Left a good job in the city,
Workin for the man evry night and day,
And I never lost one minute of sleepin,
Worryin bout the way things might have been.

Big wheel keep on turnin,
Proud mary keep on burnin,
Rollin, rollin, rollin on the river.

Proud Mary — Creedence Clearwater Revival

Link to Music Video

IMO, there are four kinds of people in the market right now:

1. Those who are stressed out and losing sleep because of the housing slump.
2. Those who are in denial and not stressed out yet.
3. Those who can afford their payments and don’t care about prices.
4. Those who are not in a market position and can watch the carnage from the sidelines.

BTW, Group 4 is also sleeping well at night. Big wheel keep on turnin…

Asking Price: $850,000

Income Requirement: $212,500

Downpayment Needed: $170,000

Purchase Price: $880,000

Purchase Date: 9/21/2005

Address: 20 Wheeler, Irvine, CA 92620

1st Loan $650,000
Downpayment $230,000

Beds: 4
Baths: 3
Sq. Ft.: 2,574
$/Sq. Ft.: $330
Lot Size: 5,000 sq. ft.
Type: Single Family Residence
Style: Other
Year Built: 1986
Stories: Two Levels
Area: Northwood
County: Orange
MLS#: S509104
Status: Active
On Redfin: 2 days

From Redfin, “This is a fantastic highly desirable corner lot home in the wonderful city of Irvine. This two floor home is great for entertaining with open areas, beatiful back yard, and a bbq area. This home features 3 bedrooms upstairs, one of which is the master bedroom, and two full bathrooms. Downstairs you will find an additional bedroom with another full bath. The kitchen has been remodeled recently and has a breakfast area. There is an indoor laundry room with room for full size washer and dryer.”

Highly desirable corner lot. You mean the one backing onto the arterial at the main entrance where you will have maximum traffic?

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The seller of this house put up a substantial downpayment, so this is not a short sale. If they get their asking price and pay a 6% commission, they stand to lose $81,000.

I don’t know why they are moving, but I admire that they are selling at a loss when they are not being forced out in a foreclosure. Perhaps they recognize they will lose all their equity if they wait. If so, it is a smart move.

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This has nothing to do with the post, but I am always scared by this graph — updated in September 2007.

From our friend at Piggington’s.

Don’t you understand, what I’m trying to say?
Can’t you see the fear that I’m feeling today?
If the button is pushed, there’s no running away,
There’ll be noone to save with the world in a grave,
take a look around you, boy, it’s bound to scare you, boy,
but you tell me over and over and over again my friend,
ah, you don’t believe we’re on the eve of destruction.

Eve of Destruction — Barry Mcguire

Link to Music Video

Do you get the sense that our real estate market is on the eve of destruction? Prices on the leading edge of the decline are already 20% off peak, credit is tightening and will continue to do so, the inventory is mounting, and the number of foreclosures keeps rising (We are behind San Diego, but on the same path.) There are no signs of any of these trends reversing.

What is really scary about the foreclosure trend is the fact that it does not include any of the homeowners represented in the chart above (remember the ARM reset problem?) The foreclosures and REOs we are seeing today were caused by people who started defaulting in 2006. Now that prices are clearly off the peak, most of the people needing to refinance will not be able to get it. In short, many of the homeowners represented on this chart are going to default and become REOs.

Since it takes at least 6 months to become an REO after the homeowner stops making payments, and since most people will exhaust all other forms of credit before they succumb to foreclosure, we can assume there will be a 1 year lag from the peak of the ARM reset chart to the peak of the REO problem. That puts us into March of 2009 before there is any hope of the number of REOs declining. Since it will also take some time to sell this inventory (we currently have a 20 month supply,) that puts the earliest possible bottom of the market in the Summer of 2010. Realistically, the selloff will continue into the 2011 buying season with the spring of 2011 being the earliest possible bottom.

If we are 20% off now, how low will we go?

We profiled another property near today’s recently: Run Away. They gave up on selling and pulled their property off the market. Today’s neighbor is in similar circumstances, but they have decided to get out — with a hefty loss…

Asking Price: $350,000

Income Requirement: $87,500

Downpayment Needed: $70,000

Purchase Price: $390,000

Purchase Date: 6/2/2004

Address: 131 Huntington #255, Irvine, CA 92620

1st Loan $316,000
2nd Mtg. $79,000
Downpayment $-5,000

Beds: 2
Baths: 2
Sq. Ft.: 1,000
$/Sq. Ft.: $350
Lot Size: –
Type: Condominium
Style: Cape Cod
Year Built: 1987
Stories: One Level
Area: Northwood
County: Orange
MLS#: S509250
Status: Active
On Redfin: 1 day
New Listing (24 hours)

From Redfin, “Short Sale! THis home has a newer kitchen appliances and flooring and is in good shape. Needs some paint but has a lot of potential. Come and get it won’t last long. Nice view of the trees and parking near the unit. Probably the best 2 bedroom 2 bath condo in Irvine.”

Probably the best 2 bedroom 2 bath condo in Irvine? This realtor is probably full of $hit.

Nice view of parking?

Nice picture of kitchen clutter. I particularly like how the bottle of Comet cleaner is prominently featured.

Check out the curio cabinet in the living room…

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Look at that rollback: $40,000 or 10% off a 2004 price. Wow! (pardon the exclamation point.)

Another one of those surprising 100% financing deals going south. This buyer may have even obtained cash at the closing. Either way, they are walking and leaving the bank to hold the bag. If this property sells for asking price minus a 6% commission, the bank stands to lose $66,000.
This property has an interesting sales history:

Date Price Appreciation
06/02/2004 $390,000
08/03/2000 $180,000
04/01/1996 $122,500
12/13/1995 $120,000
09/25/1990 $159,000

Apparently, we have seen 20%+ drops before…

This property sold for $775,000. That is a $175,000 or >20% off the peak price.

The summer solstice is the longest day of the year. According to The American Heritage Dictionary, the solstice is “A highest point or culmination.” Interesting that our housing market peaked in June of 2006 coincidentally with the summer solstice.

Today’s seller purchased a property on Solstice street at the highest point in the market. Now, they are trying to sell before the sun sets on their bank account.

Asking Price: $849,900

Purchase Price: $950,000

Purchase Date: 7/31/2006

Address: 11 Solstice, Irvine, CA 92602

Beds: 3
Baths: 2.5
Sq. Ft.: 2,013
$/Sq. Ft.: $422
Lot Size: 5,800 sq. ft.
Year Built: 2002
Stories: 2
Type: Single Family Residence
View: Trees/Woods
County: Orange
Neighborhood: Northpark
MLS#: S497016
Status: Active
On Redfin: 10 days

From Redfin, “Well located on one of largest lots in tract!!! Culdesac, long drivewa y, very private. Beautiful new lush landscaping w/ palm trees! Terrific entertaining area w/ BBQ and firepit. Interior is upgraded throughout!! Exquisite hardwood flooring, upgraded carpet, 2-tone paint, custom fixtures, gourmet kitchen, walk in pantry, stainless steel appliances, etc. .. Great community and facilities.”

The exclamation points are back, and so is the gourmet kitchen.

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Another property for sale 10% off the top in Northpark. If this seller gets their asking price, and after a 6% commission, they stand to lose $151,094 after one year of ownership. If they intended this as a flip, I would say they were not entirely successful.

And with that, the sun sets on another week at the Irvine Housing Blog.

Next week, I will be featuring properties from Quail Hill, so come back to see what’s happening. Have a great weekend.