Home sales are off again in 2011 and remain well below historic norms. Are lenders creating this problem with overly tight lending standards?

Irvine Home Address … 507 TERRA BELLA Irvine, CA 92602

Resale Home Price …… $285,000

I'd put out a burning building with a shovel and dirt

And not even worry about getting hurt

I'd lay in a pile of burning money that I've earned

and not even worry about getting burned

The Fabulous Thunderbirds — Tuff Enough

Everyone who put a down payment on an underwater home is laying in a pile of burning money they earned. In the end, they all get burned. Some will succumb to the financial pressures, some will accelerate their defaults, and some will hang on paying far too much for the properties they inhabit.

Now that house prices are again in free fall, lenders need to be concerned about loan quality and borrower qualifications more than ever. If they make bad loans now, they won't have a rising market to sell into that will recover their capital.

Slow spring: Home demand off 5%

May 2nd, 2011, 6:34 am — posted by Jon Lansner

The latest Orange County home inventory report from local broker Steve Thomas — data as of April 28 — says …

Demand, the number of new pending sales over the past month, decreased by 5% over the past month, shedding 169 pending sales and now totals 3,189. This year, the height in demand was reached on March 31st with 3,358 pending sales.

My criticism of Steve Thomas's methodology is that pending sales fall out of escrow — frequently. Using pending sales simply distorts the numbers. During the beginning of the selling season escrow numbers should be increasing instead of going down.

Two weeks prior, on March 17th, demand had increased to 2,982. So, current demand may be off over the past month, but it is definitely up from earlier in the year. The Orange County market had been following a normal cyclical pattern, but has changed course over the past month. Typically, demand remains elevated or increases during the spring, not dropping.

This is a sign of just how weak the market really is.

Is it the negative press on pricing, buyer fear, tight financing, unemployment, consumer confidence, gas prices, the Middle Eastern upheaval, the U.S. economy, or the world economy? Maybe the answer is a bit simpler; we suffer from the “too much information age.”

I will admit, the IHB contributes to the “too much information age.” Now people know what is really going on with the market. it must have been much easier for realtors when people accepted their bullshit as experts.

Market psychology is not what is holding back the market right now. The problem is that there are not enough people with jobs and good credit scores to buy the available inventory, not to mention the shadow inventory lingering out there.

In The Great Housing Bubble, I wrote about the problem this way:

In the denial stage of a residential real estate market, many speculators are unable to obtain the sale price they desire. The accumulation of unrealistically priced houses starts to build a large inventory of homes “hanging” over the market. Overhead supply is a condition in a financial market when many units are held for sale at prices above current market prices. Generally there will be a minor rally after the first price decline as those who missed the big rally but still believe prices will only go up enter the market and cause a short-term increase in prices. This is a bear rally. It is aptly named as those bullish on the market buy right before the bear market reverses and quickly declines. For prices to resume a sustained rally, the overhead supply must be absorbed by the market. Once prices stopped going up and actually began to fall, demand is lessened by diminished buyer enthusiasm and the contraction of credit caused by mounting lender losses. With increasing supply and diminished demand prices cannot rally to absorb the overhead supply. The overall bullish bias to market psychology has not changed much at this point, because owners are in denial about the new reality of the bear market; however, the insufficient quantity of buyers and the beginnings of a credit crunch signal the rally is over and the bubble has popped.

The problem is not buyer psychology. Kool aid is still alive and well in Orange County.

Back to the OC Register article.

Everybody seems to react to just about anything and everything that is happening locally, nationally and abroad. There just is too much information at our fingertips with cable news, Internet news, print news, blogs, and RSS feeds. So, where do we go from here? Demand is not going to plummet like it did a year ago with the end of the first time home buyer tax credit. It will be interesting to gauge demand in June and see if it finally surpasses 2010 year over year comparisons, a real measure of market strength.

Yes, this summer will tell us if the market is going to hold its own over the winter or take another major leg down. Based on the weak sales number so far this year, I am becoming more bearish about this fall and winter. It could get ugly.

Thomas calculates a “market time” benchmark tracking how many months it theoretically takes to sell all the inventory in the local MLS for-sale listings at the current pace of pending deals being made. By this Thomas logic, as of last Thursday, it would take:

• 3.49 months for buyers to gobble up all homes for sale at the current pace vs. 3.36 months two weeks ago vs. 2.45 months a year ago vs. 2.35 months two years ago.
• Of the 8 pricing slices Thomas tracks, 1 had faster market time vs. 2 weeks ago; and 2 improved over a year ago.
• Homes listed for under a million bucks have a market time of 3.10 months vs. 9.43 months for homes listed for more than $1 million.
• So, basically, it is 3.0 times harder to sell a million-dollar-plus residence!
• And just so you know, the million-dollar market represents 17% of all homes listed and 6% of all homes that entered into escrow in the past 30 days.

Is there any good news in there for bulls? I don't see it. By any measure, the market for high end homes in Orange County is very weak. The reduced asking prices will likely continue to be reduced. There is far too much inventory and very few buyers.

Here’s the recent data, as of last Thursday, for listings; deals pending; market time in months; last Thursday vs. 2 weeks ago, a year ago and 2 years ago (Note: k=thousand; m=million) …

Slice	Listings	Deals	Time (month)	2 week ago	1 yr. ago	2 yr. ago
$0-$250k	1,833	648	2.83	2.72	1.64	1.61
$250k-$500k	4,068	1,441	2.82	2.72	1.62	1.62
$500k-$750k	2,329	669	3.48	3.30	2.62	2.40
$750k-$1m	1,081	247	4.38	4.27	3.39	3.16
$1m-$1.5m	718	117	6.14	6.56	6.50	5.78
$1.5m-$2m	384	39	9.85	8.56	7.89	6.83
$2m-4m	526	37	14.22	13.42	13.49	11.71
$4m+	295	11	26.82	26.45	38.44	29.50
All O.C.	11,144	3,189	3.49	3.36	2.45	2.35

The glut of high-end homes is apparent. And since many delinquent mortgage squatters are inhabiting these high end properties, the shadow inventory makes the time on the market much, much longer.

The main reason there are so few sales at the high end is because people in Orange County don't make enough money to support those prices. The jumbo loan market is the only game in town. Jumbo loan lenders are lending their own money, so they are concerned about loan quality, whereas the rest of the market is origination-based lending where it only has to pass GSE or FHA standards.

Jumbo loan lenders won't loan money to people who won't pay them back, so FICO score requirements are high, interest rates are between 0.5% and 1.0% higher than conforming mortgages, and lenders are carefully scrutinizing what people really make. Jumbo loan lenders are not willing to count the appreciation and HELOC booty as income. Without mortgage equity withdrawal, far fewer people can afford the payments on jumbo loans, hence we have very low sales volumes at the high end.

That isn't going to change because the government is not insuring the market.

To make matters worse, the conforming limit is going down which will force more buyers to go jumbo — a loan they may not qualify for.

Are lenders being too tough?

