Properties take a long time from the initial financial stress of the owner through foreclosure and on to sale in the open market. Today’s featured property is nearly two years into its journey.

Asking Price: $519,900

Address: 75 Burlingame, Irvine, CA 92602

How Long — The Eagles

Well I wish I lived in the land of fools,
no one knew my name
But what you get is not quite what you choose
Tell me, how long, how long

I first featured today’s property in the post Burlingame Over on July, 26, 2007. In fact, I still have the pictures from that listing, so that puts me one ahead of the listing agent. I do like his pretty REO sign out front though.

Based on the previous listing, this homeowner was either a flipper or someone who was overextended from the start and wanted to get out. The financial distress of being a loanowner finally caused them to default at the end of 2007. A formal notice of default is issued at least 90 days after missing the first payment, so we can assume by the 4/10/2008 NOD, that this owner has not made a payment since December of 2007, and maybe even further back than that.

Foreclosure Record
Recording Date: 02/06/2009
Document Type: Notice of Sale (aka Notice of Trustee’s Sale)
Document #: 2009000052970

Foreclosure Record
Recording Date: 04/10/2008
Document Type: Notice of Default
Document #: 2008000164962

The records show the lender took ten months from NOD to NOT. This is supposed to be a 90 day process; seven full months were added to the process. That is seven months of free rent in addition to the seven a homedebtor automatically gets in the foreclosure process.

Once the bank finally decided to foreclose, they did do it promptly. The action took place on 3/2/2009 and the H&R BLOCK BANK paid $611,036 for the property.

Based on what I am seeing, unless the foreclosure process picks up later in the real estate cycle, rather than this problem being resolved by 2013, it will probably drag out until 2016 or later. There will be no meaningful price appreciation until the foreclosure problem is behind us.

Asking Price: $519,900

Income Requirement: $129,975

Downpayment Needed: $103,980

Monthly Equity Burn: $4,333

Purchase Price: $712,500

Purchase Date: 5/31/2006

Address: 75 Burlingame, Irvine, CA 92602

Another I-don’t-give-a-shit description.

This property was purchased on 5/31/2006 for $712,500–let that sink in for a moment. Someone paid that much for a 2 bedroom 2 bath condo and thought it was rational. Anyway, the owner used a $676,875 first mortgage and a $35,625 downpayment. Since this was purchased right at the peak, there were no further refinances.

If this property sells for its current asking price, and if a 6% commission is paid, the total loss will be $233,794. The property is being offered for 27% off its peak purchase price.

It is still overpriced.

BTW, I thought you might find this 20 year rollback interesting. It is a condo in Corona selling for less than its 1989 sales price. The 1989 sale was near the peak of the previous bubble, and I long suspected we would find a rollback like this one in our area. This isn’t a trashout. The only reason it has rolled back 20 years is because that is what it is worth to a cashflow investor today. If the previous bubble got 20 years ahead of current valuations, how far ahead of time was the Great Housing Bubble?

Prices are still falling, and wise owners with equity are getting out while there is still some bubble equity left. There are not many of these people, but their movement against the masses of the kool aid intoxicated will give them greater profits than those that “wait and see.”

Asking Price: $299,567

Address: 119 Fallingstar, Irvine, CA 92614

{book2}

Afternoon Delight — The Starland Vocal Band

I admire the people who manage to sell a speculative asset for a profit. As I described in Speculation or Investment? it is a very difficult thing to do because it is at odds with your emotions. Today’s featured property owner missed the peak, and by holding on for the last two years, she has left about $100,000 sitting on the table (as evidenced by the June 2007 prices), but she is still selling when she is not financially distressed, and by doing so she will likely capture $100,000 in bubble equity before it disappears as well.

