This house became an REO on 9/27/2007 for $607,901. It is now back on the market for $625,000.
Asking Price: $690,000
Purchase Price: $729,500
Purchase Date: 11/21/2005
Address: 14712 Sweetan St, Irvine, CA 92604
Beds: 4
Baths: 2
Sq. Ft.: 1,480
Lot Sq. Ft.: 5,543
Year Built: 1970
Stories: 1
Type: Single Family Residence
County: Orange
Neighborhood: Walnut
$/Sq. Ft.: $466
MLS#: P576515
Status: Active on market
On Redfin: 36 days
.
.
You have to wonder how badly this seller wants out when after 36 days, the realtor hasn’t even bothered to upload any pictures or write a description about the property. Realtor negligence aside, here we have a 2005 property offered for less than purchase price. If the seller gets their price, minus a 6% commission, they stand to lose $80,900.
It wasn’t long ago, you could count on your house making you an amount equal to the median income each year. Now, houses seem to have gotten lazy, and they are costing owners the median income each year in depreciation. I am glad I didn’t work for nothing last year…
Off topic link again – look at that. the prime ARM borrowers finally get some press.
Adjustable-rate mortgages going sour
Commentary: Foreclosure rates have doubled even for prime borrowers
http://www.marketwatch.com/news/story/adjustable-rate-mortgages-going-sour/story.aspx?guid=%7BC0E26CC9-F868-42C7-A84A-7AC9064FAA76%7D
“For prime ARM borrowers, the foreclosure rate has doubled from 0.8% to 1.6% in just one year. The delinquency rate for prime ARMs jumped from 1.5% a year ago to 2.4% this year.
Prime ARMs include so-called Alt-A or toxic loans, which exploded in popularity in the past few years because they offer teaser rates, lax lending standards and the temporary option to pay less than required to pay down the loan.
The window is closing for ARM borrowers to refinance into fixed-rate loans. Mortgage rates have soared by 58 basis points since the end of the quarter to 6.74%. In the meantime, housing prices are flat or falling in the regions with the largest foreclosure rates. ”
—–
I am sure surprised… not.
I will not be impressed until we start to see 2002 prices again….
……maybe in 26.9874 months.
I recall a recent HSBC study that showed the default rate was tied more closely to the down payment than the credit worthiness of the client. Essentially, it didn’t matter if you had a 750 FICO or 550 FICO, a 100% LTV had the same high default rates.
690k for a 1480 sq ft house? LOL
This crash is going to hurt a lot of people.
how about 2.69874 months
I would definitely say there is truth to that statement. Your FICO score only helps you qualify for a mortgage, it doesn’t guarantee your ability to make future payments.
If this is the case, you can argue that credit worthy borrowers are more at risk than sub prime/lower fico borrowers. Prime borrowers are definitely more at risk of owing more than what their house is worth. These are the people that did 100% refi’s or purchases in the last 2 years.
They may hav made every payment on time and even have higher credit scores, but they can’t refi if they are 101%+ LTV.
Good spot Sue, as usual. Thanks.
O/T: Anyone recall the comments a few days ago about buyers now asking sellers to write them a letter, or otherwise demanding things from the sellers? Well, it’s happening in Grenada Hills:
http://latimesblogs.latimes.com/laland/2007/06/22_months_on_th.html
Lending Maestro.
I think you’re talking to the discussion happening right now in lending. It’s not the borrowers, it’s the product… at least, in aggregate.
0% down, low doc, and no doc are the real problems. Regardless of the borrower’s credit history.
“Now, houses seem to have gotten lazy…”
LOL!
Those lazy houses! Get back to work houses!
OK…………..
