Most lenders are off their foreclosure moratoriums, and they are beginning proceedings in earnest. But there is another issue not getting much press coverage, and that is the number of REOs being withheld from the market. Today’s featured property was bought at foreclosure on 7/22/2008, and it is just now coming to market.
Asking Price: $849,900
Address: 30 Desert Willow, Irvine, CA 92606
Rock of Ages — Def Leppard
Rise up! gather round
Rock this place to the ground
Burn it up lets go for broke
Watch the night go up in smoke
Did you see this chart at Dr. Housing Bubble?
As I noted in Moratorium on Defaults Announced and Pent Up Supply, stopping foreclosures did nothing to stop people from defaulting on their loans. The tsunami continues to build strength.
The other little game being played in our market is the withholding of supply directly by allowing banks to hold their non-performing assets.Ordinarily, banking regulators require lenders to dispose of their non-performing assets in a timely manner. It certainly appears that these regulations are not being enforced. Could the collapse of WAMU really delayed the processing of their non-performing assets (REO) by 7 months or more?
Today’s featured property was a foreclosure back on 7/22/2008. It is next door to a neighbor I profiled back in July of 2007 (Weeping Desert Willow). In that post, I quipped, “This can’t be good news for the owners at 27 Desert Willow hoping to get $1,188,000 for their house, or the owners at 30 Desert Willow hoping to get $1,279,000? Once a similar property sells for $850,000, what chance to they have of getting their wishing price?”I think we have our answer; not much. Are you glad you didn’t catch that falling knife?
Asking Price: $849,900
Income Requirement: $212,475
Downpayment Needed: $169,980
Monthly Equity Burn: $7,082
Purchase Price: $1,235,000
Purchase Date: 5/25/2006
Address: 30 Desert Willow, Irvine, CA 92606
| Beds: | 5 |
| Baths: | 4 |
| Sq. Ft.: | 3,170 |
| $/Sq. Ft.: | $268 |
| Lot Size: | 5,011
Sq. Ft. |
| Property Type: | Single Family Residence |
| Style: | Colonial |
| Stories: | 2 |
| Year Built: | 2006 |
| Community: | Columbus Grove |
| County: | Orange |
| MLS#: | S572178 |
| Source: | SoCalMLS |
| Status: | Active |
| On Redfin: | 4 days |
MAGNIFICENT SINGLE FAMILY HOME LOCATED IN THE MASTER PLANNED COMMUNITY
OF COLUMBUS GROVE * THIS RESORT STYLE HOME HAS IT ALL *HIGHLY DESIRED
NEIGHBOORHOOD * EASY CARE LANDSCAPING * GLASS DUTCH DOOR ENTRY * WOOD
FLOORING * GOURMET KITCHEN WITH GRANITE COUNTERTOPS * PREPARATION
ISLAND * MASTER BEDROOM WITH FIREPLACE AND MASTER BATH WITH JETTED TUB
* OVERSIZE WALK-IN MASTER CLOSET * DUAL SINKS MASTER BATH AND MARBLE
FLOORS * PLANTATION SHUTTERS * WATERFALLS, FLAGSTONE BARBECUE WITH
FIREPIT AND REFRIGERATOR * UPSTAIRS LAUNDRY ROOM WITH STORAGE AND SINK
* THANK YOU FOR SHOWING THIS PROPERTY!
Where do I start?
ALL CAPS
Asterisks instead of periods
HIGHLY DESIRED
NEIGHBOORHOOD? The price declines suggest otherwise…
I give up.
This property was purchased on 5/25/2006 for $1,235,000. The loan records have dropped off my database. If it sells for its current asking price, and if a 6% commission is paid, the total loss on the property will be $436,094.
This property is being offered for 31% off its peak purchase price. This one might hit 50% off before this is over.
{book4}
Alright
I got something to say
Yeah, its better to burn out
Yeah, than fade away
All right
Ow
Gonna start a fire
Cmon!
Rise up! gather round
Rock this place to the ground
Burn it up lets go for broke
Watch the night go up in smoke
Rock on! (rock on!)
Drive me crazier, no serenade
No fire brigade, just pyromania, cmon
Rock of Ages — Def Leppard
Apropos delays, IR: What do you think about these warnings voiced at McClatchy newspapers, especially about the “two out of three” estimate?
“Two years after fissures in the residential housing market gave way to a national collapse of home prices and sales, experts warn the next shoe to drop is the commercial real-estate market, bringing more woes to the battered economy.
