Prices at the high end still are clinging to peak valuations. Unfortunately for these homeowners, very little is selling at the prices of yesteryear.

Asking Price: $975,000

Address: 40 Morning View, Irvine, CA 92603

{book2}

You can spend all your time making money
You can spend all your love making time

So put me on a highway
And show me a sign
And take it to the limit one more time

Take It to the Limit — The Eagles

When sellers price their homes, most want to take it to the limit and list at the highest possible price the market could possibly bear if a buyer with more money than brains fell in love with the property. Even then, many sellers price well above that price level and enter into the WTF-are-you-thinking category. There are many properties in Irvine price 30%-50% over comps. The inventory in Irvine is very low, and in a market rally, prices may transact 10%-15% over comps, but there is no market where a house price 30%-50% over comps will sell.

To be fair to today’s featured property owner, this one is not priced that far over comps, but it is not a bargain either. If it were a few doors down where there are views of the canyon and golf course, there might be some justification for a high price, but this one looks at rooftops through a screen of trees.

Perhaps this neighborhood is special? Most of Irvine is struggling to maintain 2004 prices, and the low end is crashing through 2003 price levels. Despite this fact, today’s featured property has more than doubled in value since it was purchased in late 2003. Hmmm… I like Turtle Rock, but not that much. It will be interesting to see what happens to prices in neighborhoods like these as the high end collapses.

Asking Price: $975,000

Income Requirement: $243,750

Downpayment Needed: $195,000

Purchase Price: $450,000

Purchase Date: 9/11/2003

Address: 40 Morning View, Irvine, CA 92603

Charming and Spectacular at the same time! That comment is both meaningless and irritating at the same time!

The attention to detail granite
is remarkable.

Sheet Rock on walls and ceiling to give the garage that
‘Finished’ look. You mean they did finish the garage, so it does look finished. I guess most of these older properties do not have finished garages, or this would not be mentioned.

strengh? atenuation?

This property was purchased on 9/11/2003 for $450,000. The owner used a $300,000 first mortgage and a $150,000 downpayment. She did open a small HELOC in early 2008, but for the most part, she was a responsible borrower. If she can manage to sell this for its current asking price, she will make a fortune. Hopefully, she is wise enough to discount the price until she sells it while there is still some bubble equity left.

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.

🙂

Remember, this coming Tuesday is our IHB Block Party.

Some properties take longer to go through the system than others. This one has been shadow inventory for about 9 months, but now it is seeing the light of the MLS.

Asking Price: $409,800

Address: 24 Salton #63, Irvine, CA 92602

The boys of summer
Nobody on the road
Nobody on the beach
I feel it in the air
The summers out of reach
Empty lake,
Empty streets
The sun goes down alone
Im drivin by your house
Though I know youre not home

The Boys of Summer — Don Henley

Nobody in the house, nobody pays the loan, the bottom’s out of reach…

The original owner who was foreclosed on stopped making payments in early 2007. This was a 100% financing deal that went bad that I first profiled and updated here: Salton ** Update 1 **. I have speculated on all the reasons for the buildup of shadow inventory, and some have argued that it does not exist.

Shadow inventory clearly exists.

Today’s featured property was foreclosed on by CITIBANK NA, ; BEAR STEARNS ALT A TRUST 2006-5 MORTGAGE back on 9/12/2008. For the last 9 months, this has been part of the shadow inventory. For the last two years, this property was occupied by a deadbeat and then empty. Nobody has been making either rent or debt service payments during that time; two years as a non-performing asset. No wonder the banks are in trouble.

You can expect to see this trend continue. The lenders have been accumulating REO. Some resisted taking the write-downs because their balance sheets could not take it, some were hoping the Obama Administration would buy these toxic mortgage assets so lenders would not have to recognize the loss at all, and some were simply overwhelmed by the size of the problem. Lenders are now in the mode of foreclosing on defaulting borrowers and selling off their REO. Look for this trend to accelerate in the coming months.

Asking Price: $409,800

Income Requirement: $102,450

Downpayment Needed: $81,960

Purchase Price: $605,000

Purchase Date: 4/27/2006

Address: 24 Salton #63, Irvine, CA 92602

If this property sells for its current asking price, the investors in the MBS being serviced by CITIBANK NA, ; BEAR STEARNS ALT A TRUST 2006-5 MORTGAGE stand to lose $219,788. At first glance this looks like an ordinary loss for an Irvine property, but when you factor in the two years as a non-performing asset, the loss is at least $50,000 greater.

This property is being offered for 32% off its peak purchase price.