Why Speculators Fail

Despite the huge price spike in the
final two years of the bubble caused by wild speculation, most
speculators will lose a great deal of money. The causes are rooted in
basic human emotions that work against making the proper decisions to
profit in a speculative market. The moment a speculative asset is
purchased and the speculator has taken a position in the market,
emotions are immediately in play. If the potential resale price in the
market is rising, the natural reaction is to want more. Greed takes
over and the asset is strongly coveted by the speculator. If possible,
the speculator will go out and purchase more of the asset in question.
This was common in the bubble when people would take the equity from
one property and purchase even more residential real estate. The
problem with this natural emotional reaction is that it prevents the
speculator from selling the asset and taking profits when they are
available. People who make a living participating in speculative
markets have learned to override this natural instinct and sell when
their emotions are telling them to buy more. The average residential
real estate speculator does not have this discipline or awareness. They
will hold the asset through the good times.

When prices begin to fall in a speculative market,
most speculators immediately lapse into denial. They were so
emotionally rewarded by purchasing and holding the asset, they see no
reason to believe the first signs of a declining market are anything
other than a temporary aberration. As prices continue to fall, the
emotions change: fear begins to creep in, and the battle between denial
and fear goes on well past the breakeven point where the speculator
could have closed the position without losing any money. As prices fall
further, the fear begins to take an emotional toll and the speculator
starts to feel pain. The further prices drop, the more pain is
inflicted on the speculator. What is the natural reaction to pain? Push
it away. As a speculative investment becomes painful, the natural
reaction is to want to get rid of it. This prompts the speculator to
sell the asset – only after they have lost money. A speculator’s
emotions always work against them. When the asset is rising in price
they want more of it, and when it is falling in price they want less.
This is a natural reaction, and it is the cause of all losses in
speculative markets. This is why most speculators fail.

In case any of you missed Mr. Mortgage’s recent entry, 5-28 – Potential Consequences of 5.5% Mortgage Rates, he walks you through all the implications of the little-noticed mortgage meltdown that occurred this week. Our spring rally may come to an abrupt halt and many properties may fall out of escrow unless the borrowers locked their rates in.

Asking Price: $299,567

Income Requirement: $75,000

Downpayment Needed: $60,000

Monthly Equity Burn: $2,500

Purchase Price: $171,000

Purchase Date: 4/30/1998

Address: 119 Fallingstar, Irvine, CA 92614

That description is not too bad; it is accurate, and it has a minimum of flowery adjectives, and no bizarre punctuation.

This owner lost $100,000 or more waiting for two years to sell, but there is still plenty of bubble equity available. This condos will see prices near $200,000 before this is over with.

This property was purchased on 4/30/1998 for $171,000. The owner used a $163,050 first mortgage and a $7,950 downpayment. There was a refinance in 2003 for $161,500, probably to secure a lower interest rate. This owner was very responsible.

If this property sells for its current asking price, and if a 6% commission is paid, this owner stands to make $110,592. It will be a nice return on her $7,950 initial investment.

I hope you have enjoyed this week at the Irvine Housing Blog. Be sure
to come back next week as we
continue chronicling ‘the seventh circle of real estate hell.’ Have a great weekend.

🙂

{book7}

Gonna find my baby, gonna hold her tight
gonna grab some afternoon delight.
My motto’s always been; when it’s right, it’s right.
Why wait until the middle of a cold dark night.
When everything’s a little clearer in the light of day.
And you know the night is always gonna be there any way.

Sky rockets in flight. Afternoon delight. Afternoon delight.

Afternoon Delight — The Starland Vocal Band

One advantage of a big house is entertaining guests in a fancy ballroom. When buyers wonder why the asking price is so high, owners can say, “because I have big balls.”

Asking Price: $1,998,518

Address: 5 New Dawn, Irvine, CA 92620

BTW, if you want to see some of the biggest balls in Orange County, check out the new Coto Housing Blog, and check out this HELOC abuse case in San Clemente.

