Author Archives: IrvineRenter

Land of the Rising Sun

Rising Sun Kitchen

Asking Price: $918,000

Purchase Price: $678,000

Purchase Date: 6/9/2005

Address: 43 Rising Sun, Irvine, CA 92620

Beds: 3IrvineRenter

Baths: 2.5

Sq. Ft.*: 1,708

Year Built: 2005

Stories: 2

Type: Single Family Residence

View: Mountain

Neighborhood: Woodbury

$/Sq. Ft.*: $537

MLS: S479901

Status: Active on market

On Redfin: 11 days

Craigslist, Redfin, Zillow

$918000 SELLER NEEDS TO GET OUT !!!

This according to the ad on Craigslist. I call BS on this one. This flipper is so desperate, they only want to make $184,920 in profit (after 6% commission) in less than 2 years? If this flipper is successful, their house will have made them more than the median income in Irvine over the last two years ($83,891 * 2 = $167,782). That is one hard working house!

This seller is not the only one cracking the whip on their house. The neighbors at 32 Rising Sun want $1,139,000 for the Former Woodbury Model Home they bought for $940,500 on 6/29/2006. They are working their house even harder. After a 6% commission, they stand to make a profit of $130,160 after only 9 months.

.

Devo rising sun

When a prop’ty comes along

You must flip it

Before the home sits out too long

You must flip it

When somethings going wrong

You must flip it

.

Now flip it

Into shape

Shape it up

Get straight

Go forward

Move ahead

Try to detect it

Its not too late

To flip it

Flip it good

Bamboozled

39 Bamboo Kitchen

Asking Price: $879,500

Purchase Price: $869,000

Purchase Date: unknown

Address: 39 Bamboo, Irvine, CA 92620IrvineRenter

Beds: 4

Baths: 4

Sq. Ft.*: 2,492

Year Built: 2004

Stories: 2

Type: Condominium

Neighborhood: Northwood

$/Sq. Ft.*: $353

MLS: S477978

Status: Active on market

On Redfin: 23 days

Redfin, Zillow

Do you get the feeling flippers are getting nervous? There are 46 addresses on Bamboo Street in the Northwood neighborhood adjacent to Woodbury; 7 of them are for sale. 41 Bamboo just sold on 2/13/2007 for $820,000, so there is activity in the area. There are 7 other homedebtors looking for the greater fool to save them. The owners at 39 Bamboo just got nervous and decided to sell even if it is at a loss. Zillow thinks the property is worth over a million dollars. Apparently the market does not agree.

Bamboo Spreadsheet

Real estate always goes up, or so buyers are bamboozled into believing by realtors. It only takes a few nervous neighbors to drive down property values in an entire neighborhood. Comps are set at the fringes where the transactions take place. I’m sure the owner at 57 Bamboo would like to make his $211,106, but it is more likely that 39 Bamboo is going to lose his $42,740 first.

Who is responsible for this mess?

I launched into a diatribe on Quiggleme.com on who bears responsibility for the bubble we are now watching deflate. I wanted to share it here. So who is responsible? Borrowers, lenders, investors, the FED: IMO, they are all responsible; it is only a matter of degree.

Irresponsible borrowers are like children, if you offer them something they want, no matter the terms, they will take it. The federal government realized this basic fact years ago when they passed predatory lending laws. Does that make the borrower any less responsible? No, but by definition, sub-prime borrowers are irresponsible. If they took responsibility for their debts, they wouldn’t be sub-prime. So if you offer a bunch of money to the most irresponsible among us, what would you expect? I would expect them to spend it irresponsibly and not worry about paying it back. That is their history, is it logical to expect anything different from these people? In my opinion, it shouldn’t have taken a rocket scientist to see this sub-prime experiment was going to end badly.

That being said, when will people start being responsible for their actions? Has our entire culture become based on having victim status and not being responsible? These borrowers should not be bailed out by any government program as it would just create more dependence. These fools who paid too much and can’t pay it back need to lose their homes, lose all their assets, and file for bankruptcy. Tough $hit. They may live their lives being irresponsible, but it doesn’t mean the responsible among us should pay for that. This is one of those instances where they will be made to take responsibility. It will feel like they are getting their noses rubbed in it, but that is what they deserve.

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However, the lenders are also responsible in this matter. I have a dim view of the lending industry, particularly of credit cards. Consumer debt lenders are akin to drug dealers in my mind. They serve no function in our society other than to leach off people by taking advantage of their inability to save money. But I digress, at least mortgage lenders provide a service because without them most people would be dead by the time they saved enough money to buy a home for cash; however, when they start handing out HELOC’s for consumption, they are as bad as the credit card / drug dealers preying on people’s reckless irresponsibility. Once mortgage lenders crossed that line, they ceased to be serving the needs of homebuyers and instead began serving the wants of the credit addicted: Shame on them.