May 3rd, 2011, 8:11 am — posted by Jon Lansner

In his latest biweekly commentary, veteran Orange County home broker Steve Thomas ranted about lenders going overboard with their underwriting, claiming it’s a reason the home market looks sluggish these days.

Lenders have reversed course and now look at every potential borrower as not lendable unless they can prove their worthiness with a mountain of written documentation and many requests that are borderline ridiculous.

Apparently, documenting income with more than a signature is too cumbersome for him. It certainly would be easier if everyone could just apply for a loan and get whatever they want, but when lenders tried that, they found that borrowers often didn't pay them back. Whocouldanode?

Their reaction reminds me of my kids reactions to painful experiences. Mia, my four year old daughter and splitting image of her gorgeous mother, was stung a few weeks ago after accidentally placing her hand on top of a crawling bee. After wiping her tears and a quick dose of Benadryl to stop the swelling, she didn’t want to go outside in fear of being stung again. Fortunately, she swiftly recovered after I took her by the hand and explained to her in front of a flowering bush swarming with bees that they were not out to get her as long as she left them alone. She resumed her normal neighborhood activities and hasn’t talked about it since.

That is cute analogy. However, what if those bees were African honey bees who will aggressively attack anyone nearby? Leaving those bees alone wouldn't be enough to protect yourself.

Lenders were stung, and they should be afraid to lend. Their lack of caution was directly responsible for the disaster they created. In a declining market with few qualified buyers, the aggressive lenders simply lose more money and go out of business — provided they are not too big to fail. The danger has not yet passed. The likelihood of more defaults and price declines is high. Lenders who fail to recognize that risk won't last very long.

I would like to take lenders and the U.S. government by the hand and show them that hard working buyers with a respectable job history, good credit and a reasonable down payment will NOT sting them. Instead, the lenders won’t go outside to play right now.

That is simply not true. Sales volumes are 30% below normal right now, but that still means 70% of the normal transaction volume is still occurring. Who are those people? They are the hard working buyers with a respectable job history, good credit, and a reasonable down payment. There aren't enough of those people. That is the problem.

They are playing it WAY too safe by lending only to those that qualify by the strictest of standards. It is time for lenders to go outside and play nicely.

Readers, do any of you think it's a good time to loan money to jumbo borrowers in Orange County? Would you put your own money behind such a loan? I wouldn't, except for those few good borrowers that remain.

They won’t get stung again as long as they don’t lend based upon one’s ability to fog a mirror.

If I understand his argument, he is saying we can do many other varieties of lending — which were proven losers during the housing crash — to inflate prices and increase sales as long as we don't go back to the worst of the housing bubble's lending practices. That sounds like nonsense to me.

Dr. Lawrence Yun, the chief economist for the National Association of Realtors estimates that if lenders would just relax their standards, sales activity would receive a 15% bump. If you don’t believe me, ask buyers and Realtors in the trenches. Lenders are commonly requesting letters of explanation for the absurd: a job 10 years prior, an old phone number that is no longer used, and much, much more.

Lenders learned from their mistakes of the housing bubble, and they don't want to repeat them. Steve Thomas does want them to repeat these mistakes because it would increase sales volumes and make him a few more pennies on commissions.

MEMO TO LENDERS AND THE U.S. GOVERNMENT: go outside and play again, lend to those that qualify, the entire economy and housing market is counting on it. An increase in sales activity would translate to more homes sold and a quicker improvement in the housing market. An improvement in the housing market helps in reestablishing consumer confidence. Confident consumers translate into more dollars spent and a return to a robust U.S. economy. Until then, expect more of the same, a housing market and an economy that lacks much direction other than sideways.

Does Thomas have a point?

No. Not really.

He paid over $400,000 for a 1 bedroom apartment

One of the surest signs of the housing bubble was the amounts people were willing to pay for glorified apartments. Properties like this only make sense as rentals. It's an obvious bubble when the cost of ownership is more than double the cost of rental — as it is with a $405,000 price tag.

This purchase was foolish for a couple more reasons. One, this was purchased in May of 2007 which is after the subprime meltdown and after outlets like the IHB were telling people the market was going to crash. The future buyer for this place was going to have difficulties without ignorant subprime lending. Two, there was no backup plan if the price didn't continue to rise 10% a year. Renting makes no sense when you are losing $1,000 or more a month with no opportunity for HELOC supplementation.

This purchase captures the essence of kool aid intoxication. It's a property purchase that only makes sense if you believe prices are going to rise significantly every year and lenders are going to give out unlimited HELOC money at ever-decreasing interest rates. Obviously, that didn't happen. It never could.

This property was purchased on 5/24/2007 for $410,000. The owner used a $328,000 first mortgage, a $82,000 HELOC, and a $0 down payment. I am amazed that any of the no money down deals still survive. We don't see them very often any more.

Despite this borrower's perseverance, the market has collapsed, and this owner is hoping for a 35% loss. I think it needs to go lower. The rent still only covers about two-thirds of the cost of ownership. Not exactly a cash cow.

Irvine House Address … 507 TERRA BELLA Irvine, CA 92602

Resale House Price …… $285,000

House Purchase Price … $410,000

House Purchase Date …. 5/24/2007

Net Gain (Loss) ………. ($142,100)

Percent Change ………. -34.7%

Annual Appreciation … -9.1%

Cost of House Ownership

————————————————-

$285,000 ………. Asking Price

$9,975 ………. 3.5% Down FHA Financing

4.72% …………… Mortgage Interest Rate

$275,025 ………. 30-Year Mortgage

$61,272 ………. Income Requirement

$1,430 ………. Monthly Mortgage Payment

$247 ………. Property Tax (@1.04%)

$0 ………. Special Taxes and Levies (Mello Roos)

$59 ………. Homeowners Insurance (@ 0.25%)

$316 ………. Private Mortgage Insurance

$395 ………. Homeowners Association Fees

============================================

$2,447 ………. Monthly Cash Outlays

-$133 ………. Tax Savings (% of Interest and Property Tax)

-$348 ………. Equity Hidden in Payment (Amortization)

$18 ………. Lost Income to Down Payment (net of taxes)

$56 ………. Maintenance and Replacement Reserves

============================================

$2,040 ………. Monthly Cost of Ownership

Cash Acquisition Demands

——————————————————————————

$2,850 ………. Furnishing and Move In @1%

$2,850 ………. Closing Costs @1%

$2,750 ………… Interest Points @1% of Loan

$9,975 ………. Down Payment

============================================

$18,425 ………. Total Cash Costs

$31,200 ………… Emergency Cash Reserves

============================================

$49,625 ………. Total Savings Needed

Property Details for 507 TERRA BELLA Irvine, CA 92602

——————————————————————————

Beds: 1

Baths: 2

Sq. Ft.: 944

$302/SF

Property Type: Residential, Condominium

Style: 3+ Levels, Other

Year Built: 2000

Community: 0

County: Orange

MLS#: S656825

Source: SoCalMLS

Status: Active

On Redfin: 4 days

——————————————————————————

Exclusive Northpark community with 24 hour guard gated security, 6 swimming pools, tennis courts, sports courts, clubhouse, parks and trails. Spacious floor plan with an indoor laundry and a 2 car tandem garage space. Highly desirable and sought after unit. Please note, sale excludes wash/dryer and refrigerator.