Big Balls — AC/DC

Well I’m upper upper class high society
God’s gift to ballroom notoriety
And I always fill my ballroom
The event is never small
The social pages say I’ve got
The biggest balls of all

The United States has always been a society of the have and the have nots. That is how capitalism works. The disparity of wealth and income is the incentive society allows the individual to motivate hard work, innovation and contribution to societal goals. Communism was an attempt to create a classless society, but it failed, mostly due to the failure of the society to provide any tangible rewards for individual effort. Socialist societies try to strike a balance between the two extremes by allowing a measure of income disparity, but not allowing very much of it by taxing residents very heavily. For better or worse, we are about to take a big step toward Socialism here in the United States.

The schism between the haves and the have nots is notable in our current real estate market. The low end of the market is getting pummelled. Have you looked at the prices in Orangetree or The Lakes lately? Every unit in there is being offered for 30%-45% off, and the bottom is nowhere in sight. Despite the collapse in pricing at the low end, the high end seems to think they are immune. Asking prices are typically at WTF levels with many owners believing their properties have appreciated 30%-45% since the peak. Some owners ask these prices from willful ignorance, but some just have big balls.

Some balls are held for charity
And some for fancy dress
But when they’re held for pleasure
They’re the balls that I like best

We all know the party is over. Everyone had their fun during the bubble, but the time has come to pay the piper, and he is only accepting cash. People will buy up these high end properties, but the end will not be quite as high when prices stabilize. Perhaps when prices are reasonable relative to incomes, people will have money left over from their wage income to throw big parties. It will not be as much fun as the bubble years with all the HELOC funding, but as long as people want to entertain, we will still have big balls.

Asking Price: $1,998,518

Income Requirement: $499,629

Downpayment Needed: $399,703

Monthly Equity Burn: $16,654

Purchase Price: $690,000

Purchase Date: 6/22/1999

Address: 5 New Dawn, Irvine, CA 92620

The word “stunning” needs to come out of the realtor vocabulary.

over $180,000 in upgrades. So that is why this is worth $1,300,000 more than they paid. [smacks forehead]

LVRM?

This is a private enclave
of estate homes that rarely come on the market. Oh, really?

8 New Dawn, Irvine, CA 92620; Price: $1,999,000

71 New Dawn, Irvine, CA 92620; Price: $1,749,000

73 New Dawn, Irvine, CA 92620; Price:
$1,899,000

Can you pick out the “estate” in this map?

This owner has delisting dementia.

This owner has no grip on reality, but at least there is no HELOC abuse. The property was purchased on 6/22/1999 for $690,000, and the owner used a first mortgage of $350,000 and a downpayment of $340,000. The first mortgage has been refinance twice, and the final balance is $301,000. This owner actually paid down a mortgage! If this property sells for its current asking price, the owner stands to make a fortune.

Of course, we all know this property is not going to sell for its asking price, but it takes courage to ask that much. With all the foreclosures in the pipeline, anyone who buys this place must be brave as well. I guess it takes big money to have big balls…

{book2}

Well I’m upper upper class high society
God’s gift to ballroom notoriety
And I always fill my ballroom
The event is never small
The social pages say I’ve got
The biggest balls of all

I’ve got big balls
I’ve got big balls
They’re such big balls
And they’re dirty big balls
And he’s got big balls
And she’s got big balls
(But we’ve got the biggest balls of them all)

Big Balls — AC/DC

Turtle Ridge is the only place in America where people actually believe their properties have appreciated 60% since late 2004. The sun is shining on Shady Lane.

Asking Price: $2,200,000

Address: 27 Shady Lane, Irvine, CA 92603

{book}

My guest blogging at Irvine Homes continues with Irvine neighborhood profile: University Park.

The Future’s So Bright — Timbuk3

Well I’m heavenly blessed and worldly wise
I’m a peeping-tom techie with x-ray eyes
Things are going great, and they’re only getting better
I’m doing all right, getting good grades
The future’s so bright, I gotta wear shades

Years ago, the brightest minds of a generation were attracted to math, science and engineering. John F. Kennedy challenged the country to send a man to the moon and safely return him. More recently, a generation of the best and brightest was attracted to business and finance with the hope of sending asset prices to the moon and the stars. They succeeded. We had two astronomical financial bubbles one after the other.