Of course, none of this would have happened without the enablers at the Federal Reserve and on Wall Street. Greenspan lowered rates and then told borrowers to take out adjustable rate mortgages. As one might suspect, he did this so his fellow bankers would not be stuck with low-interest loans for 30 years, but he gave the world of homebuyers the “green light” for taking on high risk loans. Then Wall Street investors flooded with liquidity from cheap money from home and overseas started chasing returns. These high-interest sub-prime loans looked attractive, and as long as house prices went up and nobody defaulted, everything was fine. Who do you blame for that situation? The bank of Japan for creating the carry trade? The federal reserve for lowering rates to avoid a recession? Investors chasing high yields? I don’t know. That one is too big for me to ferret out a culprit.Credit Addiction

In my opinion, the borrowers are certainly at fault; if for no other reason than they signed the papers and took the money. The lenders are also at fault because they should have known better than to give sub-prime borrowers loans they could not afford. Lenders simply cannot abdicate responsibility in this matter for financial, legal and moral reasons. The Federal Reserve and Wall Street investors are also at fault for creating the situation and enabling this to occur. In the end, all the responsible parties will be ruined: borrowers will lose their houses and go bankrupt, lenders like New Century will go out of business and/or lose billions, Wall Street investors will be sharing in those losses with the lenders, and Alan Greenspan will be remembered by history as the architect of the largest, most painful financial bubble in history.

Dream Big

Tall Hedge View

Asking Price: $2,275,000

Purchase Price: $1,471,500

Purchase Date: 2/24/2005

Address: 35 Tall Hedge, Irvine, CA 92603

Beds: 4IrvineRenter

Baths: 4.5

Sq. Ft.*: 2,825

Lot Sq. Ft.*: 6,300

Year Built: 2005

Stories: 2

Type: Single Family Residence

View: Catalina Island, City Lights, Ocean, Panoramic, Water, Other

Neighborhood: Turtle Ridge

$/Sq. Ft.*: $805

MLS: U7000721

Status: Active on market

On Redfin: 31 days

Craigslist, Zillow, Redfin

This one was bought two years ago, so it might be argued it isn’t really a flip, but when you believe your house has gone up in value 50% over the last two years (particularly the last two), you are certainly thinking like a flipper. This is a nice home full of the requisite pretentious accouterments one would expect in a Tuscan Villa / Irvine Tract Home. To quote Redfin:

“Tuscan style home in Turtle Ridge offers 4 bdrms. , 4.5 bths. , 3 car ga rage. This highly upgraded home has walnut hardwood floors, 6 crown molding, custom paint and travertine flooring in kitchen & baths. The chef s kitchen has upgraded appliances, granite countertops & walnut cabinets. Custom built balcony off master bdrm has endless city lights & ocean views of Catalina and Pales Verdes. The backyard includes a wood burning fireplace, outdoor B. BQ w/ travertine counter tops & fountain.”

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It looks like there may be some disagreement in the market as to the value of this property. Zillow thinks the house is worth about $1,850,000. Of course, their neighbors at 25 Sylvan just sold for $2,150,000; I imagine these owners must believe their house is better.

However, it is a nearby house at 20 Highpoint that must have caught these people’s attention. 20 Highpoint was purchased on 4/7/2005 from the builder for $1,873,000. It was sold on 1/19/2007 for $2,800,000. Assuming a 6% commission (which is probably too high for an expensive home) these people made $759,000 in about 18 months! Could this be fraud? Zillow thinks the new owners overpaid by $400,000. When you map the comps, this one does seem like an outlier. In any case, there seems to be some activity with these pricey homes, so maybe our flippers will get lucky.

You know, I worked the last 18 months, and I did not make $759,000. I should flip houses.

Make me move; no, just let me out!

Calabria Inside

Asking Price: $675,000

Purchase Price: $659,000

Purchase Date: 8/8/2005

Address: 19 Calabria, Irvine, CA 92620

Beds: 3

Baths: 2.5

Size: 1,547 sq. ft*

Housing: Residential

Year Built: 1982

MLS #: S479474

Craigslist, Redfin, Zillow.

As many of you know, Zillow has a feature called the “Make Me Move Price” where owners can provide asking prices that would get them to move out. To me it seems like a good place to look for “wishing prices” because that is exactly what they are. This flipper/seller must not have been very motivated when they first started because they went to Zillow and put in a Make Me Move Price of $725,000. The Zestimate is only $686,460. Obviously, the house didn’t sell.

Come forward in time, and our flipper is a bit more motivated. There is an add on Craigslist where it seems our flipper is just looking for someone to take over his payments, and he will walk. I don’t have the mortgage data, but I smell 100% financing, particularly when the add says, “Only $4,550/mo + tx & ins.” Want to guess what his payments are? ” Just four payments and closing costs moves you in.” Well, he isn’t so desperate if he wants $18,200 up front, or do you suspect he might be four payments behind on his mortgage?

NO BANK QUALIFYING, NO CREDIT APPLICATION!!!

Do you think he is offering owner financing? Is this an installment deal? Or is this just a fantasy?

I will give you my opinion, to quote Billy Joel:

It’s just a fantasy

It’s not the real thing

It’s just a fantasy

It’s not the real thing

But sometimes a fantasy

Is all you need