Big money goes around the world
Big money take a cruise
Big money leave a mighty wake
Big money leave a bruise
Big money make a million dreams
Big money spin big deals
Big money make a mighty head
Big money spin big wheels
Sometimes building ivory towers
Sometimes knocking castles down
Sometimes building you a stairway
Big Money — Rush
The high end is immune, right?
There are not many properties in Shady Canyon, and even fewer on which I can find the purchase information; however, there are three rollbacks sighted so far. Will there be more on the way?
The first of this is Mark McQuire’s old place. This property is the market leader on the way to the bottom. The price was just reduced again. The flipper is looking at a loss of nearly a million dollars after commissions. That property is clearly leading in our race to the bottom, but the two properties we have today are working to catch up.
Asking Price: $3,998,000
Income Requirement: $999,500
Downpayment Needed: $799,600
Purchase Price: $4,030,000
Purchase Date: 1/6/2006
Address: 25 Golden Eagle, Irvine, CA 92603
Beds: 4
Baths: 5
Sq. Ft.: –
Lot Size: 0.59 acres
Type: Single Family Residence
Style: Mediterranean
Year Built: 2003
Stories: One Level
View(s): Hills
Area: Turtle Rock
County: Orange
MLS#: S498428
Status: Active
On Redfin: 63 days
From Redfin, “Single Story Custom Home in Shady Canyon. Great, private cul-de-sac location with only one adjoining neighbor. Unobstructed views of pastoral canyon and hills. Tuscan style home beautifully finished with Richard Marshall wood and stone. Spacious grounds with custom built fireplace, BBQ, spa and Wolf appliances throughout. Ideal for family with small child or retired couple. Blueprint and specs for the house are available. Opportunity to expand this single level house to 5900 sq ft.”
What is Richard Marshall wood and stone? I guess I am I not cultured enough to know these things. I Googled them. I guess I should be impressed?
Are Wolf appliances better than Viking or Sub-Zero?
Ideal for family with small child or retired couple? I am sure there are many families with small children who want them running around in a museum with hard floors, not to mention the large numbers of families with small children who can afford this place. I don’t know about you, but I will not want a 5,000+ SF McMansion when I am retired.
.
.
If this seller gets their asking price and pays a 6% commission, they stand to lose $271,880. There is no mortgage recorded on the property (at least in my database,) so this flipper can absorb the loss.
Asking Price: $4,495,000
Income Requirement: $1,123,750
Downpayment Needed: $899,000
Purchase Price: $4,550,000
Purchase Date: 8/8/2005
Previous Purchase Price: $3,553,500
Previous Purchase Date: 12/15/2004
Address: 50 Vernal Spring, Irvine, CA 92603
1st Loan $2,985,000
2nd Mtg. $200,000
Downpayment $1,365,000
Beds: 4
Baths: 4.5
Sq. Ft.: 5,000
$/Sq. Ft.: $899
Lot Size: 0.57 acres
Type: Single Family Residence
Style: Spanish
Year Built: 2005
Stories: One Level
View(s): Mountain
Area: Turtle Rock
County: Orange
MLS#: U7001638
Status: Active
On Redfin: 159 days
Unsold in 90+ days
From Redfin, “Model perfect single level Masters located in the exclusive golf community of Shady Canyon. This single level home offers three bedrooms plus bonus room and a rare four car garage at the main house and a 4th bedroom and office which is attached but functions as a separate casita! The stunning exterior landscape includes a long gated driveway, pool, spa and covered cabana with fireplace all with fantastic views!”
.
.
What I find interesting about this property is how much the previous flipper made: a hair under $1,000,000 in less than 9 months. No wonder our WTF winner from $1,000 Grand thought this was possible. Well, it looks like the supply of greater fools has run out, and this owner is now the bagholder. If they get their asking price, they stand to lose $324,700 after a 6% commission.
These losses are staggering. I don’t care how rich you are, when you are losing a quarter of a million dollars or more, that is Big Money.