As the high end of the market collapses, you will see a race to the bottom among similar properties. Today’s featured property is one of three North Korean Tower penthouses competing for buyers who probably are not there.

Asking Price: $1,699,000

Address: 3141 Michelson #1704, Irvine, CA 92612

{book1}

Desperado, why don’t you come to your senses
You’ve been out ridin’ fences,
for so long – now.
Ohh you’re a hard one.
I know that you’ve got your reasons.
These things that are pleasin’you
Can hurt you somehow.

Don’t you draw the queen of diamonds boy
She’ll beat you if she’s able.

Desperado — The Eagles

Many of us here have been riding fences for a very long time, and most of us “on the fence” will probably stay there for another year or three. We have our reasons; prices are going down, and they will continue to do so. Many others pursued the Queen of Diamonds during the bubble, and she beat them, took their money, took their property, and left them broken.

I have documented other cases of similar properties racing downward to find the few available buyers. One of the more notable cases was back in 2007 in Quail Hill in a post called Stepping Down. Today’s featured properties are all penthouse units in the North Korean Towers at the corner of Jamboree and the 405. All three are high-end properties on the cusp of a calamity. Prices in this building are more than 50% off, and there is no bottom in sight. All three of these units will likely drop 65%-70% before prices stabilize. Right now, they are all priced near what the owners paid; that will change.

There are no buyers for these units, but just in case, these three properties are positioning themselves to capture a knife catcher before prices fall off a cliff. I recently documented this phenomenon in the post School of Hard Knocks on Scholarship, Jamboree Corridor, Irvine. Once prices start falling in these condo towers, there simply isn’t any support beneath prices. Cashflow valuations are a third of asking prices. Someone, somewhere is going to lose a great deal of money.

Asking Price: $1,699,000

Income Requirement: $424,750

Downpayment Needed: $339,800

Purchase Price: $1,647,000

Purchase Date: 8/7/2006

Address: 3141 Michelson #1704, Irvine, CA 92612

This unit is owned by the optimist of the group. He actually thinks he can sell it for more than he paid. He will still lose a little bit with the commission, but he really believes he will escape this unscathed.

Asking Price: $1,648,000

Income Requirement: $412,000

Downpayment Needed: $329,600

Purchase Price: $1,752,500

Purchase Date: 2/17/2006

Address: 3131 Michelson #1702, Irvine, CA 92612

This second property is nearly identical to the first. It is in the other tower, but the owner paid $100,000 more for this unit, and they are asking $50,000 less. If this one sells for its asking price, and if a 6% commission is paid, the total loss will be $203,800. Unfortunately, it will probably not sell for that much because…

Asking Price: $1,499,000

Income Requirement: $374,750

Downpayment Needed: $299,800

Purchase Price: $1,561,500

Purchase Date: 2/14/2006

Address: 3131 Michelson #1803, Irvine, CA 92612

The oil painting effect on Photoshop must be the new rage in MLS photos.

This last property is comparable to the first two, and it is $200,000 less expensive than the first and $150,000 less expensive than the second. It may not be quite as nice as the second one as it did sell for less originally, but the discount is such that a knife catcher may pick it instead.

If this one sells for its asking price, and if a 6% commission is paid, the total loss will be $152,440.

The owners of these three units are praying for a knife catcher. If they are lucky, perhaps one of them will find one; probably not. These three will continue to race downward until they either give up and go into foreclosure or find someone else willing to endure the big upcoming drop.

People who try to sell their own house do not use an agent to advise them on what to do or how to price it to sell. Some people do very well on their own; others… not so much.

Asking Price: $1,500,000

Address: 12 Lorenzo, Irvine, CA 92614

Hard to find how I feel, please someone help me.
Hard to find how I feel, controlling me every step of the way.
Hard to find how I feel, you greedy little baby!

Greed — Godsmack

Greed is a funny thing. It is an emotion we all feel, yet we are universally repulsed by it. Most religions identify it as a vice, and most people who work in finance identify it as a virtue. When everyone gets to feed their goblins of greed, the gluttony of consumerism satiates their salaciousness of the moment and greed grows unabated. When the system collapses and the greed is exposed for what it is, there is a period of shame and reflection — a fleeting moment before we do it all over again….

So how greedy is the owner of today’s featured property. Well, there is a property for sale down the street from this owner at 1 Lorenzo. It is a larger property on a corner with a view of a park. Basically, it is superior in every way to today’s featured property, and the owner there wants $320,000 less.

But this gets even better, the property at 1 Lorenzo was a WTF property profile from February 2008! (A New Drug) The owner of today’s featured property has priced himself $320,000 over a superior property that was itself grossly overpriced (it has been on the market 250 days now).