Thousands of commercial mortgages valued at hundreds of billions of dollars are approaching a renewal date. By some estimates, two out of every three will no longer meet the original loan conditions and won’t be able to refinance. And with prices for commercial properties expected to plunge, a vicious cycle may unfold much as it has in the nation’s housing market.
“It’s the next wave to hit. It’s the next round of bad news,” said Scott Talbott, the senior vice president of government affairs for the Financial Services Roundtable, a trade group for big banks and other financial institutions who are collectively concerned about the coming problems.”
http://www.mcclatchydc.com/227/story/67187.html
If this is true, then the situation won’t improve for another year or so, because even if the REOs that hit the market now will be sold there’s lots of new ones gathering in the queue.
:-/
That article is about commercial real estate (offices and stores), not residential. Still not good news, though.
maybe we will wake up one day and realize that our entire economy is not dependent on selling houses and cars. Maybe these industries were the drivers of our economy 20 years ago…………..that will be the great surprise of this housing/credit bubble.
Anyone know what the mello roos is in Columbus Grove? I see that the listing says HOA fees $175 mo. – anyone know if that is actually correct? Very nice home – drop it to 600K and I would be there!
Houses in Columbus Grove – Irvine and Columbus Square – Tustin the mello roos, taxes & hoas r very high almost 2% and keep in mind that even if house prices r down but mello roos won’t be reduced. (U r stuck.)
IR:
What price today’s featured property will most likely fetch in 2011?
To answer both you and movingaround, I would say this property drops to $600,000 to $650,000 at the bottom.
I’d buy that house if it was for sale from 600k-650k. I think thats worth it. It’s a nice house.
.
http://www.crackthecode.us/images/Enough_Granite.jpg
😆 Thanks David!
This kitchen is so formal and dark that the granite is actually the lightest thing! There is probably a good joke to be made about the homeowner entombed in their granite mausoleum, but this house already looks abandoned.
I found it amusing that the granite is now spreading and going up the walls.
What a cool concept. We don’t need to paint walls anymore or even use wallpaper; we’ll just take slabs of granite and start attaching them to the walls. We could do the entire house like that.
I can see the listing already:
” **A MUST SEE** FULL GRANITE HOUSE W/ SLAB GRANITE WALLS THRUGHOUT HOMNE ** THIS ONE WONT LAST LONG** “
That’s great David.
Like this?
http://www.latimes.com/classified/realestate/la-re-home28oct28,0,4112943.story?coll=la-home-middleright
There you go.
We can start razing our McMansions now and replace them with McCastles.
BTW, when I first read the headline, I read it as “Stupidity In Stone”.
Actually, I really like that part of Altadena and it would be great to have a view of Eaton Canyon. There are some beautiful homes and neighborhoods there. Most people send their kids to private school, though, so it’s not a place to live in if you can only afford public schools.
Nevertheless, if you’re a 1920’s stonemason, I think it would be a fabulous way to project your skills. Why not? It’s your property, your sweat and tears.
Isn’t that still a perk of owning your own place? It would be for me, anyway – do what you want, when you want, how you want, to your own property. If you showcase your skills and then get customers, even better.
Actually, I know many families up there… who attend our children’s public school. And they’re all doing well, and much more likely to stay in the community that the folks who HELOC’d to send their kids to a private school.
The private schools in Pasadena are cutting back and laying off teachers, meanwhile our public school is getting a $40 million campus upgrade.
While the private school situation in Pasadena maybe as you say, I attended summer school at Eliot, family members taught at Jackson, and I also attended Marshall for a time…….
My personal opinion: I would not recommend those schools. I’d rather move and continue to rent in better school districts than suffer those violent & explosive situations again.
If more people in the community would not HELOC to send kids to private school and instead invested time and energy into their public schools, they would probably be very different than how I experienced them.
Perhaps times are changing and you will get more committed homeowners who will keep invested in the public school system. That would be an all around positive thing.
OG Pasadena Boy here. You nailed it. And as for Altadena, yeah it’s nice (fond memories of Xmas lights at the Balian mansion) yet it’s like a mini-Oakland the other side of Lake. But there’s some good hoops at Farnsworth Park.
Actually, I like a tall backspash (granite, tile or what have you). Very practical for serious cooks – ex ever cleaned spaghetti sauce or chicken guts off the drywall or wallpaper? Not fun
Isn’t granite radioactive? Doesn’t Fred Flintstone have a granite place?
I’m not liking that shade of lipstick. 🙂
You should have gone with red.
:snake: Love it, David!
Next time, can you make the pig slobbering over some KFC on the granite? That’d be enough to keep me off the porn for a week.