In a rare wise move in Sacramento, the California state Senate killed a bill that would have dramatically changed the foreclosure process.

Irvine Home Address … 76 PACIFIC Crst Irvine, CA 92602

Resale Home Price …… $999,900

What Does It Matter To Ya

When You Got A Job To Do

You Gotta Do It Well

You Gotta Give The Other Fellow Hell

Paul McCartney & Wings — Live and Let Die

Each month when lenders get their dreadful delinquency reports, they make decisions on who is pushed through to auction and who is allowed to squat. The let some mortgage live and the let others die.

What is dual track foreclosure?

Foreclosure is the final act in a much longer drama. Foreclosure is akin to the river card in a game of poker or the verdict in a long civil trial. In poker many hands are decided before the river card is played, and in civil litigation most cases are settled without going to court.

Foreclosure is a threat to compel action. The lender wants the borrower to repay under the terms of the loan. Lenders don't want to get their money back and find another borrower, they would rather the borrower keep making their payments.

Dual track foreclosure is the process of reviewing loan modification application while simultaneously pursuing a foreclosure. Why do lenders do this? Well, many loan modifications get denied because the borrowers don't demonstrate hardship. In those cases, the foreclosure process should go forward unimpeded. Further, any loan modification is still a negotiation, and without the threat of imminent foreclosure, many borrowers don't recognize the weakness of their bargaining position.

Dual track foreclosure processing is necessary to prevent unwarranted delays by borrowers who seek loan modifications for which they don't qualify. If we eliminate the practice and force all lenders to “fully evaluate” borrowers for loan modifications, they merely add time to the process and allow delinquent mortgage squatters to further game the system.

California bill ending 'dual track' foreclosures faces key vote

Pursuing foreclosure even if a borrower has sought a loan modification has faced criticism. The Senate measure would require a lender to fully evaluate a homeowner for a loan modification first.

By Alejandro Lazo, Los Angeles Times — April 27, 2011

A proposed law facing a key vote in Sacramento on Wednesday would require lenders in California to make a decision on mortgage modifications for delinquent homeowners before beginning the repossession process, in effect ending “dual track” foreclosures in the state.

Financial institutions commonly pursue foreclosure even if a borrower has requested a loan modification, a two-track process the lending industry has argued is necessary to protect its investments. But dual tracking is under fire from regulators and lawmakers in the wake of last year's “robo-signing” scandal, which revealed widespread foreclosure errors.

Robo-signer did not reveal widespread foreclosure errors. That false perceptions probably exists in the minds of the public because the political Left heated up the rhetoric, but the Robo-signer investigations and subsequent lawsuits have not demonstrated a pattern of wrongful foreclosure. People who make their payments do not get foreclosed on.

The California Homeowner Protection Act,

People with no equity facing foreclosure do not own anything. Their names may be on title, but the only thing they own is their loan.

authored by state Senate President Pro Tem Darrell Steinberg (D-Sacramento) and Sen. Mark Leno (D-San Francisco), is one of the furthest-reaching efforts to limit the practice. Several other states have passed requirements for third-party groups to oversee mediations between mortgage servicers and homeowners.

The California bill, SB 729, would require a lender to fully evaluate a borrower for a loan modification before filing a notice of default, the first stage in the formal repossession process, and a significant change in the way foreclosures are conducted in the Golden State.

What does it mean to “fully evaluate?” And when did it become an entitlement for borrowers to get a loan modification? Aren't these private contracts? The attorneys will generate a lot of fees fighting over the definition of “fully.” No matter what banks do, lawsuits will be filed stating they haven't done enough.

The law would give delinquent homeowners the right to sue their lenders to stop foreclosures if they believe the requirement to properly evaluate their loan modification requests had not been followed. If the sale occurs without the proper evaluation, homeowners would also be given the right to sue for damages or to void a foreclosure sale for up to a year after the sale.

Auction prices would crumble if that provision were passed. With the one-year clawback, no title insurer would touch a property for a full year after an auction. Cash buyers would be required to hold for a full year unless they wanted to sell to another cash buyer. Bank REO would be similarly encumbered.

Such a change is necessary in the state because the two-track process often leads to unintended foreclosures by mortgage servicers that “don't know what they are doing” and often bungle the loan modification process, Leno said in an interview.

“We know of folks not only entering the loan modification process, but folks who have already been accepted, and are making timely loan modification payments, and then getting a knock on their door and being told 'your home will be sold,'” Leno said. “The stories are many and horrifying.”

It may be the perception of many who get foreclosed upon that the bank didn't give them the loan modification they deserved. However, the foreclosure may also be the bank's way of saying no, particularly if the borrower is hiding assets or otherwise gaming the system.

Groups representing lenders said the legislation overreaches and would only inhibit the state housing market's recovery by slowing down an already drawn out foreclosure timeline.

Yes, it would slow down the foreclosure process and deepen the ongoing crash in house prices. BTW, the housing market recovery meme needs to die now that we took out the 2009 lows.

California's comparatively streamlined foreclosure system, which allows for a home to be taken back without a court order, has helped the state work through a foreclosure glut relatively quickly and recover faster than other hard-hit states.

Nothing has recovered in California. The crash is ongoing.

“It is just not good for the housing market, which is not good for the state economy, especially when we are at 12% unemployment,” said Dustin Hobbs, a spokesman for the California Mortgage Bankers Assn. “It is a reaction, an overreaction, to procedural mistakes,” he continued, “and this doesn't really get at solving any of those problems.”

My disdain for lenders is widely known, but sometimes they are right. This is a dumb idea at the wrong time that solves none of the problems with the housing market.

The bill also would make it more difficult for investors to purchase, renovate and resell bank-owned properties to first-time buyers because it gives foreclosed-on homeowners a year to sue after a foreclosure sale, critics said. Home buying by investors has been a significant driver of California home sales since the housing market hit bottom two years ago.

Yes, this would seriously impact the auction market and the resale market within a year thereof.

“It's unlikely that any prospective home buyer would want to buy these properties with that lingering uncertainty hanging over their heads,” said Beth Mills, a spokeswoman for the California Bankers Assn. The bill also would require mortgage servicers to:

• Prove they have a right to foreclose;

• Adhere to new timelines when evaluating borrowers for possible loan modifications;

• Provide an explanation letter detailing why a mortgage modification was not granted if a borrower is denied;

• Make a declaration of compliance with the law each time a notice of default is filed.

The bill also would allow a state banking regulator or the state attorney general to take action against lenders if the law isn't followed. …

So how much cost would those provisions add to the process? Who is paying that bill? Lenders? Taxpayers?

Fortunately, cooler heads prevailed.

Foreclosure prevention legislation fails in Sacramento

A proposed law that would have ended “dual track” foreclosures in California failed to win a key vote in Sacramento on Wednesday.