Today’s featured property is for sale by owner (FSBO). Savvy sellers can do well on their own, but clueless sellers simply embarrass themselves publicly by putting their properties on the market at prices that have absolutely no chance of selling. Everyone who pays attention to the housing market is aware of this property, and when most people see it, they giggle to themselves. With no agent to bring this seller down to reality, it just sits there and with each passing day, the owner looks more and more ridiculous.

Asking Price: $1,500,000

Income Requirement: $375,000

Downpayment Needed: $300,000

Purchase Price: $455,000

Purchase Date: 8/19/1999

Address: 12 Lorenzo, Irvine, CA 92614

How the owner describes the property: [silence]

This property was purchased on 8/19/1999 for $455,000. The owner used a $355,000 first mortgage and a $100,000 downpayment. Since then, he has managed his mortgage like most Irvine residents — he doubled it — and now he has significant debt. Of course none of this matters because he plans on selling this house for a small fortune.

If this house sells for its asking price, and if a 6% commission is paid, the owner stands to make $955,000.

LOL!

ROFLOL!!!

If you look at the listing history, you see that he first put this property on the market for $795,000. At that price, he would pay off his debts, but he wouldn’t take much cash with him when he left. Realistically, it might sell for $795,000 as there is still some bubble equity left in the property, but apparently this owner wants to make a fortune instead.

I can understand his greed. The fact that it is on display in such a manner should be humiliating, but there appears to be no shame in California real estate.

Any increase in pricing brings delusional sellers out of hiding. They put their properties on the market at WTF price levels and hope to hit the lottery.

Asking Price: $1,149,000

Address: 12 Inglenook, Irvine, CA 92602

{book6}

Every time I try to walk away
Something makes me turn around and stay
And I can’t tell you why

I Can’t Tell You Why — The Eagles

Most people watched prices go up in California during the Great Housing Bubble and they had no idea how and why it happened; most didn’t care, they just enjoyed feeling rich. The only explanation most people could come up with is that California real estate is “different.” We are running out of land, you know.

The higher up the property ladder you go, the stronger the belief in price-drop immunity becomes. The people who bought $1,000,000+ homes are under the impression that buyers might be a bit scarce right now, but that their homes have still been increasing in value by 10% or more per year.

They are in for a rude awakening.

Once there is the slightest sign of life in this price range, all the overextended borrowers and those discretionary sellers looking to cash in their lottery tickets put their houses for sale. This adds to the already bloated inventory of homes priced to sit at the high end. These properties will sit on the market until the owners tire of the listing, or in many cases succumb to their debts and end up in foreclosure.

I have made some bold predictions on this blog and many people did not believe possible when I made them. I have said a number of times that the high end is going to crash very hard — in some places 65% or more (particularly near the beach). I stand behind that prediction. It isn’t a matter of “if” it is just a matter of “when.” (BTW, I am not alone in this prediction.)

Asking Price: $1,149,000

Income Requirement: $287,250

Downpayment Needed: $229,800

Purchase Price: $1,024,500

Purchase Date: 5/24/2006

Address: 12 Inglenook, Irvine, CA 92602

ALL CAP

DESIREABLE? PRESTIOUS? WALKIN? BUILTIN?

This property was purchased near the peak on 5/24/2006 for $1,024,500. It is difficult to check comps because “No similar recent past sales could be found.” The owners have a $960,000 first mortgage on the property, and there is a $25,000 HELOC. Realistically, these people are already $100,000 or more underwater, but if someone is willing to relieve them of their debt burden, it looks like they are willing to move out.

Asking Price: $2,490,000

Income Requirement: $622,500

Downpayment Needed: $498,000

Purchase Price: $1,782,500

Purchase Date: 1/13/2006

Address: 35 Canyon Terrace, Irvine, CA 92603

Preimium? suround?
vacumn?

Most beautiful Estate? I find this kind of BS particularly annoying. First, this isn’t an estate, it is a tract home, and second, are you sure it is the most beautiful?

Like many owners in Turtle Ridge, these people believe their properties are “special.” They also bought at the peak, but since their property is so beautiful, it has appreciated $750,000 since they bought it.

WTF?

Based on neighborhood comps, they might be able to get out at breakeven if they wanted to sell today, but that would not give them the huge profit they are due.

One of the great features of the IHB is going to be seeing these WTF asking prices years from now. When properties like these are back under $1,000,000, these $2,500,000 asking prices are going to be a hilarious testament to just how crazy the housing bubble was.