Good one. KFC added.
Well done. Yeah, that granite and stainless steel looks totally out-of-place in that hideous dark brown kitchen.
JMO ~ The banks are deferring these REOs from coming to market in communities just like this one because they are very concerned of the collateral damage that will come. According to Mr. Mortgage (I agree), the number one cause for default is negative equity, NOT economic circumstances. Once forced sales start to show up in neighborhoods like this one, and comps are adversely impacted, it sets up a chain of events for all those people with little skin in the game. And we know there are lots of these people with 5% or even less down. A lot of these people are also in the final year/s of their teaser rate mortgage. Most of them can’t refinance, and even if they could, it makes no sense to do so when the home (REO) across the street sold for $600,000 and you owe 1m.
I keep coming back to the same circumstance for The OC, and it’s easy to do so when you’re able to connect the dots … we are not near the “bottom”, in fact, we’re just getting started in these neighborhoods. They’re gonna get wiped out.
Agreed. 850K strikes me as WTF. Whoever buys into this neighborhood is stepping into a bear-trap. These house price numbers will be creamed when interest rates begin to rise.
It may be above the median housewise, but if you assume that the family incomes in the area are in the 150K range then that puts this place at 450K (affordable) to 600K (I can make the payment but I am house poor affordable). So take the middleground and figure 525K. This is assuming that Irvine can keep up its inflated income numbers too. If the incomes drop then this house is going back into the 400’s.
These house price numbers will be creamed when interest rates begin to rise.
No one is really thinking about that. What’s gonna happen when the Fed shrinks its balance sheet and removes accommodation (raises rates). Under normal circumstances, in a healthy real estate market, interest rates play a smaller role than many people think. But this ain’t no normal circumstance. Here in Orange County, our prices are still distorted, even after a 20-30% reduction.
When the Fed eventually raises rates, it will undoubtedly add additional pressure on prices in Orange County. Higher rates will move right up the chain.
And what’s gonna happen if foreign governments stop buying our treasuries. No one really wants to know.
If interest rates rise with little distressed inventory, there will simply be far fewer sales.
If rates rise above 8% with a lot of distressed inventory, my models show some large effects.
That is exactly the phenomenon I wrote about in The Tipping Point. We have already seen this happen with Riverside County McMansions. They have lost over half their value in 3 years, so entire neighborhoods have defaulted and walked away. Irvine and other inflated Orange County markets have not reached their tipping point yet, but the tsunami of REOs that is coming will push the market past the tipping point, and capitulation will occur.
It’s hard to underestimate how dramatic the price reductions are in Riverside County. I’ll give you an example:
http://www.redfin.com/CA/Riverside/7167-Bradford-St-92503/home/4823365
This was listed today for the exact same price it sold for in 1992 (when it was 4 years old-built in 1988). That’s right, a 1992 rollback-and not even factoring in inflation. And, as far as I can tell, there’s nothing wrong with the house or location. This is simply a typical price pattern out here for an REO.
And this is in the city of Riverside. Out in the desert, things are even worse.
That is why I have been telling people that it is OK to buy in many Riverside County areas. It isn’t that prices may not drop further, but if you are getting great positive cashflow, who cares? Besides, once properties start having positive cashflow, the bottom is near. I just wish Irvine would get there soon.
I think your logic is basically sound but who is going to rent this type of home? You can’t stay cash positive if there are no tenants.
Unemployment and declining rents are certainly a risk for these investments. Those risks should not be dismissed but discounted into the price. The price on this property appears heavily discounted.
Rents are currently much higher than payments here in Riverside. My rent on a one bedroom, 475 sq ft apartment with no patio or assigned parking here in Riverside is $75 more than the monthly mortgage payment on the 4 bedroom, 2 bath, 1,800 sq ft house on a 8,700 sq ft lot I am in escrow on right now-and my rent is less than average for the area. Now, that’s not counting the down payment, taxes, insurance, or repairs, but even if you factored in all those, purchasing right now is quite a good deal compared to renting for the same size place. Plus, once you lock in a payment, it remains stable. Assuming I don’t move or, um, die, my payment will be the same in 2039 as it is today-and in 2040 it will be zero (again, minus taxes, insurance, and repairs). Plus, I qualify for the eight grand tax rebate.
Now, does that mean such a house is a good investment property to rent out? Maybe, maybe not, since you have to factor in vacancy time and costs to prepare it for rent (repairs may be greater, advertising costs, costs for a property manager or the cost of your own time to do it yourself), plus you wouldn’t qualfiy for the eight grand, plus you are trying to make money in that situation-maybe bonds or the stock market is a better place to park your money.