Finance lost its way. The purpose of finance is to distribute investment capital among its competing ends to ensure the efficient use of scarce resources. Somewhere over the last 20 years, the financial elites convinced themselves they could actually create value as if finance were a manufacturing process. I remember reading an article written by that thoroughly discredited Wall Street talking head, Lawrence Kudlow, where he opined that the financial innovations in home mortgage finance created great societal value. This is nonsense.

When a builder constructs a house, he takes raw materials, assembles them in a manufacturing process, and the final product is worth more than the sum of its parts. That is adding value. If you take that finished house and inflate its value through some innovative loan program, the house is not changed. Where is the value added? The cheerleaders of financial innovation overlooked this obvious fact. Moving money around never adds value. It may enable manufacturers and service providers to add value, but finance by itself is incapable of adding value to anything.

Today’s featured property had plenty of “value” added to it by financial innovation before it was purchased in 2004. If this owner were fortunate, he could still sell at breakeven before pricing in Turtle Ridge completely collapses, but instead, he is trying to sell for about 60% more than he paid. WTF?

The kool aid in this neighborhood is truly astonishing. These people actually believe their neighborhood is immune, and they are entitled to these tremendous profits from appreciation just because they bought there. Amazing!

Asking Price: $2,200,000

Income Requirement: $550,000

Downpayment Needed: $440,000

Monthly Equity Burn: $18,333

Purchase Price: $1,325,500

Purchase Date: 9/24/2004

Address: 27 Shady Lane, Irvine, CA 92603

Best View in Turtle Ridge! Bullshit. There are many great views in Turtle Ridge; I doubt this is the best one.

PRIVATE FULL bath rooms. This must be very important to get the ALL CAPS emphasis.

w/ — why?

keep your bath water HOT! (pretty cool!) Perhaps, but the description is pretty lame.

Downstairs you will find a
Kitchens lovers dream! Even thought the grammar is confusing, I will give her credit for not calling it a gourmet kitchen…

• This property was purchased on 9/24/2004 for $1,325,500. The owners used a $927,700 first mortgage and a $397,800 downpayment.
• On 11/30/2005 they opened a HELOC for $250,000.
• On 2/8/2006, there is a private-party loan recorded for $400,000.
• On 10/3/2006 the took out a stand-alone second for $350,000. The previous loans were either paid off or subordinated.
• On 2/4/2008 there is another private-party loan recorded for $171,000.
• It is difficult to tell exactly how much they owe, but it looks like $1,448,700 ($927,700 + $350,000 + $171,000).

Are these owners distressed? I imagine they would tell you the loans and payoffs were part of their sophisticated financial management. Even with $1,448,700 in debt, they still believe they have $750,000 equity in their property based on their asking price. It is amazing how much stress than be removed with a huge does of kool aid and denial.

I hope you have enjoyed this week at the Irvine Housing Blog. Be sure
to come back tomorrow as I explore HELOC Abuse Huntington Beach Style, and
come back next week as we
continue chronicling ‘the seventh circle of real estate hell.’ Have a great weekend.

🙂

{book6}

I study nuclear science
I love my classes
I got a crazy teacher, he wears dark glasses
Things are going great, and they’re only getting better
I’m doing all right, getting good grades
The future’s so bright, I gotta wear shades,
I gotta wear shades

Well I’m heavenly blessed and worldly wise
I’m a peeping-tom techie with x-ray eyes
Things are going great, and they’re only getting better
I’m doing all right, getting good grades
The future’s so bright, I gotta wear shades
I gotta wear shades

The Future’s So Bright — Timbuk3

In a competitive society like ours, there are winners and losers. The people who bought before the bubble, did not HELOC their home, and are selling in time to cash in that bubble equity are the winners. Let’s celebrate them today.