Lending maestro, I think that the scenario that your talk about is one part of the problem, but I would dare to add that it also has to do with investor’s greed and stupidity. Allow me to explain, I have noticed buyers who enter the market with the 2 years fixed loan. After the first adjustment the rate spiked to unbelievable increments. This has caused many borrowers to default because they cannot afford the new payment and they cannot refinance into something that it is financially sensible either because the new rate is too high or the property does not have enough equity. Therefore, I believe that if the investors would have abstained from making such spikes on the rates after the introductory period, even when the rate was now adjustable, we would not be seeing the same amount of carnage out on the street. It was only after the bodies began to fall that some lenders began to correct such practice and introducing some solutions. For example, I know for a fact that Indymac decided to introduce a program for 100% borrowers in which the rate was fixed for 5 years instead of two. I believe that would have made a big difference to the current state of affairs. What do you guys think?
It’s not the product, it’s the buyer.
A liter bottle of Tequila in my hands is a wonderful Margarita making tool, in the hands of an alcoholic manic-depressive homeless person it’s a mini-disaster. An IO loan or Option-ARM in the hands of financially capable users is a good product.
When it comes to credit, too many Americans are alcoholics.
IMO, a time bomb with a longer fuse still explodes.
I think the ARM products are fundamentally flawed. Anything with a changing payment is simply a way to buy something you can’t afford with the hope that you can afford it later. Everybody acting in this manner drives up prices to where nobody can afford anything — which is where we are today. No amount of tweaking the variables changes the underlying flaw with the product.
The whole mortgage industry seems to be holding its breath waiting for the next “innovation” in mortgage products. I think the opposite is going to occur. The credit tightening will be a downward spiral back to 20% down, 28% DTI and 30-year fixed conventional mortgage financing. We know that works. Everything else is a grand experiment which is about to fail spectacularly.
Irvine renter?
Do you know why inflation is a borrower’s best friend and an investor’s worst enemy?
I will admit that many of those loans should not have been made in the first place. But the facts that I comment about are just another cause as to the current state of affairs. I mean when an underwriter approves a loan for a gardener stating income of $12,000/mouth, then you are really asking for trouble. Or when you have people inflating prices with straw buyers and crocked appraisers such it was the case of a con man in Atlanta who was recently sentenced for financial fraud, this situation only adds more wood to the fire. Imagine I heard the guy purchased a $1 million state in Atlanta and then had it appraised for $3 million and consequently sold it.
Mexifornia Mortgage Broker,
Inflation works great for borrowers. It is why we saw 60% DTIs in the late 70s and it made sense for borrowers even with 20% interest rates.
As far as housing is concerned we are due for stagflation or worse yet, monetary inflation and asset deflation.
The arguments for using inflation for your benefit work just as well with a conventional mortgage as they do with interest-only. You can add the tax benefit argument while your at it. It doesn’t make interest only a better way to borrow.
Debt is risk, and interest is money spent. Those facts don’t change.
Yeah,
Funny how they become shocked, SHOCKED I SAY, to learn from the home inspector that the dishwaher is not stainless, the counters are ceramic tile and the floors aren’t Terazzo, they are (dare I say it…) vinyl?
Suddenly, 40 days into escrow, they now demand what they want.
Sweet™
Run the numbers. I did. Take a 6% loan on an overinflated property or an 8% loan on one priced 20% less. Guess who has the lower monthly payment?
Sweet™
Congress is talking about restricting lending rules. The Fed has made all sorts of… nothing. I wonder what exactly should or shouldn’t be done. Financial instruments have allowed some liquidity and success where there was previously nothing possible e.g. wheat futures. Those instruments were essential. Like all things they were perverted to another’s use.
To what degree should usury laws and regulation step in and deny all applicants?
To what degree should Congress (or any other law making body) restrict financial instruments specifically home mortages?
We enjoy the schadenfreude and we enjoy Irvine Renter’s blog (hurrah!), but I think we can all agree that this bubble isn’t a good thing for our neighborhoods (blight), our friends and family (difficulty living in same neighborhood, foreclosure), or good for the economy in general (future loss of consumption and job). What should be done?