But whether or not you will make money off something is a different story than the simple rent vs. buy calculation for where you sleep at night. We are definitely past the rent vs. buy calculation. Whether or not an investment property makes sense probably depends on the particular deal-some will, some won’t. I’m getting an above average deal, IMHO, so it might make sense if I did want to rent this place out.
Even when the rent vs. buy situation makes sense, buying is not right for everybody. There are significant transaction costs (the realtor’s commision, for one) when one buys-if you are only going to be in an area for a short period of time (say four years or less), renting probably makes sense. Plus, some people can’t come up with the down payment (although that wasn’t a problem during the bubble years and is only a minor one these days-most people should be able to come up with the 3.5% down for an FHA loan, if not the full 20%), and/or their credit sucks and/or don’t have steady enough employment to qualify.
I’d like to see it, but the link doesn’t work.
geotpf…are you the one currently in escrow for a house out there? Congrats (I think it was you).
Will you have to commute?
Thank you. My commute is five minutes each way. I would hate to be on the freeways for a hour or more a day.
If you copy/paste, the link will work. (I’m not sure how to linkify here…maybe it’s straight html…)
If it is, this should work (new window)
That didn’t work. Lemme try again:
Did this?
Yes, this one works. Ok, I see what you mean. That’s a huge house for $133,500. I’ve been looking at real estate at Zip Realty.com for over a year now. I can look by city, number of bedrooms, baths, price ranges, etc. It even shows when the prices go down. It’s fun for me to look at. Simple people, simple pleasures:)
For Riverside, that’s just slightly better than average (in dollars per sq ft). Out in the desert, you could get a house the size of the one featured today for $150k.
Here’s an example:
Link
2176 Lavender Ct
San Jacinto, CA 92582
Price: $146,900
Beds: 5
Baths: 3
Sq. Ft.: 3,117
$/Sq. Ft.: $47
Lot Size: 7,405 Sq. Ft.
Property Type: Detached, Single Family Residence
Stories: 2
Year Built: 2006
Community: Hemet/San Jacinto
County: Riverside
MLS#: I09045867
Source: MRMLS
Status: Active
On Redfin: 7 days
BANK OWNED – REO SALE – PROPERTY SOLD AS-IS WITHOUT REPAIRS OR WARRANTY.
“…According to Mr. Mortgage (I agree), the number one cause for default is negative equity, NOT economic circumstances…”
I disagree. The number one cause is the “stretch.” Negative amortization and a falling market result in negative equity, but the root cause was the home buyer deciding to stretch their finances to the limit to buy the “most house” possible.
Had the home buyer not stretched (i.e. bought a home less than 2 or 3x their income), they could survive hard economic times for a considerable period and the negative equity wouldn’t be an issue pushing them out of the door.
Yes, they *could* pay for an overpriced house, but why would they want to? I have a co-worker who overpaid for a new condo in a sketchy area in 2006 which is now worth 40-50% less than he paid. He can easily afford the mortgage, but he is in escrow on a house in a much nicer neighborhood for about 30% less than he currently owes on the condo. He had to state on the loan app that he was renting out the first house, but was not able to use the rental income in qualifying. This was easy for him, because the first house was not a “stretch” for him by any means.
He plans to rent the house at a loss for 6 months to make good on his statements in the mortgage app and then let it go into foreclosure.
My parents are also in escrow on a second house even though they are upside down on the first home. In their case, they plan to rent out their current house indefinitely and wait for rents to rise so it no longer has a negative cash flow. (I would just let it go.)
In these two cases, the cause for the possible foreclosures is “investing in residential real estate” as opposed to “buying a home.” Why did your friend buy a condo in a sketchy neighborhood? I’d guess he thought it would appreciate and that this was a “starter home.”
Neither of these situations were “investments” they were both homes. Now, they are under water, and they can get a nicer home (to live in) for less money; they are doing that.
Renting out the first home is a function of how underwater they are. They cannot sell the first home because of the negative equity and the lender will not give a new loan without a signed lease showing that the previous primary residence is being converted to a rental. It is hardly viewed as an investment by my friend, just a temporary thing to get the new mortgage.
My mom doesn’t see it as an investment either, but has moral reservations about lying on the mortgage app and about not fulfilling the obligation she made to the first lender. Therefore her plan is to continue renting it after getting the new house. Like I said, my advice to her is to let it go after the term of the first lease is up (or the renter breaks the contract.)
