O Holy night, the stars are brightly shining

It is the night of our dear Savior’s birth

Long lay the world in sin and error pining

Til He appeared and the soul felt it’s worth

A thrill of hope the weary world rejoices

For yonder breaks a new and glorious morne

Fall on your knees

O hear the angel voices

O night divine!

O night when Christ was born

O night divine!

O night, O night divine!

And in His Name, all oppression shall cease

Sweet hymns of joy in grateful chorus raise we

Let all within us praise his Holy name

Christ is the Lord!

Their name forever praise we

Noel, Noel

O night, O night Divine

Noel, Noel

O night, O night Divine

Noel, Noel

O night, O holy Divine

O Holy Night — Celine Dion

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Asking Price: $524,900

Income Requirement: $131,225

Downpayment Needed: $104,980

Purchase Price: $682,763

Purchase Date: 5/29/2007

Address: 81 Chantilly, Irvine, CA 92620

Beds: 2

Baths: 2.5

Sq. Ft.: 1,824

$/Sq. Ft.: $288

Lot Size: –

Type: Condominium

Style: Other

Year Built: 2005

Stories: Two Levels

Area: Woodbury

County: Orange

MLS#: S515272

Status: Active

On Redfin: 3 days

From Redfin, “Great 2 level condo located in Woodbury!! Very open and spacious with large rooms throughout. Family kitchen, wood and stone tile floors, living room with fireplace, seperate laundry, and private courtyard entry are just some of the features of this home. Close to everything Irvine has to offer!!”

Two exclamation points? I thought three was the standard?

seperate?

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Sales History

Date……………….Price

05/29/2007 $605,032

09/08/2005 $679,000

I assume this is an REO. Interesting that it took them 6 months to list it. If they get their asking price, assuming they originally loaned $679,000 and they pay a 6% commission, the total loss would be $185,594. Notice this asking price is 22.6% off the peak sales price. Yikes!

There is a reason for the credit crunch: lenders are losing money. Lenders don’t like to loan money when people do not pay them back. The more they get burned, the more conservative they become. As they get more conservative, fewer people qualify for loans and loan amounts decline. This in turn puts more people underwater makes refinancing that much more difficult and causes even more bank losses. It is a classic downward spiral. This is why credit will not loosen any time soon. There are people out there who believe the credit crunch is a temporary thing that will pass soon. It isn’t, and it won’t. In fact, it is likely to spread to other forms of borrowing as the situation continues to deteriorate.

So what does all this mean, and how do you prepare for it? Basically, it means borrowed money will not be widely available, and what is made available will be more expensive. If you live a life without credit dependency, the credit crunch will not impact you much. If someone takes away something you do not use, it doesn’t harm you much. However, if you are like most Californians and you are addicted to credit, you are in for some struggles.

The best thing you can do to prepare for the upcoming deepening credit squeeze is to stop using credit. Pay off what you have and stop using it. If you don’t, you might find your interest expense increasing dramatically, and you will find yourself subject to the whims of your creditors. There is no freedom when you have debt. The next thing you can do is to start saving money. Things could get very bad, particularly locally. We have already seen waves of layoffs in the real estate industrial complex, but this could easily trigger a wider slowdown in the economy and put people in related fields out of work. It could be you. Save now, and you will be prepared to weather the storm.

Well, way up North where the air gets cold

There’s a tale about Christmas that you’ve all been told

A real famous cat all dressed up in red

And he spends the whole year workin’ out on his sled.

It’s the little Saint Nick

little Saint Nick

It’s the little Saint Nick

little Saint Nick

Just a little bobsled, we call it Old Saint Nick

But she’ll walk a tobogan with a four speed stick

She’s candy apple red with a ski for a wheel

And when Santa hits the gas, man, just watch her peel.

Little Saint Nick — Beach Boys

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Today’s property was purchased on 10/16/2006 for $869,000 and sold at auction on 9/27/2007 for $682,763. These are not asking prices, these are actual transaction amounts. That is a 21.4% loss in less than one year, and that is not including any transaction costs.

Asking Price: $739,900

Income Requirement: $184,750

Downpayment Needed: $147,800

Purchase Price: $682,763

Purchase Date: 9/27/2007

Address: 12 Apple Valley, Irvine, CA 92602

Beds: 4

Baths: 3

Sq. Ft.: 2,150

$/Sq. Ft.: $344

Lot Size: –

Type: Single Family Residence

Style: Other

Year Built: 2000

Stories: Two Levels

Area: Northpark

County: Orange

MLS#: S514361

Status: Active

On Redfin: 9 days

From Redfin, “Charming home in guard gated community of Northpark!! Main floor master suite with large oval tub, enclosed shower, and dual sinks. Upstairs bedrooms with walk-in closets. Kitchen with breakfast bar plus seperate dining room. Spacious laundry room with deep sink and cabinets. Nice patio in side yard. The many association amenities iclude pool, spa, barbeque, sport court, tennis and more. Close to parks, golf, dining, and shopping at The Market Place”