The California bill, SB 729, would have required a lender to fully evaluate a borrower for a loan modification before filing a notice of default, the first stage in the formal repossession process.

Sen. Alex Padilla (D-Pacoima) abstained from voting following a hearing in the state Senate's Banking and Financial Institutions Committee and the bill failed 3-3.

The California Homeowner Protection Act, authored by state Senate President Pro Tem Darrell Steinberg (D-Sacramento) and Sen. Mark Leno (D-San Francisco), was one of the furthest-reaching attempts to limit dual tracking, a common practice among financial institutions in which they pursue foreclosure even if a borrower has requested a loan modification.

The two-track process is one the lending industry has argued is necessary to protect its investments. But the practice is under fire from regulators and lawmakers in the wake of last year's “robo-signing” scandal, which revealed widespread foreclosure errors.

The most cowardly way politicians kill a bill is to let it die in a committee without a nay vote. It's sad what they have to go through in order to do the right thing. I suppose its the price they pay for pandering the rest of the time.

Ordinarily, I wouldn't rejoice when the banks win one, but this was a bad bill that deserved to go down to defeat.

A 2003 high-end rollback

First and ONLY Showing Wednesday at 6pm May 4th! CORPORATE OWNED REO; NOT A SHORT SALE

Today's featured property is a previously rare 2003 rollback at Irvine's high end. With weak sales and prices reaching 2003 levels across much of Irvine, properties like this will be more common.

• The owner paid $1,015,000 on 12/15/2003. He used a $761,250 first mortgage and a $253,750 down payment.
• On 1/29/2004 he opened a $150,000 HELOC.
• On 2/13/2004 he got a second $150,000 HELOC with a different lender.
• On 1/25/2005 he obtained a $418,750 HELOC.
• On 3/28/2008 he took out a $100,000 loan from Anaheim General Hospital. Perhaps that is the Corporate owned reference in the description. The owner on title is the individual who HELOCed himself into oblivion and quit paying the mortgage.

Foreclosure Record

Recording Date: 03/28/2011

Document Type: Notice of Sale

Foreclosure Record

Recording Date: 12/21/2010

Document Type: Notice of Default

I think the description is likely bullshit. From what my records show, this is likely to be a short sale unless a bidding war happens this afternoon at 6PM and the offered price makes this borrower whole. In this market, I don't see that happening.

Irvine House Address … 76 PACIFIC Crst Irvine, CA 92602

Resale House Price …… $999,900

House Purchase Price … $1,015,000

House Purchase Date …. 12/15/2003

Net Gain (Loss) ………. ($75,094)

Percent Change ………. -7.4%

Annual Appreciation … -0.4%

Cost of House Ownership

————————————————-

$999,900 ………. Asking Price

$199,980 ………. 20% Down Conventional

4.72% …………… Mortgage Interest Rate

$799,920 ………. 30-Year Mortgage

$178,213 ………. Income Requirement

$4,158 ………. Monthly Mortgage Payment

$867 ………. Property Tax (@1.04%)

$283 ………. Special Taxes and Levies (Mello Roos)

$208 ………. Homeowners Insurance (@ 0.25%)

$0 ………. Private Mortgage Insurance

$100 ………. Homeowners Association Fees

============================================

$5,617 ………. Monthly Cash Outlays

-$1003 ………. Tax Savings (% of Interest and Property Tax)

-$1012 ………. Equity Hidden in Payment (Amortization)

$358 ………. Lost Income to Down Payment (net of taxes)

$145 ………. Maintenance and Replacement Reserves

============================================

$4,104 ………. Monthly Cost of Ownership

Cash Acquisition Demands

——————————————————————————

$9,999 ………. Furnishing and Move In @1%

$9,999 ………. Closing Costs @1%

$7,999 ………… Interest Points @1% of Loan

$199,980 ………. Down Payment

============================================

$227,977 ………. Total Cash Costs

$62,900 ………… Emergency Cash Reserves

============================================

$290,877 ………. Total Savings Needed

Property Details for 76 PACIFIC Crst Irvine, CA 92602

——————————————————————————

Beds: 4

Baths: 3

Sq. Ft.: 3456

$289/SF

Property Type: Residential, Single Family

Style: Mediterranean

View: Park/Green Belt, Yes

Year Built: 2001

Community: Northpark

County: Orange

MLS#: 11-523255

Source: TheMLS

Status: Active

——————————————————————————

First and ONLY Showing Wednesday at 6pm May 4th! CORPORATE OWNED REO; NOT A SHORT SALE; PRICED FOR QUICK SALE; RARE AND PRIVATE DOUBLE SIZE LOT(12,000 SQ FT). BEAUTIFUL HOME IN NORTH PARK SQUARE WITH A LARGE FLOWING FLOOR PLAN WITH A GOURMET KITCHEN WITH GRANITE COUNTERS THAT OPENS TO LARGE FAMILY ROOM WITH COZY FIREPLACE. ONE BEDROOM DOWN AND THREE UP INCLUDING A GRAND MASTER SUITE WITH A SPA LIKE BATH + BONUS ROOM + COMPUTER CENTER. .. 3 CAR GARAGE. .. LIMITED SHOWINGS WITH 24 HOUR(OR MORE) NOTICE BUT WELL WORTH IT. .. DO NOT DISTURB OCCUPANTS

A foreclosure advocate crossed the line between civil disobedience and criminality, and the State Bar Court took away his law license.

Irvine Home Address … 4111 BLACKFIN Ave Irvine, CA 92620

Resale Home Price …… $895,000

Has he lost his mind

Can he see or is he blind?

Can he walk at all,

Or if he moves will he fall

Is he live or dead?

Has he thoughts within his head?

We'll just pass him there

Why should we even care?

Black Sabbath — Iron Man

Writing about real estate rarely leads me to the California Bar Journal. The housing bubble has spawned a number of attorney abuses including up-front payments for loan modifications, bogus foreclosure delay tactics like the deficient Notice of Default, and other practices. However, with as bad as some of these behaviors are, nobody gets censured for going over-the-top crazy. That is until foreclosure attorney, Michael T. Pines, managed to lose his mind.

I can appreciate this gentleman is passionate about helping people with real estate, and he is obviously an intelligent man. However, he lacks the wisdom to guide that passion and intelligence toward something which contributes to the greater good. As I pointed out above, success for him would have caused the housing market to cease functioning, and our banks to become undeniably insolvent.

Perhaps he didn't care? Maybe he just wanted his 15 minutes of fame? He got it.

At least some of it went toward improvements

Most of the HELOC abuse cases I profile show few if any improvements to the property. This leaves most readers, me included, asking “where did you spend all the money?”

At least with today's featured property, some of it was spent improving the property.

