More Avenue One Price Drops – UPDATE #1

Originally posted December 27, 2007

Address: 1124 Scholarship, Irvine, CA 92612
Plan: 1A 725 sq ft – 1/1
MLS: P609516 DOM: 46
Sale History: none
Current Price: $334,990

See our previous posts on Avenue One. This brand new home is for sale by the builder, K Hovnanian. The builder listed a similar property in October 2006 for $396,990 which translates to about a 15% drop in asking price in the past 14 months.

Here are the private remarks on the property:

BROKERS AND REALTORS, DOUBLE YOUR COMMISSION TO 6% ON SELECT UNITS. Contracts must be written by 12-31-07 and COE by 1-31-08. MOVE-IN-READY. $10,000 Deposit required. Agents must bring Buyers to the Sales Office and register them during their very first visit to Avenue One. Our Sales Office ( 2100 Scholarship ) is open Mo. 1p.m. – 5p.m. and Tue. – Sun. 9a.m. – 5p.m. Please call a Sales Consultant at 949-975-8545 and ask about our current specials , incentives and upcoming events.

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The builder has priced this well below other units with the same plan. It’s putting this seller (a RE Broker who has the highest asking price for this plan) in a tough spot:

Address: 1138 Scholarship, Irvine, CA 92612
Plan: 1A 725 sq ft – 1/1
MLS: P584759 DOM: 123
Sale History: About $409k on 8/2006?
Current Price: $420,000

These 725 sq ft units can bring in a rent of $1400-$1600/month. What’s the unit worth to you?

UPDATE #1 – February 13, 2008

Recently, I noticed that several units in this complex were labeled as ‘Sold’ in MLS. What’s interesting is the price listed in MLS as the Sold Price. These units were all sold by the builder:

1164 Scholarship – Plan 1B – 1/1 – 602 sq ft
– Sold for $323,990 on 1/10/2008

1124 Scholarship – Plan 1A – 1/1 – 725 sq ft
– Sold for $253,492 on 1/30/2008

1327 Scholarship – Plan 1A – 1/1 – 725 sq ft
– Sold for $280,591 on 1/29/2008

1434 Scholarship – Plan 2AL – 2/2 – 1213 sq ft
– Sold for $445,042 on 1/25/2008

And here’s what is pending from the builder:

2138 Scholarship – Plan 2A – 2/2 – 1037 sq ft
– $474,990

2434 Scholarship – Plan 2AL – 2/2 – 1213 sq ft
– $556,990

1446 Scholarship – Plan 3AL – 2?/2 – 1538 sq ft
– $674,990

The Sold prices are significantly lower than anything we’ve seen in this tract. I haven’t been able to confirm this information with the Title info. If anyone can confirm, please post. As I’ve mentioned on other Avenue One posts, the builder is going to sell these units one way or another.

The 1124 Scholarship unit is the one that started the this post on Dec 27, 2007. If it can be rented for $1600/month, then it is at just under the 160 multiple.

WOT 2-16-2008

Goodbye Housing Bubble

There are several terms unique to bubble blogs. The following is a list of some of the more common terms compiled from a list provided on Patrick.net:

Housing Bubble Glossary

· Schadenfreude – Feeling joy in the misfortune of another. The introduction is an examination of this phenomenon in bubble blogs.

· Real-Estate-Industrial-Complex (REIC): Variant of Eisenhower’s Military-Industrial Complex, referring to the collection of related industries dependent upon residential real estate transactions such as building, lending and sales.

· Homedebtor – A homeowner who is overextended with a mortgage they cannot afford often due to their own desires for more home or more spending money.

· Serial Refinancer – A Homedebtor relying on mortgage refinancing to maintain artificially low debt service payments or fuel a lifestyle of consumption.

· Loanowner or Loanership – Terms used to convey the reality of home ownership for overextended homedebtors who are in essence renting from the lender. A related expression is “Equity is fantasy and debt is real.”

· NEOs – Negative Equity “Owners” – Homedebtors who owe the bank more than what their property is worth. It is similar to REO or Real Estate Owned, the acronym used by lenders to describe a property they have acquired through foreclosure.