My friend bought that condo because house prices were insane and a condo was all that he could comfortably afford. Other people with his income were buying SFRs for more than double what he paid. He had a few friends from church who had bought in the condo development (most of whom are in default or gone now) and I didn’t have his ear at that time as I had sold my house and taken a short term job in Arizona. I am not sure it would have mattered. I tried to tell a lot of people not to buy or to sell in 2005/2006 and they thought I was completely insane.
Maybe when Irvine prices decline further I’ll be the same place as your friend and mom. Right now, there’s not another place I’d rather be living in for its current price. I can see my mood changing over the next couple years though. Me & the Mrs. will keep strengthening the balance sheet so that we have options in a couple years.
Both of them are in Riverside County. I think you will see the same situation as prices fall further in Irvine.
This entire situation is corrupt you buy something that is the price you paid do I get a do over when I buy stocks that plummet in price?
Can I walk away from my debt? Those that walk away from their debt are no better than if they walked into a bank and robbed it. Just like buying a stock it can go up or down–just like a house. It is an investment and should be treated as one.
Walking away because you can give the debt to the taxpayer should be illegal. You sell it and take your loss like every other investor does.
See my response to Geotpf below. The bank entered into a contract. If the contract is breached, there is a remedy. It’s called foreclosure. If you put an offer on a house (a contract) and then saw it drop in price by $200k during escrow and the bank was still willing to loan the larger amount against that collateral, would you still pay the extra $200k to “keep your word.” Or would you cut your losses and walk away from the offer allowing them to seek the remedy of keeping your $2000 deposit?
It’s the same thing. Don’t get all high and mighty.
A home just like any investment goes up and down in price depending upon a time frame. Who is to say this house won’t go back up. Same thing as owning a stock in the future it could go up or down this is what an investment is.
You agree upon a price there is no guarantee what the price will be when you sell it. To say now I am under the selling price in my area is insane because what are you comparing? Your neighbor may have taken out heloc’s and now has foreclosed so since they have left you are going to leave as well?? Drop your debt on the rest of us who live in your neighborhood because your perceived future selling price has dropped.
No matter what kind of loan you have a contract now if it was received with fraud you have a case but just because the price has dropped now and you can very well afford your mortgage should be no reason for you to walk away as well. All you are doing is contributing to the cause. You are punishing all of those who want their homes and can still afford the contract they all signed.
You could lower your mortgage by getting it refinanced along with your property tax by claiming the home is worth less so I need to pay a less percentage. But tell me when the home goes back up in price would you call up the state and ask them to come appraise to raise it?
What you are asking for is a guaranteed price in housing and it does not exist.
Some lose and some gain when they invest there should be no way to cheat the system.
This is exactly why I stick with apartment complexes as I think my odds are better of landlord/tenant laws being obeyed and my rent money being used to pay bills rather than be skimmed.
I love watching amateurs jump into the landlord game. The “I will just rent it out” pattern.
It never ceases to amaze me how people think that renting out their places is such an easy thing to do. They overpay for a house and then think that they are entitled to rent it out for what they paid only to run into a wall when they find out what someone is truly willing to pay to live their.
I know two people who are renting out second houses for less than their carrying costs while waiting for the market to rebound. One of them had a renter who stopped paying altogether and demanded a rent re-nogiation. They then squatted for several months before finally being kicked out.
The other has had things break, etc.
All this effort and for nothing. It’s painful to witness such stupidity.
live their? there? Grammar police?
“He plans to rent the house at a loss for 6 months to make good on his statements in the mortgage app and then let it go into foreclosure.”
Something doesn’t sound right about this. He will not fulfill his contractual obligations on the first house, but will proceed to purchase a second house because “he can easily afford it”?
When lenders get back to lending to people who can be trusted to pay them back is when I’ll be buying a home. Until then I’ll be yelling at my Congressman who wants me to pay for the consequences of this monkey business.
Sounds like he underpurchased by a whole lot, and now that condo is worth half of what he paid for it, and he’s going to walk away, not because he can’t afford it, but merely because it’s value has dropped in half.
IMHO, this guy’s word is completely worthless. He is not a trustworthy person. A trustworthy person pays his debts if he can, even if he made a bad decision.
However, we don’t have debtor’s prisons in this country, for some very good reasons. The only thing that will happen to this guy is that a numerical value of how trustworthy he is will drop (that is, his credit score will go down a hundred points or more). Sometimes something is immoral but it is not practical or proper to punish them legally. This is one of those cases.