• My property records don't go back to the 1988 purchase for $327,000, but it is likely the owners used a 20% down payment.
• By 6/27/2001 through sophisticated financial management, the owners grew their mortgage to $384,000.
• On 1/15/2002 they obtained a $96,000 HELOC.
• On 7/30/2004 they got a $650,000 first mortgage. The listing says they tore the property down to the studs in 2005. I doubt it. This $170,000 increase in their mortgage is the largest of their serial refinances.
• On 10/5/2004 they opened a $135,700 HELOC, perhaps to finish paying for the renovation.
• On 3/28/2007 they refinanced with a $784,000 first mortgage.
• On 5/14/2007 they opened a $116,000 HELOC.
• On 11/19/2009 they either paid down the mortgage, or obtained some principal forgiveness as their final mortgage amount is shown as $696,000.
• Peak mortgage equity withdrawal is over $600,000.

Irvine House Address … 4111 BLACKFIN Ave Irvine, CA 92620

Resale House Price …… $895,000

House Purchase Price … $327,000

House Purchase Date …. 10/24/1988

Net Gain (Loss) ………. $514,300

Percent Change ………. 157.3%

Annual Appreciation … 0.1%

Cost of House Ownership

————————————————-

$895,000 ………. Asking Price

$179,000 ………. 20% Down Conventional

4.72% …………… Mortgage Interest Rate

$716,000 ………. 30-Year Mortgage

$159,517 ………. Income Requirement

$3,722 ………. Monthly Mortgage Payment

$776 ………. Property Tax (@1.04%)

$0 ………. Special Taxes and Levies (Mello Roos)

$186 ………. Homeowners Insurance (@ 0.25%)

$0 ………. Private Mortgage Insurance

$0 ………. Homeowners Association Fees

============================================

$4,684 ………. Monthly Cash Outlays

-$898 ………. Tax Savings (% of Interest and Property Tax)

-$906 ………. Equity Hidden in Payment (Amortization)

$320 ………. Lost Income to Down Payment (net of taxes)

$244 ………. Maintenance and Replacement Reserves

============================================

$3,444 ………. Monthly Cost of Ownership

Cash Acquisition Demands

——————————————————————————

$8,950 ………. Furnishing and Move In @1%

$8,950 ………. Closing Costs @1%

$7,160 ………… Interest Points @1% of Loan

$179,000 ………. Down Payment

============================================

$204,060 ………. Total Cash Costs

$52,700 ………… Emergency Cash Reserves

============================================

$256,760 ………. Total Savings Needed

Property Details for 4111 BLACKFIN Ave Irvine, CA 92620

——————————————————————————

Beds: 5

Baths: 4

Sq. Ft.: 2800

$320/SF

Property Type: Residential, Single Family

Style: Two Level, Contemporary

Year Built: 1971

Community: 0

County: Orange

MLS#: S657149

Source: SoCalMLS

Status: Active

On Redfin: 2 days

——————————————————————————

ARE YOU THINKING NEWER HOME IN IRVINE? – THIS IS A MUST SEE!! Home has been completely rebuilt from the studs in 2005. Over $400,000 invested in unimaginable upgrades. BETTER THAN NEW- YET, NO MELLO ROOS, NO HOA, LOW TAX RATE. All natural materials used in every inch. 4 Bed & 3 bath upstairs + one bed & bath downstairs. Chef Kitchen, Top of the line Blue Star gas range and oven, industrial grade, Heated Marble Floors, Home Theater System w/ pull down screen from the ceiling, Sky lights, Modern recesses lights throughout, Whole house fan, triple pane windows, Water Softener and reverse osmosis water filter systems, Smart Home Electric System let you control the entire home from a remote or from your smart phone, Salt Water Pool and Spa, Private Yard, Open and Specious- Interior design was reconfigured to have the kitchen opened to both Living /Dining Room and to the family room. Unreal Master Bath with Jacuzzi Tub and Much Much more * * see full list in Media section * *

There are many ways to spend $400,000 for improvements. Do you think it was money well spent?

The decline in house prices is pickup up speed. The market will find a bottom when sellers holding out for higher prices capitulate and sell in despair.

Irvine Home Address … 33 LAKEPINES Irvine, CA 92620

Resale Home Price …… $225,000

Break me off, tie me down, tear me down

Make me feel like a little dog

We're a waste, we're a waste, we're a waste

And we're going down the drain, down the drain, down the drain

‪Lilly Wood & The Prick – Down The Drain‬

Far from getting better, the housing market in the United States is accelerating its swirling decent into the crapper.

Housing Crash 2.0 Is Accelerating

Published: Tuesday, 26 Apr 2011 — By: John Carney, Senior Editor, CNBC.com

House prices are falling again—and the decline is accelerating.

Today’s big housing numbers comes from the Case-Shiller home price indexes. The indexes, which measure how prices have changed over the previous three months, show prices falling in every major metropolitan area (except, weirdly, Detroit). The 20-city average declined 3.3 percent from a year ago, and 1.1 percent from the previous three-month average.

This is the seventh successive month of widespread price declines.

Last week we took a look at how the NAr spins data with bullshit. How do you think they would spin that uncomfortable series of data points?

The housing recovery began to stall last spring, after the government’s home-buyer tax credit expired. The three-month moving average of the Case-Shiller 20-city index showed that gains in home pricing slowing to a crawl in early summer and actually reversing in July and August. By September, it was clear that home prices were going into a serious decline.

The November numbers (which are actually the three-month average of September, October and November) showed a 1 percent decline over the previous month. Prices kept dropping by 1 percent in December and January.

February’s data shows that the decline is actually accelerating a bit.

This is the opposite of a recovery—it’s a crash building steam.

We’ve become almost passé about home price declines. A 3.3 percent year-over-year decline doesn’t seem all that shocking anymore. But prior to the recent housing crash, such a steep decline was unheard of.

The housing market is performing much worse than expected. In 2009, the Mortgage Bankers Association predict home prices would rise by 3 percent in 2011. Last year, the consensus among economists interviewed for the MacroMarkets LLC September survey was that home prices would fall by just 0.8 percent in 2011. A month ago, the economists were gloomier, estimating that housing prices would fall 1.38 percent by the end of the year. That estimate now looks overly optimistic.

I predicted that prices would fall between 2% and 5% this year. The consensus estimates are finally catching up to me. My detractors have inaccurately labled me as bearish. I do believe prices are going to fall, particularly locally, but I am only bearish when and where conditions suggest real estate is overpriced and likely to fall in value.

I am very bullish on Las Vegas real estate, despite the fact prices will continue to fall there. When cashflow becomes very positive, as it has in Las Vegas, the benefits of ownership outweigh the short-term loss in value. With low interest rates, even if prices fall further, it is entirely possible that the cost of ownership may actually go up when interest rates rise.

In Las Vegas, real estate is hated by everyone who owns. Prices are at 15-year lows and still falling. Most owners are underwater on their mortgages, and being a recourse state, they can't just walk away from their obligations.

Everyone in Las Vegas who owns wishes they didn't. The market is experiencing widespread despair. These are the best possible conditions to acquire good cashflow properties with a potential for future rebound.

Housing Bottom Comes When People Swear Off Houses

Neither housing nor employment show any sign of recovery. Nearly four years after the collapse of Countrywide, the nation’s biggest subprime lender, housing is still going down.

How far will it go? A. Gary Shilling says it will take another 20% drop in housing prices to bring them in line with their historical trend. Housing usually rises with the economy. Not more. Not less. To get back on track with the economy now, house prices have to go down.