Only two exclamation points? The realtor must not be excited enough about this listing for the standard three exclamation points.

seperate, iclude… I routinely misspell separate, but then again, I take the time to use a spell checker…

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From the ownership records, it is not clear if this is an REO or a flip. The new owner is an LLC suggesting it might be a flip attempt, but the low asking price relative to the purchase price suggests this LLC may have been formed as the REO holding entity. In either case, the 21.4% loss may actually get larger. In a normal foreclosure situation, the first mortgage holder, who usually has an 80% loan against the property, will go to auction and bid the loan amount. If they are the highest bidder (lately they have been the only bidders,) they end up with the property. The price may need to fall further to find the real market. If this property sells for less than its purchase price, it really reflects a larger loss on the original sale.

In a small market correction, a property such as this one that comes up for sale at an auction generally does not go back to the bank. Since the bank is only going to bid 80% of the original purchase price (the amount of the first mortgage,) there is usually someone who thinks the property is worth more than what the bank is willing to bid and buys the property. The bank does not care because they got their loan money back, and if the speculator is correct, they can make a few dollars in the deal. You know the market is in bad shape when banks bid 80% of original purchase price and get the property. You know the market is in really bad shape when nobody even bids against the bank (which has been happening regularly.)

So where is the Irvine market right now? 15% to 20% off the peak. We have documented numerous cases of properties with asking prices 15% -20% off the peak, and today’s property is a recorded sale at 21% off the peak. It is hard to argue with the data.

This has been another eventful week at the Irvine Housing Blog. We had two days of well over 100 comments in a lively conversation. Come back again next week as we continue to Chronicle ‘the seventh circle of real estate hell.’

I want to leave you this week with a picture of me — at least how some of the bitter homedebtors see me.

I received an email from a reader providing more information on this listing:

Here is the deal on this property: Mr. Windfall Profits purchased the property for $330,000 direct from Shea Homes in Jun-2003. Just 14 months later, Ms. Greater Fool purchased the property for $500,000 in Aug-2004. Ms. G.F. encumbered the property with $475,000 in debt at the time of acquisition. Ms. G.F. apparently needed some money (new Mercedes lease? tropical vacation?), so she refinanced in Aug-2006–a $480,000 first and a $128,000 second, for a total of $608,000 in debt.

When Ms. G.F. refinanced, her original loan would have been paid off, enriching her with a whopping $133,000 in cash.

Ms. Greater Fool sold the property in Jul-2007–but unfortunately for the lender this was not sold by a grant deed, it was sold by trustee’s deed! Deutsche Bank Trust Co America is the recorded owner at a price of $505,138. It’s on Redfin for $469,900. With a full price offer and 6% in sales commissions, the total lender loss from the Aug-2006 refi will be $166,294 or 27%!

It is Black Friday today…I wonder what Ms. Greater Fool is doing with all that cash?

I am wondering the same thing. If I had just walked away with that much of the banks money, I would be very thankful…

I close my eyes, only for a moment,
and the moment’s gone
All my dreams, pass before my eyes,
a curiosity
Dust in the wind,
all they are is dust in the wind.
Same old song,
just a drop of water in an endless sea
All we do, crumbles to the ground,
though we refuse to see

Dust in the wind,
all we are is dust in the wind

[Now] Don’t hang on,
nothing lasts forever but the earth and sky
It slips away,
and all your money won’t another minute buy.

Dust in the wind,
all we are is dust in the wind
Dust in the wind,
everything is dust in the wind.

Dust in the Wind — Kansas

Link to Studio Version Music Video

The recent fires have reminded me of the helplessness of man to confront forces larger than himself. Many homeowners are hoping the FED or somebody can save the housing market. The forces in play are much larger than anyone can control. We are all powerless to change our real estate market, including the FED. All we can do at this blog is keep people informed of its progress, and hopefully keep of few readers from watching their hard-earned money consumed by the market or dissipate into the ethers.

