Variations on Canon — George Winston
Today’s listing is a perfect example of how bad timing and unrealistic expectation can be a costly combination.
Asking Price: $675,000
Income Requirement: $168,750
Downpayment Needed: $135,000
Purchase Price: approximately $725,000
Purchase Date: unknown 2004/2005
Address: 27 Wonderland, Irvine, CA 92620
Beds: 3
Baths: 3
Sq. Ft.: 2,146
$/Sq. Ft.: $315
Lot Size: –
Type: Condominium
Style: Mediterranean
Year Built: 2004
Stories: Two Levels
Area: Northwood
County: Orange
MLS#: S490583
Status: Active
On Redfin: 172 days
Unsold in 90+ days
From Redfin, “Move in condition, highly upgraded spacious home. This gorgeous home offers 3 bedrooms and a huge bonus room. There are two master bedrooms, one down plus additional bedroom and another master upstairs with a huge bonus room and builtin computer area. Upgraded hardwood flooring and carpeting, plus plantation shutters. Formal dining room, spacious kitchen upgraded with granite counters and wood cabinetry and stainless steel appliances.”
That is a well written listing. You don’t see those very often…
.
.
Price Reduced: 08/07/07 — $818,000 to $780,000
Price Reduced: 09/06/07 — $780,000 to $760,000
Price Reduced: 10/13/07 — $760,000 to $730,000
Price Reduced: 10/26/07 — $730,000 to $699,000
Price Reduced: 11/02/07 — $699,000 to $675,000
The asking prices started somewhere in Wonderland on the exact day the credit crunch took hold. From there, the seller has slowly and methodically chased the market down, always staying one step behind the drops necessary to make a sale.
To me, this is a very pretty house. A reasonable size. But the income requirement!! Even if they came down a bit more than another 10%, you’d need $150,000 a year, forever and ever, or 30 years, whichever comes first.
That is a LOT of money.
—–
It may be nice, but for $675,000 I wouldn’t want any common walls. For this price I’d want a detached home with at least some back yard.
The thing is…at $675K this house still seems outrageously overpriced. I think somewhere in the mid $400 range is a little more realistic. Even today’s “lower” prices still seem totally disconnected from the reality of the incomes that most people earn.
So this is what it’s come to. A top-tier housing blogger has to compliment a real estate professional for writing a listing that doesn’t sound like it came straight out of “Are You Smarter Than a Fifth Grader?” It still bugs me that an agent would even list that place at that price in this market. The funny thing is, had the seller priced it at what they are wishing for today, they may have actually had the chance to sell it. Now, it’s just bring the pain. If LendingMaestro, or any other lending type reads this, what kind of loan could you actually get approved on this place at this price? I mean, since we are in Wonderland today
dont you know that every one in Irvine makes a million dollars a year.
should sell IMO in the 400ks as William jones suggests.
Agreed. It’s a well-written listing. The ubiquitous exclamation points and unnecessary capitalization are mercifully absent. The only problem, however, is with “move in condition.” It should read “move-in,” but I guess we can’t be greedy when we see a REALTOR(TM) who is literate.
The previous 4 posters seem the feel the same way I do, that these asking prices are completely ridiculous. Of course many will say they are perfectly reasonable when compared to comps. But I and I suspect many others believe that the comp pricing is ridiculous as well. It would seem that most housing bear blog readers can see the insanity of today’s prices, but what about the rest of the population? What is the average Joe’s take on home prices?
Will prices return to sane levels before the reimergence of easy money and lowered lending standards cause the masses to lose their minds again?
To me a condo always meant “compromise” (common walls, crappy parking, neighbors 6″ away, ect., etc.) that one could purchase for a substantial discount over a SFR. How did condos get elevated to the same status as SFR’s in the minds of buyers?
Property tax is listed as $10,126.00 and HOA is $276/mo. 10k in property tax for a condo? Wow! Those both seem really high to me. That is not going to help sell the place.
Another one…”built-in”. not builtin
Again, pretty sad that this is as good as it gets as far as grammar goes. I wonder what would happen if I continually spelled words incorrectly in my reports for my boss…
Anyhoo, sometimes I wonder if they do this on purpose. (head scratch)
hope…springs. Seeing 3 Bed/3 Bath + bonus room finally fall into the 6’s is attention grabbing. if this house were in Woodbury i would be contacting the agent today. Northwood is great but doesn’t quite have the amenities – especially the walking distance Town Center – to which we have been accustomed in WB. If these types of houses fall into the 5’s then it may be time to put the savings to work.