Time keeps on slippin’ slippin’, slippin’, into the future… Or is that Time keeps slip sliding away… I hope you aren’t Ticking away the moments that make up a dull day…
Another week has passed at the Irvine Housing Blog. Come join us next week as we continue to chronicle ‘the seventh circle of real estate hell.’ Have a great weekend.
🙂
Rush rules! I saw them in Concert in Phoenix in August. God that was a great show. Best Album – Counterparts.
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IR, hey, what are you doing there in the middle of the night? A new posting at this time? Can’t sleep?
🙂
“Rush rules!”
Damn, for a moment, I really thought “Oh no, freeper trolls here?!”. Glad to see I confused this. But the band really should sue a certain talkradio host for giving their name a bad rep!
😀
Don’t worry, the Asians are flying into LAX with suitcases full of money to buy up this inventory.
🙂
I do get up at 5:00 AM, but not as early as these posts come out. Fortunately, I can post date them to come up automatically in the middle of the night.
UH OH, pull the ejection handle. The Register just posted the new sales figures for week ending 9/14, and it’s not good.
Aug 31: $642,500
Sept 11: $620,000
Sept 14: $605,000
http://www.ocregister.com/ocregister/money/housing/article_1853896.php
Hope springs eternal in Vernal Springs (that was a double pun, btw).
Perhaps this was not an individual flipper but an investment trust? The original seller might have been the builder?
Like Meatwad says “Echos with the sounds of satesmen-of salesmen!”
Those are a couple of very nice homes. Unfortunately, I can’t afford either of these places even if they drop 50%.
We can always hope for an 80% decline, right?
lol. God Willing.
It’s scary looking at the income requirements for these places…
Just FYI, Wolf = Subzero, they’re owned by the same company. I’ve used both Wolf and Viking ranges, and although I own Viking now, I tend to prefer Wolf’s burners. However, both are better than what I am capable of producing, so it really doesn’t matter.
WTF is a “Pastoral canyon View”?
gimme a break
I was a little confused when I first read this. I thought the first property pictured was the Mark McGwire property and I couldn’t understand how there could be a million dollar loss.
Anyway, for anyone else who hasn’t had their morning coffee yet, the Mark McGwire property is currently listed at $3,395,000 – a $555,000 difference from the purchase price of $3,950,000. That plus the quarter mil in commissions and whatever the carrying costs are would put it near the million dollar loss as IR points out.
I was under the impression that Mark’s house was at the top of the hill just before you get to some sort of Water and Power buidling. Is that the home that you are referring to? The property I thought was his is double lot piece in best location in Shady Canyon.
Maybe the pastoral canyon view is referring to the land land that used to be used for cow grazing.
Someone posted recently that McGuire bought three lots. He lived in the first house while he was building the monster. He sold his temporary house to the flipper who is getting roasted.
I don’t understand the Golden Eagle listing. No square footage is listed, and the text indicates that blueprints are available to expand to something over 5000 sq feet. So it’s sort of unfinished? The setting looks pretty, but the pass thru kitchen heading to an endless hallway is strange. A lot of money for something that isn’t quite done.
OK that makes sense. Then his primary residence is F***ing Sweet!
Actually, I’ve been in the area and the description is correct.
Their HOA should hire a sheepheder, a dog and a bunch of sheep and keep them in the valley. The view and the houses do look like you’re someplace in a lower valley in the Pyrenees or Apennines.
Add in a Citroen or two, some rude gendarmes and a cheese shop and you might as well be in the Rousillon.
What is the attraction of Viking ranges?
Consumer Reports consistently has them near the bottom of their rankings and they are expensive. (Wolf gets ranked about mid pack–sorry I couldn’t resist.) As an added bonus Viking ranges have the worst repair rate in CR’s survey. It has 50% more repairs and serious issues than the next worst brand.
I’m not trying to piss anyone off, I’m just curious why they seem to be so desirable. I’ve never personally seen one.