Now, this is completely different, morally, than if somebody buys a house, and then loses their job and can’t afford the payments and loses the house in foreclosure. There are also a lot gray areas in between both extremes. I’m also sure a lot of people will disagree with me whether walking away just because the value of the house has dropped is immoral or not.
The mortgage or trust deed is secured by real property. If you don’t pay your obligation, the bank takes the property; that is what you are giving your word to when you sign on the dotted line.
It is not as if this was not known by the bank at the time the mortgage was signed. That is why they typically require a certain amount of “skin in the game.” The bank is in complete control of the contract and the terms. They have considerable resources that they can bring to bear on the analysis of the collateral. The borrower has none of these resources and no control over the take-it-or-leave-it terms of the loan.
The borrower is well within his rights to breach a civil contract. The lender is within their rights to seek a remedy. On a non-recourse purchase money loan in California, that remedy is foreclosure or trustee sale.
The fact that our corrupt government (Bush administration as well as Obama’s) decided to step in and give your money and mine to the banks because they entered into unfavorable contracts that were completely on their own terms does not change the moral issues involved in this situation.
Your self-righteousness is absurd. In the same situation, there is no way that I would take food out of my family’s mouth to continue paying a mortgage on a house that is under water by $200k just to make some banker rich and you happy. They misjudged the collateral; they can have it.
The trust in the entire system is broken if you can foreclose one home yet buy another. Lenders giving money out like candy while there is no stablization in pricing if people continue to do this who in their right mind would buy a home? Again it’s cheating the system
Yeah, maybe I was a little too hard on the borrower. I know people who are in similar situations. Still, I think it’s fairly dirty pool.
I wish there was a good data source that tracked underwater default rates by debt-to-income ratios. I haven’t seen one. That would give us a way to measure underwater default rates at different DTI ratios to try to measure the “stretching effect.”
The statistics clearly show that homeowners default at increasing rates the moment they go underwater. The conventional interpretation is that homeowners do this because they bought for appreciation and they are simply walking away. That interpretation may not be correct. If underwater homeowners did not stretch to get into their homes, the default rates would probably not spike so much; unfortunately, the vast majority in California did stretch because prices were so high, and default rates are astronomical.
If you stretched to make the payment but the house was appreciating they would stay. Being house poor now is ok because in the future they will cash out. Or they just run up credit cards and pay with a HELOC.
If they stretched and now are upside down being house poor sucks they don’t have the ATM.
Time to walk.
Perspective … watch this video. Negative equity will crush these neighborhoods.
Good, detailed info from Mr. Mortgage, as always. I agree that the larger the negative equity position, the greater the likelihood the debtor will walk. I just don’t see it as THE reason debtors walk.
I think the “3 Cs” used for underwriting can be used for evaluating the likelihood of walking. And I think capacity is the most important factor in both – the stronger the borrower’s ratio of income to PITI is, the less likely s/he is to default. However, if the borrower’s credit is already poor, then default is more attractive. Likewise, if the collateral is in an increasingly negative position, then default is more attractive.
But it all comes back to capacity. If the borrower has the ability (comfortably), then there are options and decisions to be made. If the borrower doesn’t have capacity because of stretching or income loss, then neither the credit nor collateral matter. They will default.
I sure hope so. As goes Irvine, so goes Newport in most areas (where I live, right off of Jamboree in Newport, is a stone’s throw from Irvine, and there’s no view or “real” proximity to anything that Irvine doesn’t have- – schools are good here and there, etc.). A house that was asking 1.749 back last year just went under contract – -or into escrow, which could fall out, of course – -and the asking was 1.6. It isn’t anything special. And these houses were in the 400-600 range 5-10 years ago. I am hoping that this person who is about to buy the house is indeed a knife-catcher and that I am not being stupid just watching it all!
thats what gets me the most.
I bought this house for $500k in 2001, its for sure worth $1.25M now
*sigh*
Chuck in Newport,
You will enjoy my post for Saturday on HELOC Abuse Laguna Beach style. As I look at these high-end neighborhoods, the HELOC abuse is truly shocking. Huge, huge dollar amounts, and it is everywhere.
These high-end neighborhoods are going to get flattened. Take that $500,000 sales price in the mid 90s, and project it forward using 3% appreciation, and you will have a good idea of where these will bottom.
The house looks pretty nice but even at $600k what are you getting? You are right on top of your neighbors, Harvard is a pretty noisy street, probably a pretty high mello roos, power lines very close and you can’t really walk to a commercial area. Even though everything is a short drive, my opinion is that you’re spending a lot of money for a house but you’re not getting many fringe benefits. Also, wasn’t there some concern a while back that these homes might have some toxic waste issues from the military base that used to be there?