Those are very good questions. I wish I had some good answers.
They have had extensive discussions about these issues over at Calculated Risk. Those threads and the comments are long, but thoughtful and informative.
Personally, I tend to loathe government action because it is almost always the wrong action to take. However, this was clearly a failure of our financial markets and the free market system. Human nature being what it is, I don’t know how you could have legislated something like this from happening. I am afraid of what would happen if they tried.
Random link – could be worse, we could live in Hong Kong. Imagine $2 million Hong Kong dollars (which is even more in US$) for 500 sq. ft., only to see it drop to 60% of that.
http://newpaper.asia1.com.sg/news/story/0,4136,132866,00.html
Oops, sorry, missed a decimal like that Office Space guy :).
2,000,000.00 HKD = 255,780.64 USD
Hey, wait a minute, even before the drop to 60%, that’s not bad by SoCal standards …
The American people need to stop allowing banks to create money on a fractional reserve system. The only true winners in this system are the banks, they create the money out of people’s debts (through loans which are in turn the basis for 10 times more loans, sometimes 20, 30 times more, i.e. debt IS money, no debt no money created, no loans given, no jobs..etc, no INTEREST PAID out of a pool of money that only includes principal…a system designed to have foreclosures and financial insolvency for a portion of the consumers of bank loans…) Banks create money out of debt AND charge interest…that’s truly incredible, you don’t have to ponder why we have business cycles, they are DESIGNED to purge the masses of the wealth they think they have aquired through bank loans…just stop and think why do we need large loans at all in a sustainable way of life?…Its truly a sick system. I would much prefer a system where banks are required to have 100% reserves for every penny loaned…also, funny lending practices such as no docs loans should be outlawed. The creation of money needs to be in the sole hands of the Federal government, not private institutions such as banks (again, money is created out of promises of people to pay money (princial plus interest), i.e money is debt, except for the small percet of paper money which is only about 5% of all money in the current economy). End the practice of debt money and usury and we shall have a better world? Of course this is wishful thinking, its too late, the ponzi scheme is global and there is no way to stop it. I hope you understand that it doesn’t matter who our politicians are, Republicans, Democrats, it doesn’t matter at all, the bankers and their cronies control our economy…they are the puppet masters, our politicians the puppets of course…..
Get rid of the Federal Reserve and fiat currency. Credit expansion and contraction is negligible without fiat currency.
Hey, check it out, Casey made the http://www.msn.com homepage
Today’s Picks
‘Most hated’ blogger leaves U.S., threatens lawsuits
http://tech.msn.com/news/articlecnet.aspx?cp-documentid=5013133>1=10138
Well here we are, your prediction is true after just 4 1/2 months.
Just call you IRadamas.
It is true that with more time, it is conceivable that someone who suddenly acquires some fiscal discipline can put down a few hundred extra dollars a month, and maybe not be in such bad shape when the loan resets. We paid down our mtg with every dribble and drabble of extra money we had and now owe–ta dah–$1507.00.
But would we do this if we were underwater? The hub would say that we had promised to pay, and so we should pay. I’m not so sure I am that moral.
And virtually no one suddenly acquires fiscal discipine like that.
If the American people ever allow private banks to control the issue of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their fathers conquered.
-Thomas Jefferson
“I believe that banking institutions are more dangerous to our liberties than standing armies. Already they have raised up a monied aristocracy that has set the government at defiance. The issuing power (of money) should be taken away from the banks and restored to the people to whom it properly belongs.”
— Thomas Jefferson
Our system of credit is concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men. We have come to be one of the ruled, one of the most completely controlled and dominated governments in the civilized world – no longer a government by free opinion, no longer a government by conviction and the vote of the majority, but a government by the opinion and duress of small groups of dominant men.
-Woodrow Wilson, three years after signing the Federal Reserve Act into law.
The Federal Reserve system is the worst monetary policy, except for all the others – just as democracy is to government.