Thought just occured to me. Well several actually. I was thinking about the optimal asset allocation ex-ante. My premise is that the cycle of disinflation that we have enjoyed over the past 20+ years is ending, and that we are likely to see a reflationary environment into the foreseeable future. The other alternative is that inflation stays at its current level, and we just chug along. Support for this “steady state” infaltionary environment could be made using globalization world in flat type arguments. However, I am more inclined to believe that we are likely to see a rise in inflation over the next 10-20 years, based on (1) unfunded Social Security/Declining Labor Force (2) Continued Weakening Dollar and diversification of Global Central Bank reserve assets (3) Increasinly Socialist Federal Policy including increasing entitlement programs and/or industrial protectionism.
Whether the net result is inflationary or stagflationary, both should lead to higher real asset prices, including Real Estate. Now, I think we all agree that valuations on real estate seem to have eliminated the positive impact provided by the inflation hedge, but is it possible that R/E would do better, despite valuations, than domestic equities, fixed income, etc? (I guess this is a rehash of the question of what asset classes are you expecting to provide attractive returns).
Someone is going to answer Gold, so I am curious at how one determines the intrinsic value on gold. Does anyone have a model?
Finally, what were the comparable figures for housing NOI vs cost of owning in the early 70s? I have spoke with a lot of older people lately, who remember buying into the housing market in the early 70s with very low return expectations only to be shocked by the returns they realized.
hmm….is this:?
http://www.baynature.com/2006janmarch/images/ease_main_1.jpg
It certain does look like the FED is going to bring back inflation. We have been living without it for so long, I wonder if everyone forgot what a pernicious problem it is.
Inflation eats into the returns on all investments because the dollars returned are less valuable. It tends to drain money out of investment in business and puts it into investment in things which is detrimental to the economy.
Inflation will not stop the housing train wreck, but it may make the drop less severe in nominal terms. In real terms, it will still be pretty dramatic. After rents and incomes climb enough to reach parity with the cost of ownership, real estate will likely appreciate at the same rate as inflation and resume its role as a good inflation hedge. It will never be a good investment for earning a return in excess of inflation, unless of course we get another bubble.
I don’t see the FED bringing back inflation for the long term. After all, the FED is the central bank. Banks get screwed by high inflation because the money returned to them at payments is worth less than when they loaned it. The FED would be knowingly screwing its member banks.
Interest rates were able to fall so low over the last 25 years because inflation has been contained and banks are willing to loan at lower rates when they believe the money they are getting back in the future will have value. A permanent increase in the rate of inflation will bring back high interest rates on long-term loans like mortgage loans. This in turn will drive house prices much lower.
Most homeowners are rejoicing over the lower FED rate and the increase in inflation, but little do they know that this move will have the long term effect of raising interest rates and depressing their home values further.
Gosh, it pains me to agree with you, but I agree with you 85%.
I tend to think that most asset classes will increase in price due to an inflation in the money supply, except for the most recent bubble. And only because of mass psychology.
Unlike most gold investors, I do not think gold has much intrinsic value, if any. All it has is history; a history of being money and an inflation hedge.
I second everything you just said. And why in the world does anybody want a commercial grade appliance in their home. I worked in a restaurant for 11 years, and commercial ovens and stoves are hard to clean and extremely fuel inefficient. And you have to have a housekeeper just to keep the stainless looking ok. That said, does anybody have experience with Gaggeneau or Le Cornieu? And I have no idea how to spell those.
lol. Thanks Awgee. You’re a better man than I!
What can you buy as an inflation hedge that isn’t already overvalued? ….. Been thinking about that, can’t come up with anything. Which sucks.
Good points on the rates. I think the surge in commodities prices this month is going to garner some attention on the inflation side. We already witnessed a 10-year yield rising in response to the Fed rate cut under renewed inflation expectations. The TIPS markets is still pricing 2.27 breakeven inflation on te 10-year, that is the curious part…
That said, I am a little fixated on the 70s experience right now…
It was a period of rising inflation, rising interest rates, and rising home values. I think we need to find a little more information on this period to figure out what, if anything, applies to the current situation.