The house looks pretty nice but even at $600k what are you getting?
Completely agree. I seriously hate neighborhoods constructed out of stick-and-stucco boxes 5 feet from each other. How truly different is this from living in a townhouse?
I fault buyers for encouraging builders to do this. If buyers were as concerned about their privacy and space as they are about kitchen counter tops then builders would find it in their best interest to not do this as it would cut the value and their profits.
I think that what has happened is that a new generation of buyers have LET the builders dictate that yards are not important so long as you have a small slab of concrete in the back where the dog can hang out all day. The builders have also decided that your neighbor’s wall is a more efficient use of space as a property line than a fence. You said it, it’s “townhouse” living. I’m ok with townhouse living as a “starter” home for $275k… not $850k or even $650k. The builders have been in the driver’s seat since 2000 and we never held them accountable for their greed. It seems to me that every home in Irvine built since then on the market for less than a million fits that description. That takes a lot of houses off of my “interested in” list. If they were priced as starter homes I’d be fine with it but I can’t see spending 15 years in some of these homes and being cash poor with an ulcer each month. To sum up my rant, I also fault the buyers and now it sucks because most of the houses that have sprung up all over SoCal in the last 8 years all fall into this category.
This is why I like older houses. They tend to have larger lots, so you have more privacy.
Here’s an old housing tract here in Riverside with houses that are 727 square feet (2 beds, 1 bath, 1 car garage (not counted in the square footage)) on lots that are 7,405 square feet. Now, this is a bit extreme, but can you imagine such a thing being built today?
http://www.redfin.com/CA/Riverside/7814-Sycamore-Ave-92504/home/4986178
But…Isn’t this Columbus Grove? Haven’t I read derogatory things in the nature of it being on an old indian burial ground on this very blog? If that’s still true, no one actually would buy for themselves, only for investment.
Also, to what extent is Irvine protected from market forces by the Irvine RealtyCompany? Doesn’t Big Brother Irvine habve some influence?
The Irvine Company can work to limit supply by stopping all construction–which they have essentially done. They only control asking prices on new homes, they can do nothing about asking prices on resale homes, nor can they do anything about how much buyers are capable of bidding for properties.
The real problem with the market is the change in lending standards is reducing the amount people are capable of bidding for properties. This problem is not going away, so bids will continue to decline, and sales prices will continue to decline as a result.
Don’t underestimate the power of Boss Bren… they aren’t just the near-exclusive builder, they are also the near-exclusive commercial landlord AND the near-exclusive residential landlord. That is many, many strings available for the pulling.
34 Bombay (from yesterday) is in escrow as of April 28.
I wonder if the exposure on the IHB made a difference? I doubt I will get a thank you card from the listing agent.
😉
If the escrow date is correct, it sold before your story yesterday.
you mean like the FBI building in DC (I think that’s what it is) that was supposed to get granite facing but they ran out of funds and it just has it’s waffle-concrete pattern with holes in it?
Cara,
We have been investigating your posting problem. We have tried whitelisting your IP, but our spam filter still doesn’t like it. Our system says you are not signed in before you post (which makes you type in the letters in the box). If you log in, your comments should not get closed by our system.
As for your comment, I sometimes wonder why buildings don’t do that once you get above the first or second floor. Nobody can tell the difference on the 18th floor when you look up from the ground.
1% tax+10k/yr Mello Roos, plus $200/mo HOA.
right now that is $2k/month, 24k/yr
even if it sells for $600k, that is $1500/mo, $18k/yr
how many Irvinites can afford the nut plus that?
There is a lot of pressure to buy now you have low interest rates begging you to consider. FOMC yesterday gave us this piece of info
http://www.federalreserve.gov/newsevents/press/monetary/20090429a.htm
The government will keep rates low so we can refiance those existing loans if possible and buy those properties for sale.
Many will buy now they have waited a long time and see 30% and more off as a great opportunity.
My own thought is when housing finally finishes this adjustment period in value and pricing I do agree with many here rates will have to go up. And when they do it will be slowly but it will hurt those trying to resale unless we reflate the housing market again.
Another layer of repricing may occur but if the pricing of housing can continue upward people will jump back in again.
I wonder if we will see a change in new home starts and what kind of homes?
The pressure will be to build the same or even more expensive homes so the entire sector rises again.
The roar is not loud enough to change I fear. Mello roos will continue along with high HOA fees.