What about over-shoot? Yes, that’s a risk too. Bubble markets don’t tend to go back to “normal” levels right away. Instead, they tend to go below normal.

Whether or not Mr. Shilling is correct with regards to Orange County, the harsh decline in prices with downside overshoot has certainly occurred in Las Vegas and a number of other subprime markets.

At first, homeowners think it is just a temporary break in an upward trend. They hold on, hoping to catch another move to the upside. Then, they gradually resign themselves to a long slump, but still believe that “you can’t go wrong on real estate, not over the long term.” Then, housing prices continue to sink. More homeowners give up. Some sell. Some default. More foreclosures depress prices even further.

The double dip is causing many real estate bulls to finally see their error in judgment. Bulls waited for three long years of serious declines to reach the illusory bottom of 2009. Now that prices are falling and gaining downside momentum, loan owners who less than a year ago thought they might be back above water soon are now faced with the reality of several more years waiting for a recovery that may never come.

The peak in foreclosures is not expected until March of 2012. When it comes – five years after the crisis began – most homeowners will be ready to throw in the towel. “Housing may go up in the long run,” they’ll say to each other, “but this downturn could last longer than I do.”

Prices are likely to drop below their historical trend. Homeowners will tell their children: “Don’t bother to buy a house. Rent. Housing is a losing proposition. It never goes up.” Then, with housing prices perhaps 25% to 40% lower than they are today, the market will have found its bottom.

When? Housing markets move slowly. It could happen by 2015, maybe 2020.

2003 rollback

Many people who bought in 2002 and 2003 believed they were buying in a normal market. In reality, they were buying into a housing bubble. Jon Lansner at the OC Register began talking about the housing bubble in 2002. Despite his early call, he was correct in his analysis. House prices were too high in 2002 and 2003 relative to incomes and historic norms. He can't be faulted for failing to anticipate just how stupid borrowers and lenders would become.

Few in real estate were seriously concerned about prices being too high in 2003. Few believed it was possible for prices to go down. Obviously, the bulls were wrong — not just a little wrong, but completely and totally wrong on all counts.

The owners of today's featured property bought on 12/23/2003, and they are paying the price for buying into the housing bubble frenzy. After nearly seven and one half years of ownership, they are going to sell for a loss.

They were conservative in their mortgage management, not that they are being rewarded for their prudence. They borrowed most of the money using a $188,000 first mortgage, a $35,250 second mortgage, and a $11,750 down payment. Despite the insanity which followed, they did not add to their mortgage, and if they get their current asking price, this will not be a short sale.

These owners did not find the pot of gold in California real estate, but through prudent management of their mortgage, they will escape with a small loss and their credit still intact.

Irvine House Address … 33 LAKEPINES Irvine, CA 92620

Resale House Price …… $225,000

House Purchase Price … $235,000

House Purchase Date …. 12/23/2003

Net Gain (Loss) ………. ($23,500)

Percent Change ………. -10.0%

Annual Appreciation … -0.6%

Cost of House Ownership

————————————————-

$225,000 ………. Asking Price

$7,875 ………. 3.5% Down FHA Financing

4.72% …………… Mortgage Interest Rate

$217,125 ………. 30-Year Mortgage

$48,373 ………. Income Requirement

$1,129 ………. Monthly Mortgage Payment

$195 ………. Property Tax (@1.04%)

$0 ………. Special Taxes and Levies (Mello Roos)

$47 ………. Homeowners Insurance (@ 0.25%)

$250 ………. Private Mortgage Insurance

$295 ………. Homeowners Association Fees

============================================

$1,915 ………. Monthly Cash Outlays

-$105 ………. Tax Savings (% of Interest and Property Tax)

-$275 ………. Equity Hidden in Payment (Amortization)

$14 ………. Lost Income to Down Payment (net of taxes)

$48 ………. Maintenance and Replacement Reserves

============================================

$1,598 ………. Monthly Cost of Ownership

Cash Acquisition Demands

——————————————————————————

$2,250 ………. Furnishing and Move In @1%

$2,250 ………. Closing Costs @1%

$2,171 ………… Interest Points @1% of Loan

$7,875 ………. Down Payment

============================================

$14,546 ………. Total Cash Costs

$24,400 ………… Emergency Cash Reserves

============================================

$38,946 ………. Total Savings Needed

Property Details for 33 LAKEPINES Irvine, CA 92620

——————————————————————————

Beds: 1

Baths: 1

Sq. Ft.: 934

$241/SF

Property Type: Residential, Condominium

Style: Two Level, Other

Year Built: 1977

Community: 0

County: Orange

MLS#: P779013

Source: SoCalMLS

Status: Active

On Redfin: 6 days

——————————————————————————

EQUITY SELLER. This beautiful 1 bedroom, 1 bath condo is located in picturesque Lakepines. This home features high smooth ceilings, warm paint and carpet colors, walk in closet, private washer/dryer hookups and a spacious fenced patio. Association amenities include 2 pools, a spa and tennis court. Great square footage and floor plan. No one above or below. No Mello Roos.

Most stories on the Irvine Company are planted in the media as advertisements disguised as news. Today we learn how to properly read and interpret these stories.

Irvine Home Address … 203 BRIARWOOD Irvine, CA 92604

Resale Home Price …… $269,000

I believe the morning sun

Always gonna shine again and

I believe a pot of gold

Waits at every rainbow's end

Catherine Warwick — Pollyanna

When the National Association of realtors issues a press release, they always spin the data like a Pollyanna. Their rosy projections are intended to cajole buyers into action whether or not that action is good for the buyer. Their actions are completely self serving.

realtors have bullshit and spin down to a formula. Barry Ritholtz, a blogger who is as disdainful of the NAr as I am, has decoded the pattern of self-serving nonsense realtors serve up with every press release.

How to Read National Association of Realtors News Release

By Barry Ritholtz – April 20th, 2011, 2:19PM

Pardon our belated look at Existing Home Sales (but we’ve been busy).

For this post, we will look at our favorite chart — Existing Home Sales (NSA) — and also teach you how to read a National Association of Realtors news release.

Our favorite chart, courtesy of Calculated Risk, is below. It shows the Existing Home Sales BEFORE they get seasonably adjusted. The pattern you see is the home sales pattern — bottoming in December January, and peaking in June/July/August. Note the ongoing weakness — until the tax credit kicked in. Now, in 2011, we see more signs of weakness.

As to the National Association of Realtors, there is a small secret to reading their news release: You need to ignore every other paragraph. It typically looks like this:

Data data data Data data data Data data data Data data data Data data data Data data data Data data data Data data data Data data data Data data data Data data data

Spin Bullshit Spin Bullshit Spin Bullshit Spin Bullshit Spin Bullshit Spin Bullshit Spin Bullshit Spin Bullshit Spin Bullshit Spin Bullshit Spin Bullshit Spin Bullshit Spin Bullshit

Data data data Data data data Data data data Data data data Data data data Data data data Data data data Data data data Data data data Data data data Data data data

Spin Bullshit Spin Bullshit Spin Bullshit Spin Bullshit Spin Bullshit Spin Bullshit Spin Bullshit Spin Bullshit Spin Bullshit Spin Bullshit Spin Bullshit Spin Bullshit Spin Bullshit

The secret is to focus on the data, and ignore the spin.