I will see what I can find.
BTW, Awgee, that is has always been my issue with gold. I suppose it works as a dollar hedge, but why not own foreign currencies that (1) diversify away from the dollar (2) pay a yield?
O.C. housing heads to worst price drop since ‘96
http://lansner.freedomblogging.com/2007/09/28/oc-housing-heads-to-worst-price-drop-since-96
Found this on Wikipedia while searching for historical income/house price and rent/own data.
Anaheim Hills: $120,852
Villa Park: $116,203
Tustin Foothills: $96,230
Irvine: $85,624
Newport Beach: $83,455
Yorba Linda: $79,593
Rancho Santa Margarita: $78,475
Mission Viejo: $78,248
Aliso Viejo: $76,409
Laguna Niguel: $76,408
Laguna Beach: $75,808
How the Hell is the Irvine Median income higher than both Laguna Beach and Newport Beach?
“why not own foreign currencies that (1) diversify away from the dollar (2) pay a yield?”
I don’t have a big answer. It would seem some foreign currencies may provide the same hedge and provide a yield. Maybe yen, swiss franc, and loonie, but it also appears that many other currencies are either tied to the USD or are in the same boat. And what kind of yield can you get on yen or ch?
My take on TIPS, which I have my mom in, is that since they are tied to the CPI, they are not an real inflation hedge and the market discounts this knowledge.
Enough of this nicey-nice. Isn’t there something we can argue and be snippy about?
McGwire’s house looks like it’s on steroids. But, we’re not here to talk about the past.
Ok, here you go. Plenty to be snippity about the rip into there…
Gas prices rising and food prices rising is a good thing because it’ll make us walk more and eat less. And help reduce medical care costs for future generations.
Manteca Home Auction Angers Neighbors
http://www.news10.net/display_story.aspx?storyid=33245
But some 24 residents in the Paseo West subdivision in Manteca say what’s happening to them goes beyond a dismal real estate market. Anderson Homes, which built the subdivision, announced it is auctioning off 34 homes in the upscale neighborhood, homes that have sat unsold on a stagnant housing market for a year.
In some cases, the starting bids are about half of what some current homeowners paid for nearly identical homes just over a year ago.
“They didn’t treat us very good as far as I’m concerned at all,” said Amy Sturdevant who in August 2006 paid $585,000 for her family’s four-bedroom, two-bathroom home. Now, a nearly identical home with the same floor plan right across the street from Sturdevant is set to be auctioned at a starting bid of $295,000.
OT, but have any of you noticed if the HomeDepot or Lowes parking lots down there are less full nowadays?
Our HD is a morgue after 6:00pm. I was in there last night and I bet there were 4 cars in the parking lot. I needed some pipe cut and was talking with the guy working the plumbing dept. He told me that the store is so dead that management has cut hours and made most F/T staff P/T. He went from 40 hours to..get this..16! Insurance goes away then too.
I firmly believe the economy is in recession and sliding further fast.
I’ve tried researching this very issue, how high inflation and resulting high borrowing costs in the 70’s resulted in significant asset price inflation. I think they key is whether or not the inflation spreads to wages or not. If wages are not increasing then asset prices are held in check – particularly with increased borrowing costs as you mention.
I thought the same looking at the finishes in the photos. The inside just looks like a big middle class southwest motif.
Here’s something you wont want to miss:
Regulators Close Troubled NetBank
American Banker |
By Joe Adler
WASHINGTON — The Office of Thrift Supervision announced on Friday that it had closed NetBank. The shutdown marked the biggest failure of a depository institution since the savings and loan crisis.
The OTS appointed the Federal Deposit Insurance Corp. as the conservator for the $2.5 billion-asset Alpharetta, Ga., thrift, which had about $2.3 billion of deposits as of June 30.
NetBank, which had suffered a high mortgage exposure and failed bids to sell off nonperforming units, was the largest institution to fail in 15 years. Meritor Savings Bank of Philadelphia failed in December 1992 with $4.1 billion of assets and $2.9 billion of deposits.