· Sheeple/Sheople – Derogatory term for the vast, clueless, herd-following instincts of the general public. Sheeple are easily manipulated by the fallacies promoted by the real estate industrial complex and often end up slaughtered by the market.

· Knife Catcher – A buyer during the decline attempting to time the bottom and catch a price reversal. Since prices generally decline for long periods in a real estate slump, there are many buyers who buy too early and pay too much thus causing financial injury.

· Alligator: Term popularized by Robert Kiyosaki. Refers to any unsuccessful investment that “eats” far more income than it generates. During the bubble the cost of ownership for residential real estate far exceeded any income or savings from rent making all bubble purchases alligators.

· Flip – a Property purchased to resell quickly for a profit. Flippers are derided for bidding up house prices and preventing normal families from purchasing houses for reasonable prices while often adding no value to the property.

· Pergraniteel™: Pergo fake wood floors, granite countertops, and steel appliances. It is an amalgamation of flipper’s most popular home improvements when improvements were made at all.

· Wishing price – An unrealistic price a seller establishes for their property on the market due to need or greed. A house for sale at a wishing price does not sell, and it often results in the seller chasing the market down and selling for far less than they would have if they had priced the house properly initially.

· Floplord – A speculator who cannot sell his flip for either the wishing-price (greed,) or enough to cover the existing mortgage (need,) so finds himself in the position of becoming an unintentional landlord.

· Bagholder – A homeowner unable or unwilling to sell a property that is declining in value.

· Jingle Mail – Term coined by early bubble prognosticator Bill Fleckenstein, referring to homeowners who have “mailed in the keys because they can’t make the payments and no longer have any equity in their homes.”

· Liar Loans – Also known as stated-income loans. A type of loan used when a borrower could not qualify for a loan based on their real income.

· Suicide loan – Also known as Option ARM or Negative Amortization loan. A type of loan where the principal grows with each payment.

· MEW – Mortgage Equity Withdrawal – Any form of increased property debt. This can result from direct cash borrowing through refinancing or home equity lines of credit (HELOC,) or it can result from loan terms with negative amortization. MEW fueled a great deal of consumer spending during the housing bubble.

· Liberated Equity – An Orwellian industry-friendly euphemism for MEW originally coined by CAR Vice President and Chief Economist, Leslie Appleton-Young.

· Kool Aid – A reference to the pathological beliefs of people who believed the rally in house prices would continue forever.

· MIRAGE (Moneyed Immigrants, Rich Ancestors, Generous Expatriates): Acronym to lampoon the bulls’ argument that housing demand is being supported by cash-rich immigrants, wealthy parents and transplants from other states.

· ILLUSION (Irrational Lending Lax Underwriting Speculative Investing Ownership Nonsense): Acronym to describe what drove housing demand during the bubble rally.

· CHUMPS (Cunning Hard-eyed Ultra-savvy Market ProfessionalS): Acronym to lampoon the bulls’ argument that most recent buyers who used exotic loan products are market-savvy professionals who fully understand the downside risks and are financially prepared for them.

Hell in a Bucket

Well I was drinkin last night with a biker

And I showed him a picture of you

I said, pal get to know her, youll like her

Seemed like the least I could do.

Cause when hes chargin his chopper

Up and down your carpeted halls

You will think I am dressed up quite proper

Never mind how I stumble and fall.

You imagine me sipping champagne from your boot

For taste of your elegant pride

I may be going to hell in a bucket, babe

But at least Im enjoying the ride, at least Ill enjoy the ride.

Hell in a Bucket — Grateful Dead

I have to wonder if today’s flipper decided to buy after a night of drinking. He certainly had more kool aid than common sense. Today’s property was purchased for peak pricing a year after the peak in May 2007. This property was purchased despite the news of the subprime blow up 3 months earlier. Perhaps this flipper really believed the “subprime containment” meme? It is easy to ridicule a bad investment after the fact, but we at the IHB would have ridiculed it before the fact, and we would have been right. Enjoy the schadenfreude at this flipper’s expense, with the damage to his credit this fiasco will entail, he won’t be doing it again any time soon.