For example:

Sales of existing-home sales rose in March, continuing an uneven recovery that began after sales bottomed last July, according to the National Association of Realtors.

Lawrence Yun, NAR chief economist, expects the improving sales pattern to continue. “Existing-home sales have risen in six of the past eight months, so we’re clearly on a recovery path,” he said. “With rising jobs and excellent affordability conditions, we project moderate improvements into 2012, but not every month will show a gain – primarily because some buyers are finding it too difficult to obtain a mortgage. For those fortunate enough to qualify for financing, monthly mortgage payments as a percent of income have been at record lows.”

Existing-home sales, which are completed transactions that include single-family, townhomes, condominiums and co-ops, increased 3.7 percent to a seasonally adjusted annual rate of 5.10 million in March from an upwardly revised 4.92 million in February, but are 6.3 percent below the 5.44 million pace in March 2010. Sales were at elevated levels from March through June of 2010 in response to the home buyer tax credit.

NAR’s housing affordability index shows the typical monthly mortgage principal and interest payment for the purchase of a median-priced existing home is only 13 percent of gross household income, the lowest since records began in 1970.

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage was 4.84 percent in March, down from 4.95 percent in February; the rate was 4.97 percent in March 2010. Data from Freddie Mac and Fannie Mae show requirements to obtain conventional mortgages have been tightened, with the average credit score rising to about 760 in the current market from nearly 720 in 2007; for FHA loans the average credit score is around 700, up from just over 630 in 2007.

“Although home sales are coming back without a federal stimulus, sales would be notably stronger if mortgage lending would return to the normal, safe standards that were in place a decade ago – before the loose lending practices that created the unprecedented boom and bust cycle,” Yun explained.

OK, I cheated — I moved a paragraph to make this funnier. But the idea is that you look at the data and ignore whatever it is they are spinning about it.

Barry is right on, as usual. With his preamble, let's take a detailed look at how the Irvine Company operates.

The specifics of data, spin and bullshit

For greater clarity, we need to define some terms before we analyze an Irvine Company press release.

Data: Factual statements that present statistics or some measurable phenomenon. Presenting data is ostensibly the reason for a real estate press release. However, the real intention is to spin the data or otherwise manipulate the interpretation.

Spin: The offered interpretation of data that forwards the agenda of the organization issuing the press release. Spin is usually a plausible interpretation that is most often taken out of context, knowingly, by the authors.

Bullshit: An interpretation of data that is either not factual, or the data itself is not factual, or an interpretation that is not plausible based on the data. Bullshit is an obvious lie an organization passes off to a gullible public in hopes that nobody catches on.

The color coding of text above will be used to help decipher the nonsense that follows.

Analyst: Why Irvine new home sales are booming

Veteran Southern California real estate analyst G.U. Krueger adds his commentary on the housing market to this blog in a spot we call “Thursday Morning Quarterback.” Here’s his latest installment. …

The Irvine Company sold 1,350 new homes in its North Irvine communities since January 2010.

This false statement falls under the category of repeating a lie long enough that people come to believe it. Back in February, I reported that the Irvine Company opens two new developments with 2,600 houses, and later I asked How large is the Irvine land premium?

The truth is from January 2010 to February 2011, the Irvine Company closed on 642 home sales, not the 1,350 number they keep repeating.

Despite some signs of slowing, the projects are still running between 4 and 8 sales per month.

Four to eight sales per month? That is terrible. Nice spin sandwiched between some negative data points.

If sales don't pick up, they will either slow production, or they will start offering incentives to close deals. I doubt they would lower prices, particularly after creating their own bottom by selling under market properties in 2009. They will maintain prices by providing necessary incentives until that doesn't work any more.

How come, they are doing so well, when new home builders elsewhere are faltering?

Here's our Top 10 list why that is:

10. Irvine is an economic powerhouse in its own right. In 2009 its businesses employed 209,000 people. Its top three industries were Manufacturing (14%); Professional, Scientific, and Technical Services (12%); and Health Care (8%). These are well paying jobs.

This time we got spin as bookends on data. When did manufacturing become a well paying job? How many factory workers are buying $800,000 Irvine homes? Fifty percent of good paying real estate and mortgage jobs have left Irvine over the last several years.

9. Also, Orange County jobs are growing again since March 2010 and it is the above mentioned industries, which are partially driving the recovery. Ultimately it is all about good jobs.

8. Key socio-economic indicators are stellar. The State’s Academic Performance Index averages a whopping 931 for Irvine, one of the best city performances in California. And its violent crime rate is low. Both indicators add to the value proposition of the community.

The facts presented above are very good reasons to live in Irvine. Notice the author had to punch-up the facts with spin.

7. About 50% of Irvine’s employees live within a 20-mile radius, a captive audience which spread the “water cooler buzz” about the Northern Irvine community throughout the OC.

The fact at the beginning of the sentence is meaningless, and the bullshit that follows it is silly.

6. Irvine is an ethnically diverse city – 50% Caucasian, 39% Asian, and 9% Latinos. There is your secret weapon, and the Developer leveraged it with deliberation. Check out the Irvine Company’s website, which touts its new homes in English, Korean, Chinese, and Spanish. Smart.

That point was a mixture of fact, spin, and ass-kissing bullshit.

5. New housing supply is tight in Irvine as one would expect in a “closer in” location with great jobs. Essentially, no new homes were started in 3 years and what new home competition there is currently, consists mostly of product based on the design palette of the housing bubble.

The reason new home supply is tight in Irvine is because the Irvine Company is a monopoly that controls the production of all new homes in Irvine. It has nothing to do with location. Also, there is no new home competition in Irvine, and there is very little competition in Orange County. Rancho Mission Viejo is waiting to see what the Irvine Company does, and the small builders are not active on infill sites because prices are not stable and sales volumes are low. The Irvine Company is proud of their new floorplans, but competitors are not building bubble era designs.

BTW, I find it interesting that they acknowledged a housing bubble in their press release.

4. Existing home inventory is tight. In March 2011, the resale inventory was 4.5 months in Irvine and overall vacancies were just 5.9% of its housing stock, well below the State’s 8.1% and the Nation’s 11.4%. Shadow supply is under control. Foreclosures and defaults are rising, but they are relatively low and the rise is likely to be temporary. The delinquency pipeline is dropping. For example, in September 2010, 30-day delinquencies for non-agency mortgages were down 30% in Irvine to 113 from 159 a year earlier.

It's difficult to sort through the facts, spin and bullshit above. First, the existing inventory is not tight. The months on the market continues to rise as inventory is growing faster than sales. I like how he spun the data with qualifying words.