With cheap money to loan no one is really looking under the rug at the true costs of housing.
Can anyone change the way Irvine has done business and how our housing has been priced ?
I really want to see fair value and reality pricing. And would love to see other builders coming into Irvine allowing us options such as Green housing.
But I am just dreaming.
if you want green housing, move into a forest! :coolsmirk:
Here is what is being touted as the first “green” house for sale in Turtle Rock – $1.475 million in the Sierra streets – ouch! Funny that the only picture they have is one of the bathroom…
http://www.redfin.com/CA/Irvine/19421-Sierra-Noche-Rd-92603/home/4740956
who would have thought that IR stood for Irvine Realtard!!! Loser. Block this!
.
http://www.crackthecode.us/images/tantrum.jpg
LOL! You take pathetic to a new level.
https://www.irvinehousingblog.com/wp-content/uploads/2007/07/loser.jpg
Thats funny
You guys are too nice.
http://www.greenhomeguide.org/what_makes_a_green_home/index.html
California could do this–open your mind
Energy Consultant: Davis Energy Group
Marketing: PowerLight Corporation
lighting Review: University of California-Davis
Lighting Technology Center
Project Size (One Home): 2,543 square feet
Site Costs: $128,500 per lot
Construction Costs: $70 per square foot
Photography Grupe Company
big difference in pricing—
“Can anyone change the way Irvine has done business and how our housing has been priced?”
Yes, write your congressman and let him know that you will not vote for him unless he passes legislation which mandates sensible lending.
Amazing that constituents have to do this;, that is, tell the congressman to make sure lenders only lend to people who are capable of paying them back.
However, the incestuous ties between Wall St. and Washington created this condition. And YOU are paying for IT! How do you like it?
NO one congressman is not going to care about how one city was manipulated in pricing. The only way would be to get the public involved. And they are very happy paying for the koolaid prices past and present.
OMG. That’s hilarious! That’s the best photo of lipstick on a pig. Thanks! LOL.
I’ve seen listings in San Diego longer than 9 months as short sales.
On a related note, the Senate just says no to cramdowns:
http://www.reuters.com/article/americasRegulatoryNews/idUSN3054983020090430
Interesting reading.
I am not sure what to make of this issue. It probably would cause an increase in interest rates because lenders would need to factor in the losses in a cram down. But then again, every owner in bankruptcy who gets to cram down a lender is staying in a house they cannot afford. In a bankruptcy proceeding where there are some surviving assets (Chapter 13) the mortgage lender benefits at the expense of other lenders (credit cards mostly). In that regard, I like the idea because it really screws credit card issuers (who are on par with drug dealers in my opinion).
If the cramdowns become comps, I’m all for them. Might be the fastest way to get the market moving down to affordability for the rest of us. (Just make the borrower pay back the difference if s/he sells for more than the cramdown value in the near future.)
This is crazy..
Of the 3.7 million home loans made in 2004, less than 1 percent have since resulted in a lender filing a default notice. Of the 3.7 million loans originated in 2005, 4.9 percent have triggered a default notice so far. Of the 3 million in 2006, 8.5 percent have so far resulted in default. A particularly toxic period appears to have been August through November 2006 which had more than a 9 percent default rate. Of the 2.1 million loans made in 2007, it’s 4.6 percent – a percentage that’s likely to rise significantly during the rest of this year.
http://www.dqnews.com/Articles/2009/News/California/CA-Foreclosures/RRFor090422.aspx
So the toxic period was mostly in ’06. If that is the case, the default rate should stabilize.
The key now is unemployment.
While underwriting standards are part of the problem, the period with the highest default rate is also the period with the highest home prices. As prices fall, people from 2004, or 2001, won’t be able to sell for the loan value.
It’s being built here in CA–
http://www.usgbc.org/DisplayPage.aspx?CMSPageID=1721#homes
would love it to go right into the GREAT Park great waste of space—after we clean up the toxic earth of course—LOL
could get a lot of NEW jobs
thanks IR,
I guess I’ll login first then.
-Cara
My comment (for those who couldn’t follow) was in relation to AZDavid’s comment about granite sneaking up the walls.
I’m guessing only doing granite near the bottom of buildings isn’t done because it would look tacky, but I have seen buildings that are intentionally that way with granite near the bottom and glass further up.
that period is currently the toxic period simply because prices have fallen below there already. 2004 rollbacks are not ubiquitous yet, but when they are people who lose income and would otherwise sell to fulfill their debt obligations won’t be able to and then the NOD will start there too. It’s all about employment now. (at least until the recasts start in earnest).