Asking Price: $849,995

Income Requirement: $212,498

Downpayment Needed: $169,999

Monthly Equity Burn: $7,083

Purchase Price: $1,050,000

Purchase Date: 5/9/2007

Address: 53 Legacy Way, Irvine, CA 92602

1st Loan $787,500

2nd Mtg. $262,500

Downpayment $0

Beds:	5
Baths:	4
Sq. Ft.:	3,683
$/Sq. Ft.:	$231
Lot Size:	7,426 Sq. Ft.
Type:	Single Family Residence
Style:	Contemporary
Year Built:	1998
Stories:	Two Levels
View(s):	Park or Green Belt
Area:	West Irvine
County:	Orange
MLS#:	S521032
Status:	Active
On Redfin:	2 days

Rarely on the market, Largest floorplan in The Legacy Tract. Spacious West Irvine Home features a Gourmet Cook’s Kitchen with Granite Counter tops. Large Family Room With Fireplace. Beautiful tile floors throughout family room. Extra large Loft. Guest Bedroom on First Floor with full Bath. Three car garage with large driveway. Top Award winning schools: MYFORD Elementary, PIONEER Jr High and BECKMAN HIGH. Wonderful neighborhood with no association dues. Views of the Park and trees.

This large, single-family detached property is selling in Irvine for $231 / SF. This is not a bad property in a bad neighborhood, it is a beautifully updated property with a large yard backing onto a park. It is selling at such a low price for a couple of reasons. First, the market is declining precipitously, and there are few buyers around. Second, this seller used 100% financing (I guess you could still get that in May 2007,) so he doesn’t have any reason to keep up payments. This was purchased as a speculative flip, and the lender was taking all the risk. It didn’t work out, so the flipper gets bad credit, and the lender gets a huge loss. If this property sells for asking price, the lender (JP Morgan) stands to lose $251,005 after a 6% commission. That is a sizable loss considering this loan was made about 9 months ago. I wonder if the flipper has even made any payments? This could be fraud, but the owner is a real person and not some fictitious business entity, so I think this was a real flip attempt — a very foolish one.

That concludes another week at the Irvine Housing Blog. I hope you have enjoyed the Grateful Dead. Come back next week as we continue chronicling ‘the seventh circle of real estate hell.’ Have a great weekend.

🙂

Valentine

To my wife:

I worship and adore you,

like the goddess that you are,

loving you is easy,

you are my superstar.

I have put you up so high

through these years as one,

and when I don’t annoy you,

we do have ample fun.

So much time is writing

for this goofy blog,

You are petrified your prince

has morphed into a frog.

I enticed you with my fairytales

so you became my spouse,

my vision is through writing,

perchance we’ll get that house.

Your faith in me is rooted

you are patient like a tree,

Our family draws its spirit

from you, more than me.

The words they do elude me,

I know I can’t express,

the love I feel when with you,

the sight, the sound, the caress.

I have never felt so blessed

as when you became my wife,

with you I am happy,

you make my time a Life.

I promised you a poem,

for all the world to see,

it’s a clumsy, clownish cliche,

but what did you expect from me?

IrvineRenter

By special request: The Style Council – You’re The Best Thing

As part of my Valentine’s gift to my wife, I have asked her to show me her favorite house available for sale in Irvine. I told her it did not have to be realistically within our price range, it just had to be her dream house. If any of you have seen the video for The Secret, it does contain a thread of truth concerning goal setting and visualization of a better future. Although these things have no impact on a financial market, they can influence decisions in one’s daily life that have a powerful synergistic effect leading in many cases to the achievement of the goals and aspirations of one’s deepest vision. This post is my wife’s vision board of the perfect house.

Now if I could just get each of the 3,500 daily readers to donate $3,336.85 to my downpayment fund, I could raise the $11,679,000 necessary to buy the house. I haven’t quite figured out where I am going to come up with the $9,732 per month I would need to cover the property taxes, but according to The Secret, I don’t need to worry about how these things will happen, I just need to focus on the vision of it happening. Perhaps I am a bit myopic, but I have a hard time seeing this coming to pass…

Asking Price: $11,679,000

Income Requirement: More than you make

Downpayment Needed: More than you have

Monthly Equity Burn: Who cares?