My savings have been working just fine during this bubble, thank you.
The taxes and HOA on this place practically cover my yearly rent for my tiny apartment – 1/3 mile from the beach.
Do I hear my neighbors? Yes. Does 27 Wonderland hear their neighbors? Probably. So, what’s the point of buying?
No point. I’ll just keep renting until I can AFFORD what I WANT.
If I’m not mistaken this development is adjacent to Woodbury, just on the other side of Jeffrey road. Basically, you would need to cross Jeffrey to enjoy those amenities.
I think I get your point, Woodbury it’s not, but I don’t think this location is so bad either.
Hey Cal,
You beat me to it. Well said!
Once real estate became an investment in people’s minds, quality didn’t really matter much. Anything would do as long as it goes up in price. Of course, now that prices are declining, quality leaps to the forefront, and it is the undesirable properties showing stress first.
Major, I too am renting a small place not too far from the beach (2 miles versus your 1/3 mile). My rent keeps going up, so I am just looking to buy in order to lock in my housing costs. I am prepared to buy something similar to what I live in now. I’d love a little less noise, but I am acutely aware that, back in 1996, I chose not to buy because my standards for buying drifted way higher than my standard for renting. That turned out to be a dumb move on my part.
keep those savings dry 😆
Uh, patientranter, look at the other comments: 10126 for taxes and 3312 for Hoa every year. That’s 1120 bucks every month, and then the interest rates and the aquitance for the mortgage would come on top of this (not to speak of maintenance costs). Or, if you actually have the 675k, they will bring you 2587 in interest every month (when safely invested in US treasuries). So, in order for buying to make sense, the rent for this place would have to be higher than 3707$. Hmm, I know next to nothing about Condo rents in Irvine, but are they really that high???
I don’t believe buying at these prices makes much sense…
:-/
Well my gut tells me that the inflection point for rent vs. own in this area is in the mid 500’s. I don’t have a cash flow valuation formula that would yield a precise figure, and if even I did it would have many forward looking variables that could only be estimated. A 3BR/3BA condo like this in WB rents for between $3,000 – $3,500. I don’t know what it would be on the other side of Jeffrey. Maybe I just think that that $500’s is reasonable since these were listed in the $900’s when I moved into this area. Does anyone have a good formula for calculating the equilibrium point? I don’t put a lot of faith in rule-of-thumb multiples.
Grey, I don’t plan to pay more than $300K, cash, for anything. Buying at current prices makes no sense to me. Prices have gone up by 400% over the last 10 years, and now we’re getting all excited by a 5-10% drop. This 5-10% has no meaning to me except perhaps as a sign of much, much bigger falls to come.
I have invested most of my money for many, many years in Treasuries and a wide variety of other bonds, held to maturity. The returns, net of taxes and inflation, are usually close to zero. I am in the top tax bracket. Even my tax-free CA general obligation munis haven’t averaged more than inflation, because I invest fairly short. If you allow yourself to invest heavily in the longer term bonds, then I’d allow a maximum net return of 1% over the long run, and I think you’d be lucky to get that. I’d be delighted to see any data to the contrary.
Hey IrvineRenter,
Check your mail again if you could — Sent you an updated doc with a correction… I know you dont check your mail that often 🙂
Thanks,
Zileas
Rule-of-thumb multiples come about by crunching through the detailed analysis a few times and seeing where the relationships are. Depending on the assumptions used, the breakeven point for an owner occupant is somewhere between 150-200 times monthly rent. If you want to see the numbers in action, go through the calculations yourself. Find a house that is both for sale and for rent and calculate the total cost of ownership (fully amortized payment on 30-year fixed, taxes, insurance, HOA, etc.) and compare the two numbers. After doing this for a number of properties, you will get a range of values showing you where the market is currently (somewhere around 250) and where the breakeven point resides (around 160).
Of course, this only represents and area where buyers will become interested in buying. If the number of foreclosures exceeds the number of buyers at these price points, prices will drop even lower. Big money will not enter the market until prices drop to where a rental will positively cashflow. This is somewhere between 100-120 times monthly rent.