Asking Price: $747,500

Address: 14811 Mayten Ave, Irvine, CA 92606

BTW, I am guest contributing to the Irvine Homes blog this week. Today’s post is a community profile on Woodbridge.

We Are The Champions — Queen

I’ve taken my bows
And my curtain calls –
You brought me fame and fortune and everything that goes with it
I thank you all –

There was a time, many years ago when success came through vision,
hard work and sacrifice. Achieving success was a slow process, and
there were no guarantees. It doesn’t work that way in California any
more.

Now, success comes through passive ownership of real
estate. It requires no vision, no work, and no sacrifice. In fact,
people are allowed to immediately enjoy the fruits of their lack of
labor through mortgage equity withdrawal. They do not need to slowly
accumulate wealth when they can quickly live off the converted income
from their brilliant asset purchase. The old measure of success was
asset accumulation, whereas the new measure of success is resource
consumption. It is important to drive the right car, carry the right
handbag, eat in the right restaurants, and of course, live in the right
neighborhood. People should be surrounded by the other people who are as brilliant and successful as they are.

The real champions of conspicuous consumption and pretentious consumerism are suffering right now. Many have already lost their homes, and the rest will soon enough. This recession we are all enduring was caused by the banks lending people insane amounts of money and losing it. They lost this money to the pretenders I profile with HELOC abuse stories almost daily. It is hard to feel too sorry for the pretenders; after all, they would be the first to tell you how they are entitled to their lifestyles, and they are superior to you because of it.

Today’s featured property is different; the owners represent success
from a bygone era. They allowed their equity to accumulate, they paid
down their mortgage, and now they have an opportunity to cash out and
enjoy a well-funded retirement. These owners are among the champions of Irvine. When a knife catcher comes along and cashes them out, they will pocket about $700,000. They are winners.

Our bubble economy and culture favors speculators and gamblers. There was a time when you could invest in reliable cashflow investments at reasonable prices and make relatively secure investment returns. A bad investment might not earn you the return you hoped, but they didn’t have the potential to cause catastrophic losses like we are witnessing during the housing bubble. Once the Wall Street market mavens realized they could fleece the unsuspecting masses through asset price volatility, the days of cashflow investing were over.

Despite this change in investor psychology, there are still people who lived by the rules of yesterday. Saving money and living frugally went out of style years ago, but those who clung to their old values still have cash and equity. If they move quickly they still have time to make a few extra bucks off the adherents to the speculative mindset being summarily crushed in our post-Ponzi Scheme world.

So please, any knife catchers out there, go buy this property and let your mistake make their success complete. They deserve it.

Asking Price: $747,500

Income Requirement: $186,875

Downpayment Needed: $149,500

Monthly Equity Burn: $6,229

Purchase Price: $45,000

Purchase Date: 12/19/1973

Address: 14811 Mayten Ave, Irvine, CA 92606

WOW! LOCATION! LOCATION! LOCATION! These sellers deserve better than this kind of meaningless realtorspeak.

This property was purchased for $45,000 on 12/19/1973. The owners long ago paid off their mortgage. On 3/9/2006 they did take out a $45,000 mortgage, but it is obvious from the photos that the property was completely updated. I imagine that every penny of this money went into the update. If this property sells for its current asking price, and if a 6% commission is paid, the total profit on the sale will be $657,650. I hope they get it.

I see so few properties for sale where the owners were responsible with their debts. There are probably many more out there, but since they are not in distress and have no desire to sell, I don’t see them; however, if it is for sale today, even the organic sellers have generally doubled their mortgages and they are in distress.

To today’s featured property owners: I salute you.

{book1}

I’ve paid my dues –
Time after time –
I’ve done my sentence
But committed no crime –
And bad mistakes
I’ve made a few
I’ve had my share of sand kicked in my face –
But I’ve come through

I’ve taken my bows
And my curtain calls –
You brought me fame and fortuen and everything that goes with it
I thank you all –

We Are The Champions — Queen