Purchase Price: $3,969,400 for lot

Purchase Date: unknown

Address: 56 Golden Eagle, Irvine, CA 92603

Beds:	5
Baths:	6
Sq. Ft.:	11,700
$/Sq. Ft.:	$998
Lot Size:	0.94 Acres
Type:	Single Family Residence
Style:	Mediterranean
Year Built:	2006
Stories:	Three or More Levels
View(s):	Mountain
Area:	Turtle Rock
County:	Orange
MLS#:	U8000513
Status:	Active
On Redfin:	11 days

Tuscany inspired residence on one of Shady Canyon’s largest and most private lots. One of the finest homes yet to be offered in one of the country’s most prestigious private communities. This home features 5 large bedrooms, 6 full and 3 half baths, 3000+ square feet subterranean garage, commercial elevator and nearly 11000 feet of living area, huge pool and outdoor entertaining areas with multiple water features.

Let’s take a closer look at this property…

The view is fantastic. The rock outcrop provides an interesting focal point.

A great entertaining room with wet bar and big screen with beautiful wood inlays.

A modest room to hang out with the family. I particularly like how the indoor and outdoor spaces blend together by eliminating the separating wall.

This was one of my wife’s favorite features. Again the distinction between what is an indoor space and what is an outdoor space is blurred. The swimming pool becomes part of the environment.

The pool and spa are spectacular.

So there you have it, my wife’s Irvine dream home. I must admit, I like her vision.

For those of you who want to work on your visualization skills this Valentine’s day, I have a video for you: Kiss Me.

Foreclosure stats and updates for 2/13/08

DataQuick reported the foreclosure numbers today. Hat tip to Matt Padilla for the numbers.

My guesstimate numbers, from Friday, were pretty close. It seems my math is coming in low for the NODs, but it is still within a 10% error margin. I will experiment with a new calculation for this month, and see if it comes closer to the real numbers. Also, my number for foreclosures will always be higher than DQ’s numbers, because I include the homes that are bought by someone, other than the bank, at the auction.

One quibble I have, is Matt stated “To be sure, foreclosures account for a small percentage of total housing stock in O.C., which has increased by tens of thousands of homes since the last downturn of the 1990s.” This is not true when you do the math. The owner occupied (keep in mind, DQ’s foreclosure numbers are for owner occupied housing) housing stock at the end of 1996 was 560,753, and in 2007 it was 614,815. The record foreclosure month was October 1996, with 674, and now the record is 802.

That is…

1 foreclosure for every 832 homes in 1996.

1 foreclosure for every 767 homes in 2008.

Any way you look at it, it is bad, it is really, really bad.

And, for the first five days in February there has been 580 NODs recorded (116 per day), 229 NTSs recorded (45.8 per day), and 189 trustee deeds recorded (37.8 per day). Keep in mind, February has 19 business days compared to January’s 21 business days. So, while the monthly numbers may not be higher, or the same, they are still increasing.

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Today, 40 homes went back to the bank at the Santa Ana court house, and 2 sold. Here are the 5 homes in Irvine that went back to the bank…

51 Momento for $1.52mil.

70 Oak Tree Ln. for $565k.

2253 martin street #114, for $350k.

115 remington #327, for $304k.

305 Streamwood, for $258k.

And… the big news of the day, (insert awgee snickering here), Slade’s home went back to the bank for $1,282,500. It looks like the zestimate of $3.15mil is a bit high. I guess Jo’s singing career is not going so well. And, for those who think we at IHB are completely heartless, and kill a puppy for every home sale, I sincerely hope his kid it doing well. Just remember… don’t buy stuff you can’t afford. You never know what life will throw at you.

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Oh… and, Brian Martinez, of the OCR, did a blog post on the WTF house of Irvine. I wonder if he knew, that IrvineRenter did a post on it already? It would have been nice to be mentioned for breaking the story first.