Off topic – but if you live in the OC area, please help get the word out, maybe we can help catch the Santiago Fire arsonist.
from http://www.ocfa.org/ocfamain.asp?pgn1=3
Click on the “Your help is needed with identifying a vehicle of interest”
Santiago Fire – Possible Vehicle of Interest
Anyone driving a vehicle matching this description or knowing of someone driving this vehicle on or around 6:00 PM on Sunday, October 21, 2007; is asked to call the OCFA Arson Tip Line at (800) 540-8282.
Your help is greatly appreciated. Thank you!
There is a picture of a truck (White Ford F-150, year 1998 to 2004, standard-cab with chrome tubular running-boards)
Corrected
Click on “Santiago Incident”
Then click on the “Your help is needed with identifying a vehicle of interest”
FICO has limited validity, it’s just a manufactured index, and probably an intentionally error prone one at that. The credit bureaus get together to make a score that they hope everyone accepts (based on their data and calculations, they do not release the equation underlying it) and they control all aspects of it. The movie Maxed Out talks about this. I’m glad that it doesn’t seem to have good validity in the housing market– maybe this crash will spur the development of a quality index.
Maybe the toxic loans, irresponsible borrowers and unresponsive regulators are all symptoms of one core problem. Maybe it’s the toxic marketing of consumption in the United States. We are constantly bombarded with messages to “buy, buy, buy.” Maybe if, as a government / social policy, we decided that Americans should save and invest instead of spend ourselves into eternal debt for crap we don’t need, we could start to cure all these ills. How about this, “the first $5,000 of interest or dividends will be tax free” as an incentive to save and invest. And on the flip side, “there shall be an excise tax of 20% added to the interest rate of any debt” as a disincentive to borrow. So that 10% rate of interest becomes 12% (ie, 10% x 1.20).
Buster–
Don’t we already have tax free dividends in a minor way?
Well, we aren’t going to buy, buy, buy, because very shortly,
if not right now, we aren’t going to have any money, money,
money. As everybody as noted and posted, the “real” inflation rate is much higher than what the govt sez it is. We are only making a little less money, but we seem to not be able to maintain our former lifestyle. Everybody else says the same thing.
Using houses as ATM machines is now impossible, unless you procured a line of credit before the great August seize-up.
Seems like everybody is doing poorly in my east Florida haunts,
except at least some of the restaurants.
We would have to stop regarding apparent wealth as a status symbol. Are we going to do that? I doubt it.
(Irrelevant note: my quest for non-Chinese shoes continues to be fruitless)
I hope you guys catch the arsonist. To bad burning at the stake would be considered cruel & unusual punishment.
“An IO loan or Option-ARM in the hands of financially capable users is a good product.”
In the hands of a typical American, it’s a short rag and a matchstick away from being a Molotov cocktail. 🙂
Nothing should be done by the government. Freedom means that people must have the freedom to make mistakes and fail, not just succeed. The opportunity to succeed does not exist without the possibility of failure.
I wonder if this guy saw the “Money is Debt” documentary.
Well not all Real Estate Agents are totally awful.
I just got one that has been specializing in Short Sales since the 1970s to do a 70 minute Audio Recording for my site, AnonRecordings.com
On the recording he says that RE Agents can do great in this market, if they are actually WILLING TO WORK.
I think he’s right, but I know that most of them don’t want to work, so let ’em starve!
Yeah, but the guy who bought at 8% payment will be easily refinanced if/when rates go down to 6%. The guy with 6% payments will be screwed if rates go to 8%.
yeah it’s going to take a lot of work to convince those sellers to cut their prices.
Even if the home he financed at 100% is worth less than when he bought it? Or if he put 5% down and the property is now worth less than the loan amount?
I’ve been hearing ads on the radio for Quicken Finance where they’re offering “about 6.25%” on a 30 year fixed. Sounds like they’re trying to get ahead of the bus.