of the daily posts here. The carnage we are witnessing — and will continue to witness — isn’t funny for the people losing money. Residential real estate bubbles are very painful when they deflate. I vacillate between sadness and laughter reviewing these properties all the time. You have to be able to laugh at the grim happenings in life. Life is too short to be bummed out all the time.

Today’s featured property is another speculator who is getting flushed out of the housing market. Not to worry though, he has extracted all the equity and is passing the loss on to the lender.

Asking Price: $549,000

Income Requirement: $137,250

Downpayment Needed: $109,800

Monthly Equity Burn: $4,575

Purchase Price: $612,500

Purchase Date: 8/30/2005

Address 114 Townsend, Irvine, CA 92620

Note to realtor: in English, we put spaces after punctuation marks.

This property was purchased in late 2005 for $612,500. The owner put 10% down. In September of 2007, he managed to increase his credit line on his HELOC to extract all his equity (I can’t believe a lender approved this after the credit crunch in August.) Of course, now the lender is going to eat the loss. It isn’t likely this will sell for its asking price as it is probably 10% over market, but if it did, the total loss after a 6% commission would be $96,440. The lender must feel really good about extending that HELOC.

Thus concludes another 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.

🙂

.

Isn’t it rich? Are we a pair?
Me here at last on the ground and you in mid-air
Send in the clowns

Isn’t it rich? Isn’t it queer?
Losing my timing this late in my career
But where are the clowns? Send in the clowns
Well, maybe next year

Send In The Clowns — Stephen Sondheim / Frank Sinatra

Trouble — Coldplay

Do rational people still deny there was a housing bubble? Today’s featured property is being offered 25% off its peak purchase price. It is one of many. There was a recent post over at South OC Tracker with a property 60% off in Aliso Viejo. Those kind of price drops are not a correction below value, they are the deflating of a bubble to value. Prices are not going to quickly rebound to peak values from an undervalued condition. They are going to drop to rental value and remain there until the toxic mortgages and overextended homeowners are purged from the market.

Today’s featured property is another 100% financing deal gone bad. One of many yet to be purged from the system.

Asking Price: $485,000

Income Requirement: $121,250

Downpayment Needed: $97,000

Monthly Equity Burn: $4,041

Purchase Price: $650,000

Purchase Date: 8/18/2006

Address: 24 Burlingame, Irvine, CA 92602

Is it just me, or does anyone else see a face in the left side of the front elevation?

If this property sells for its asking price, WMC Mortgage is going to lose $194,100 after a 6% commission. The piggy-back mortgage is a total loss, and the first mortgage is going to feel some pain.

For entertainment value, I often go over to the OC Register blog and read the comments of the bulls. They are case study in market
denial. When people take a position in a financial market, they often
lose their objectivity in reviewing the flow of data. Every piece of
information is interpreted as reaffirming the correctness of their
original decision to take a position. It is comical to read the
comments of the bulls. Every piece of market data that is unequivocally
bearish is simply dismissed. Every piece of market data that is 90%
bearish and 10% bullish is taken as bullish. Lately, there has been no
other kind of market data. This denial takes an enormous amount of
emotional energy as the market will force what Mark Douglas calls “a painful forced awareness” on its participants. I suppose it is
a natural human reaction. Nobody likes to admit a mistake, particularly
after they have made arrogant, and completely incorrect, statements to
family, friends and coworkers. Rather than eat their words, they
maintain denial to the bitter end. After the fact, many will likely
blame unforeseen, outside factors rather than admit they had no idea
what they were doing, and they were completely wrong. We offer comfort
here by telling people it is all OK if they can afford the property. We
all know it really isn’t OK. There are still people holding stocks they
purchased at the peak of the stock market bubble. I doubt they feel it
is OK because they were buying for the long term. You don’t lose money
until you sell, right? Bull$hit.

.

O no, I see,
A spider web is tangled up with me,
And I lost my head,
The thought of all the stupid things I’d said.

They spun a web for me,
They spun a web for me,
They spun a web for me.

Trouble — Coldplay