The thrift, which specialized in Internet banking, was shut due to “early payment defaults on loans sold, weak underwriting, poor documentation, a lack of proper controls, and failed business strategies,” the OTS said.
“As a result, the OTS executed a formal enforcement action with NetBank in 2006 directing the institution to correct its operating deficiencies and enhance its capital position,” the OTS said. “While the institution continued to operate in excess of minimum capital standards, the actions taken to address these problems were unsuccessful and it became clear that high operating expenses combined with continuing losses were jeopardizing the institution’s viability.”
The OTS said it shut the thrift after NetBank’s efforts to sell to EverBank Financial Corp. fell through last week.
“The institution had no remaining prospects for raising capital and achieving profitability,” the OTS said. “Accordingly, the OTS exercised its authority under the Home Owners’ Loan Act to appoint the FDIC as receiver of the institution.”
Inland home builders put on brakes
http://www.pe.com/business/local/stories/PE_Biz_D_cbia28.31099d8.html
Steve Johnson, a director of Metro-Study, a real estate consulting firm in Riverside, said even homes for which builders have obtained permits from counties and cities may not get built.
He said there are about 15,000 permits for single family homes that recently were close to expiring.
There are also 27,000 lots prepared for new homes on which construction has not begun, he said. Johnson said a majority of the empty lots are in emerging housing markets such as Banning, Beaumont and south Riverside County that were the first to feel the downturn in home sales.
How’s this for argumentative?
Medical costs are going up up up, because americans are FAT FAT FAT!
Traffic circles. I have decided that they are the second most dangerous thing on the Irvine roads!
Wage price spiral. Correct. I am assuming if there is economy wide inflation we will see a return of cost-push inflation.
Still need to find the income and housing price numbers from the 70s.
“Building the monster”? So the temporary first house is where he took all his steroids?
On the nice note. Good move on TIPS for your mom. Awgee, I am going to take back some of the things I’ve said about you!
TIPS, they may not be perfect, but here is a little example.
Over the period from 1960 to 1980 the US economy was faced with persisent rise in inflation. Until that time, investors always assumed that equities were and inflation hedge. They were wrong. They knew bonds would suffer under inflation. In fact the best performing asset class would have been something that yielded just 2% over CPI over the 20 years.
Sound Familiar.
No opinion of traffic circles, but if it leads to irritation, maybe I can fake an opinion.
Also have mamsita in gold.
FAT and government interference! That ought to raise a few hackles.
Have you considered a commodity index as opposed to direct holdings of Gold?
The McGwire house is fascinating. It’s 15% below the last sale price and 20% below asking, and probably priced at double what it’ll eventually fetch. Bursting bubbles have a way of deflating a lot of pretenses, one being that a house anywhere near Irvine, California would ever qualify as top-end.
Isn’t that all that matters? As long as everyone thinks of it that way, it produces it’s own ‘bubble’. If you get in and out early enough, then you win.
Same with RE. You think when the markets hot anyone gives a rats A$$ about fundamentals or intrinsic values? Get in and get out and don’t be greedy.
If you are in for the long term, then worry about it.
Maybe new entrants? If Newport Beach is full of older people who’ve lived there for years, while Irvine keeps growing bringing in new prime-earners, then it’s feasible that the medain could be greater in Irvine.
Here’s an article from the Register in Jan 2007 outlining the 2004 median household incomes by OC zip.
http://www.ocregister.com/ocregister/money/abox/article_1556015.php
It does raise some interesting questions about the strength of the correlation between income and home prices.
I’ve been looking for this, but the new District (Jamboree & Barranca) is crazy! If we’re in a recession, I wouldn’t expect two hour waits at every restaurant on Friday nights. And I wouldn’t expect to have to park a mile away from the nearest building.
Maybe Home Depot & Lowes are slower ’cause all the flippers are gone?
So a 4% drop in nominal terms plus 6% commission / selling costs means that anybody who bought with 10% or less down is TOAST! 100% equity loss – gone, evaporated. A loss of 100% on your investment and moving quickly into negative territory.
