Asking Price: $280,000
Purchase Price: $265,000
Purchase Date: 10/8/2004
Address: 302 Tangelo, Irvine, CA 92618
Beds: 1
Baths: 1
Sq. Ft.*: 662
Year Built: 1978
Stories: 1
Type: Condominium
View: Lake
Neighborhood: Orangetree
$/Sq. Ft.*: $423
MLS: P564627
Status: Active on market
On Redfin: 40 days
They say a picture is worth a thousand words. The following is pure speculation based on the picture above…
Toward the end of 2004 a young family wanted to get in on the hot housing market and perhaps make some money to trade up to a larger home. They found what they could afford: a 662 SF condo in Orangetree. The family has been living in these cramped quarters for two and a half years sacrificing the much larger space they could have rented in order to build equity in a home (sounds better than flipping, doesn’t it?) After all the sacrifice, they missed the peak of the housing bubble, and they need to sell now for full asking price just to get out at breakeven. It probably won’t happen.
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{adsense}
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Do we feel sorry for these people? Didn’t they do what you are supposed to do in Southern California? Is this the profile of a greedy flipper? Where did they go wrong?
What happens if they can’t sell now and end up the bagholder? How would you like to be trapped in a 662 SF condo and be $150,000 underwater for 5 or 10 years? Do you walk away and declare bankruptcy?
Just one example of the death of the California Dream…
The only one that I have ever known
Don’t know where it goes
But it’s home to me and I walk alone
On the Boulevard of Broken Dreams
Where the city sleeps
and I’m the only one and I walk alone
A two year teaser ARM, a plan to go to the community college right there and a single parent could have made this work better than paying rent. Provided they get out even.
—–
sorry, i didn’t understand that comparison?
“Provided they get out even.”
That is the risk few acknowledged during the rally and now they are about to find out it is real, and it is serious.
BTW, if you click on the link to Broken Dreams, it goes to the Green Day video. IMO, this is one of the better songs written recently (I think they won a grammy).
They are victims, but they knew or should have known of the risks, and even if the buyers are less culpable than the flippers, they are not innocent.
When we sympathize with stupidity (which we tend to do because we all know we can be misled), we are more inclined to bail folks out and postpone (and exacerbate) the ultimate crash. It does more harm than good, and though we feel for those who believe the BS they hear, they did sign the documents and must understand that Ponzi schemes and real estate exponential climbs cannot be sustained and have to return to reality . . .
Let’s calculate the loss :
6% realtors fees : $(15,900)
Price Difference in condo : ???
Lost interest income on down payment : 4% * 53,000 * 2.5 years = $(5300)
Rent vs. interest on loan : ~~even
say $1000 rent? i don’t know the area
5.5% on $212,000 = $970
HOA fees : $220 * 30 months = $(6600)
Taxes : 265,000 * .012 * 2.5 = $(7950)
So they have lost $35,750 without selling the condo – which they are hoping for a $15,000 profit. Tough loss – but survivable I hope for them…
So what is the lesson : Avoid crappy fees!
You could do this by renting, but if you are going to buy :
Never buy into a god-damn HOA! Fees always go up and trust me, hiring contractors for your SFH is way cheaper!
When buying a SFH, try submitting your own bid with an RE attorney. Or at a minimum, don’t buy into the “starter house” bullsh*t. If you are going to shell out over $30K for some taxi driver and housesitter for 2 weekends of work(buying and listing agents) – try to do it just once in your lifetime… Most of our grandparents had that one figured out…
I strongly feel everyone should be responsible for, and held accountable for, their own actions and decisions. Financial decisions DEFINITELY included. If these owners’ decisions to buy were out of naivety, so be it. If they were acting out of greed, so be it. Let the free market work this situation out. If they take a financial bath from their poor decisions, good, perhaps they (and people close to them witnessing what they go through) will learn something.
What do you guys think about selling Housing Futures on the CME? I believe they are predicting something like 4% drop in home prices in the next 9 months.
Some problems I see are: how they calculate the home price, the liquidity of the housing futures market, and having a time factor to worry about(trying to time the market).
I believe the median price is calculated by the resell of the same home. It seems like there’s going to be problems with how they determine the price. For example, if it’s the same house, does that mean it will included remodeled homes which will naturally increase the value of the home?
I’m very experienced in stocks and analyzing companies but have never ventured into futures. Throughout the years I realized that being right in a bubble/bust situation is helpful, but everyone else thinks your insane. I’ve given up on trying to educate people that want to live in a dreamworld. I might as well profit from my knowledge. So what do you guys think about housing futures?
Thanks for the laugh!
SmartMoney’s comment had me quickly visualizing Eddie Murphy’s bit about Aunt Bunny falling down the stairs.
The bottom of the stairs is the bottom of the stairs–nothing can change that. So all this bailout talk/effort will simply make the fall “take a half-hour then.”
Left alone, the market forces will efficiently throw us to the bottom of the stairs where these folks can pick themselves up, dust themselves off, and move on with their lives. There’s no need to intervene.
Unfortunately, society continues moving towards idiot proofing everything and yet we still have “victims”. The real crime here is poor education compounded with greed.
p.s. I am speaking of course in general and not specifically towards this family that stretched themselves into a tiny 1/1 condo. We all make decisions in life–some better than others.
wbcmbg,
I haven’t put much energy into housing futures. It has all the problems you described, plus there are plenty of stocks you can short for companies that will suffer during the crash. Mostly, I plan to benefit by purchasing a house for a better price, not as an investment, but as a nice place to live that lowers my cost of housing.
Purchased on 07/28/1999 for $88,500
That kind of tells me all I need to know.
This is the remark from the listing agent:
OWNER VERY MOTIVATED!!! PLEASE CALL THE AGENT FIRST, DO NOT DISTURB, OWNER HAS A SMALL BABY AND BABYSITTER WILL NOT SHOW THE PROPERTY, SUMMIT OFFER SUBJECT TO INSPECTION. OR SHOW BY APPOIMENT ONLY BY CALLING OWNER AT (000) 000-0000. OWNER RELATED TO AGENT. WE WILL WORK WITH YOU.FOR MORE INFORMATION PLEASE CALL (000) 000-0000
Some people just set themselves for failure, this agent does not know what she is doing. If there was a buyer interested in this unit, and I emphasys the IF, this remarks makes the property even less marketable. Why put all these restrictions when you have an urgency to sell? The next comment she will put there will be for the property not to be shown on the 5th de Mayo because it is a National Holyday. 🙂
well well well, irvinerenter, i finally found something disagreeable about one of your statements…
green days’ “holiday” is one of the best rock-n-roll songs ever written. that is the song that you should have mentioned (even though it didn’t fit your theme)…
Bought High,
I might have missed it, but I think you left out their income tax return write off. Good analysis, thanks.