New Asking Price: $469,900

Old Asking Price: $499,900

Income Requirement: $124,975

Downpayment Needed: $99,980

Purchase Price: $505,138

Purchase Date: 7/24/2007

Address: 19 Flowerbud, Irvine, CA 92618

Beds: 2
Baths: 2
Sq. Ft.: 1,200
$/Sq. Ft.: $417
Lot Size: –
Type: Condominium
Style: Townhouse
Year Built: 2003
Stories: Three or More Levels
Area: Quail Hill
County: Orange
MLS#: P606334
Status: Active
On Redfin: 1 day
New Listing (24 hours)

From Redfin, “END UNIT TOWNHOME W/ DIRECT GARAGE ACCESS IN ‘QUAIL HILL’ PRICED FOR IMMEDIATE SALE. FORMAL LIVING RM W/ FIREPLACE, UPGRADED DISTRESSED HARDWOOD FLOORS, GRANITE KITCHEN COUNTERS, BALCONY, PEDESTAL SINK IN GUEST BATH, INSIDE LAUNDRY AREA, NICE SIZE BEDROOMS. SUPER MOTIVATED SELLER WILL MAKE EVERY EFFORT TO WORK WITH YOUR QUALIFIED BUYERS. SUBMIT!!!”

CAPS LOCK, AGAIN.

SUBMIT!!! Sounds like a line from a bad bondage video…

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Check out the sales history:

Sales History
Date Price
07/24/2007 $505,138
08/26/2004 $500,000

This is actually a 2004 rollback and the second REO we have seen prices below $500,000 in Quail Hill. The first might be written off as an anomaly, the second is an ominous sign. At what point does this become identified as a trend?

Just in case you forgot why we are seeing all these REOs.

Dogs of war and men of hate
With no cause, we don’t discriminate
Discovery is to be disowned
Our currency is flesh and bone
Hell opened up and put on sale
Gather ’round and haggle
For hard cash, we will lie and deceive
Even our masters don’t know the webs we weave

One world, it’s a battleground
One world, and we will smash it down
One world … One world

Invisible transfers, long distance calls,
Hollow laughter in marble halls
Steps have been taken, a silent uproar
Has unleashed the dogs of war
You can’t stop what has begun
Signed, sealed, they deliver oblivion
We all have a dark side, to say the least
And dealing in death is the nature of the beast

One world, it’s a battleground
One world, and we will smash it down
One world … One world

The dogs of war don’t negotiate
The dogs of war won’t capitulate,
They will take and you will give,
And you must die so that they may live
You can knock at any door,
But wherever you go, you know they’ve been there before
Well winners can lose and things can get strained
But whatever you change, you know the dogs remain.

One world, it’s a battleground
One world, and we will smash it down
One world … One world

Dogs of War — Pink Floyd

Link to Live Music Video

Link to Video from The Wall

Attention all homedebtors: The lender is coming for your house. Steps have been taken, a silent uproar, Has unleashed the dogs of war. You can’t stop what has begun. Signed, sealed, they deliver oblivion.

Do you think they care about you? Hollow laughter in marble halls

Is the lender more concerned about you or about themselves? They will take and you will give, And you must die so that they may live.

Do you think you can work something out with them? The dogs of war don’t negotiate. The dogs of war won’t capitulate,

Do you think your mortgage broker is responsible? For hard cash, we will lie and deceive, Even our masters don’t know the webs we weave.

Do you think the problem is widespread? You can knock at any door, But wherever you go, you know they’ve been there before.

Do you think those with good credit are unaffected? Well winners can lose and things can get strained. But whatever you change, you know the dogs remain.

Asking Price: $719,900

Income Requirement: $179,975

Downpayment Needed: $143,980

Bank Purchase Price: $782,000

Bank Purchase Date: 10/11/2007

FB Purchase Price: $815,000

FB Purchase Date: 3/20/2006

Address: 4032 Rampage, Irvine, CA 92620

Beds: 5
Baths: 3
Sq. Ft.: 2,700
$/Sq. Ft.: $267
Lot Size: 8,400 sq. ft.
Type: Single Family Residence
Style: Contemporary
Year Built: 1970
Stories: Two Levels
Area: Northwood
County: Orange
MLS#: S511527
Status: Active
On Redfin: 4 days
Fixer-upper

From Redfin, “Great Opportunity! Bank owned single family home with pool on huge lot. Located in a cul de sac close to park in the Northwoods area of Irvine. Added family/game room. Living room w/ fireplace, formal dining room, kitchenw /nook, one bedroom and bath downstairs. Needs some TLC “

If you submerged this house in water, it would make a great ski jump.

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$267/SF: This is a new low in Irvine. It wasn’t long ago that finding a property under $300/SF was difficult, now we are on our way back under the $200/SF mark, particularly for the larger properties. Based on the 20% off the peak we have been seeing, this property is still $60,000 overpriced, so we will likely see the $250/SF barrier fall. If the bank manages to get the full asking price, they stand to lose $105,294 assuming a 6% commission, and assuming the auction price did not already cause a loss on a second mortgage.

For those of you offended by some of my selections of fine art, please do not look below.

DANTE ET VIRGILE AUX ENFERS by William Bouguereau

Dogs of war and men of hate
With no cause, we don’t discriminate
Discovery is to be disowned
Our currency is flesh and bone