The homedebtors of ’05 and ’06 are officially burnt, unless they were smart and bought with nothing down! Buyers from ’04, you are next! Get out your sunscreen because the bright rays of the market are about to sizzle you to a crisp as well. Buyers from ’02 / ’03, is it getting warm yet?
I thought this initially about Shady Canyon. How could such astronomical prices be justified in Irvine? The more time I spent in and around the development, the more I have grown to like it. It is very well laid out, private golf course, gated, nice views, easy freeway access, pretty, and very quiet. No its a nice place alright. Prices may inflated along with the rest of the market, but that doesn’t mean it isn’t an awfully nice place to call home.
I have no problem with commodity indexes. In my mind gold and silver will move greater than other commodities, because during times of monetary inflation, precious metals are also thought of as money.
Defaults on Insured Mortgages Increase 30 Percent (Update5)
http://www.bloomberg.com/apps/news?pid=20601087&sid=aEDo0hL_qfFI&refer=home
Great schools too.
We go hiking on the Shady Canyon trail quite a bit. When the hills are green the area is spectacular. The views are amazing – especially when you see deer running in the distance.
According to the Census bureau:
Newport Beach median household income is:
$103,068;
median family income is $147,697
url:
http://factfinder.census.gov/servlet/ACSSAFFFacts?_event=&geo_id=16000US0651182&_geoContext=01000US%7C04000US06%7C16000US0651182&_street=&_county=Newport+Beach&_cityTown=Newport+Beach&_state=04000US06&_zip=&_lang=en&_sse=on&ActiveGeoDiv=&_useEV=&pctxt=fph&pgsl=160&_submenuId=factsheet_1&ds_name=null&_ci_nbr=null&qr_name=null®=null%3Anull&_keyword=&_industry=
Kitchen remodels go on a diet
The number of renovations costing more than $20,000 has dropped by 40% compared with last year.
http://realestate.msn.com/Improve/Article_wsj.aspx?cp-documentid=5448793>1=10431
LendingTree cuts 250 jobs, mostly in Irvine
http://mortgage.freedomblogging.com/2007/09/28/lendingtree-cuts-250-jobs-mostly-in-irvine/
LendingTree said today it is cutting 250 jobs, or 17 percent of its workforce, mostly in Irvine.
For those who enjoy history or literature, or just like Dickensian writing
Buying A House In 1906
Part 1: http://www.viewfromsiliconvalley.com/id351.html
Part 2: http://www.viewfromsiliconvalley.com/id352.html
Humor: Businessweek sound byte
Housing: Ugly And Uglier
http://www.businessweek.com/magazine/content/07_41/c4053063.htm?chan=search
“The only thing going up in the U.S. housing market is for-sale signs.”
Viking products are the worst. I will never have another Viking product again. The dishwasher doesn’t dry completely and malfunctions randomly. The fridge ice dispenser clogs when you select cubes, how they can make a fridge that does that is beyond me, just enlarge the opening or make the ice cubes smaller, it’s beyond annoying when I can only dispense crushed ice because cubes clog the dispenser. The stove is the only decent thing with high heat but the knobs have a lot of loose play.
Countrywide CEO sold big as stock dropped
Quick changes in Mozilo’s trading plan raise red flags, experts say. The mortgage firm says the sales were in line with company policy.
http://www.latimes.com/business/la-fi-mozilo29sep29,0,3110113.story?coll=la-home-business
Well, $1 US closed lower than its counterpart $1 CAD. Dollar constant fall will result in inflation, Fed will fuel to fire by cutting rates further. There is no control and way to go America!! Outsource everything and import everything at much higher costs.
Will it ever stop?
Speaking of Rush, how about Subdivisions? For those Bitter Renters
HAL
Mark McGwire’s old property (3 Redbird in Shady Canyon) has just reduced their price AGAIN another $100k. It’s now down to $3,295,000. As a reminder, it was purchased on 3/8/06 for $3,950,000.