The manipulation of the vacancy data is spin that borders on bullshit. Vacancies are elevated over historic norms everywhere because we overbuilt homes during the bubble. We have a glut of empty homes in most communities. Many of these homes are held in shadow inventory which is not under control. He notes foreclosures and defaults are rising, but they he lapses into total bullshit about it being low and temporary.

At least the press release finishes well.

3. The new homes in North Irvine are in a nice and established master plan with parks, retail, and other amenities. No mere promise here, but a realized vision. The developer kept tight control of the neighborhood. There was no contagion effect from busted new home tract sites.

This is another strength of the Irvine Company. They do deliver a top-notch product.

2. Extensive consumer research compelled the Developer to insist on fresh, new housing product. Their design palette trades formal dining areas for kitchen-linked ‘great rooms’. They also create more indoor-outdoor living spaces, taking advantage of one of the best climates in the world. This design “turn” became real because of the ueber-element of money. The developer was in total financial and design control and hired builders best suited for the new paradigm.

The Irvine Company has done a nice job with the new floorplans. Although, the idea that floorplans can be fresh or innovative is on par with the idea that finance can innovate. Floorplans change over time, but they don't advance. The good floorplans of the 70s are just as useful and desirable today as they were when they were the innovation of their time.

1. The ultimate reason of success in the northern Irvine new home projects, however, is “the pride, respect, and dignity of everybody involved”, according to Larry Webb from The New Home Company. Often public builders are just engineering homes instead of designing them and, worse, they are obsessed with the financial wizardry that keeps Wall Street happy. What was done in North Irvine was a much needed refocus on building and designing homes to meet the desires of changing consumer tastes, kind of a provocation these days in the building industry?

Focusing on the details of the floorplan is a great thing. It becomes much easier to do when you are selling a small fraction of what you used to sell.

The spinmeisters at the Irvine Company are going to have to raise their game. The standard of bullshit they were able to pass off in the past will not longer get past the scrutiny of me and the IHB. It's obvious the Orange County Register, who is desperate for advertising money, is not going to tell the truth.

So what is really going to happen?

Wells economist: Foreclosure supply points to 'long, arduous' recovery

The reality for new home sales isn't good.

A flip gone bad

Today's featured property was originally purchased by a Ponzi in 2003. She HELOCed and refinanced herself into oblivion terminating with an Option ARM in 2006. She quit paying in mid 2009, and was promptly foreclosed on.

Foreclosure Record

Recording Date: 12/23/2009

Document Type: Notice of Sale

Foreclosure Record

Recording Date: 09/18/2009

Document Type: Notice of Default

At the foreclosure auction in January of 2010, the property was purchased for $258,000. After overpaying at auction, the flippers plowed more money into the property and put it for sale.

Date	Event		Price
Apr 28, 2011	Price Changed		$259,000
Apr 06, 2011	Listed (Active)		$269,000
Apr 04, 2011	– Delisted (Cancelled)		—
Apr 02, 2011	– Price Changed		*
Mar 26, 2011	– Price Changed		*
Mar 24, 2011	– Price Changed		*
Mar 18, 2011	– Price Changed		*
Mar 05, 2011	– Price Changed		*
Feb 24, 2011	– Price Changed		*
Feb 09, 2011	– Price Changed		*
Jan 15, 2011	– Price Changed		*
Dec 14, 2010	– Price Changed		*
Nov 23, 2010	– Price Changed		*
Nov 18, 2010	– Price Changed		*
Sep 07, 2010	– Price Changed		*
Jul 23, 2010	– Price Changed		*
Jun 30, 2010	– Price Changed		*
Jun 22, 2010	– Price Changed		*
Jun 07, 2010	– Price Changed		*
May 20, 2010	– Listed (Active)		*
May 19, 2010	– Delisted (Cancelled)		—
May 01, 2010	– Relisted (Active)		—
May 01, 2010	– Pending (Backup Offers Accepted)		—
Mar 20, 2010	– Price Changed		*
Mar 15, 2010	– Price Changed		*
Feb 23, 2010	– Price Changed		*
Feb 22, 2010	– Price Changed		*
Feb 12, 2010	– Price Changed		*
Feb 03, 2010	– Listed (Active)		*
Jan 27, 2010	Sold (Public Records) This home was sold at a foreclosed.		$258,000

It looks like they managed to get the property in escrow just as the tax credit was expiring. Then it fell out of escrow.

It's never a good thing when a property falls out of escrow, but when it falls out at the top of the market, it turns out even worse for the flipper.

They relisted the property almost a year ago, and they have been chasing the market down ever since.

Greed kept them in the hunt past the prime selling season, and by the time they realized they needed to cut their price to get out of the property, it was too late. Now they are looking at a $30,000 loss after their renovation and carrying costs.

So much for easy money in real estate.

Irvine House Address … 203 BRIARWOOD Irvine, CA 92604

Resale House Price …… $269,000

House Purchase Price … $258,000

House Purchase Date …. 1/27/2010

Net Gain (Loss) ………. ($5,140)

Percent Change ………. -2.0%

Annual Appreciation … 3.3%

Cost of House Ownership

————————————————-

$269,000 ………. Asking Price

$9,415 ………. 3.5% Down FHA Financing

4.78% …………… Mortgage Interest Rate

$259,585 ………. 30-Year Mortgage

$58,235 ………. Income Requirement

$1,359 ………. Monthly Mortgage Payment

$233 ………. Property Tax (@1.04%)

$0 ………. Special Taxes and Levies (Mello Roos)

$56 ………. Homeowners Insurance (@ 0.25%)

$299 ………. Private Mortgage Insurance

$385 ………. Homeowners Association Fees

============================================

$2,332 ………. Monthly Cash Outlays

-$127 ………. Tax Savings (% of Interest and Property Tax)

-$325 ………. Equity Hidden in Payment (Amortization)

$17 ………. Lost Income to Down Payment (net of taxes)

$54 ………. Maintenance and Replacement Reserves

============================================

$1,951 ………. Monthly Cost of Ownership

Cash Acquisition Demands

——————————————————————————

$2,690 ………. Furnishing and Move In @1%

$2,690 ………. Closing Costs @1%

$2,596 ………… Interest Points @1% of Loan

$9,415 ………. Down Payment

============================================

$17,391 ………. Total Cash Costs

$29,900 ………… Emergency Cash Reserves

============================================

$47,291 ………. Total Savings Needed

Property Details for 203 BRIARWOOD Irvine, CA 92604

——————————————————————————

Beds: 2

Baths: 1

Sq. Ft.: 941

$286/SF

Property Type: Residential, Condominium

Style: One Level, Other

Year Built: 1978

Community: 0

County: Orange

MLS#: P776605

Source: SoCalMLS

Status: Active

On Redfin: 19 days

——————————————————————————

Private end unit overlooking greenbelt in beautiful, peaceful neighborhood of Irvine. This unit has been renovated with new paint throughout, new carpet, new baseboards around all rooms and brand new kitchen appliances. Tile entry opens to spacious living room. There is also a separate room for laundry. Walking distance to parks, North Lake, schools and association pool.

Have a great weekend,

Irvine Renter