The spirits up
Were here tonight
And thats enough
Simply having a wonderful christmastime
Simply having a wonderful christmastime
The partys on
The feelins here
That only comes
This time of year
Simply having a wonderful christmastime
Simply having a wonderful christmastime
Wonderful Christmas Time — Paul McCartney
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Today we are off to the races. We have a pair of small condos priced almost 20% off the peak racing to find a knife-catcher…
Asking Price: $369,900
Income Requirement: $73,980
Downpayment Needed: $92,475
Purchase Price: $430,000
Purchase Date: 8/24/2006
Address: 43 Alberti Aisle #348, Irvine, CA 92614
Beds: 2
Baths: 2
Sq. Ft.: 900
$/Sq. Ft.: $411
Lot Size: –
Type: Condominium
Style: Other
Year Built: 1987
Stories: One Level
View(s): Park or Green Belt
Area: Westpark
County: Orange
MLS#: P610348
Status: Active
On Redfin: 24 days
From Redfin, “Welcome Home! Nobody above or below! Peaceful interior location above the garage. Two balconies, cathedral ceilings, pergo flooring throughout this home, cedar-lined closets, mirrored wardrobes, two full baths, two master suites. Nice, clean, and bright home. One of the nicest units in the entire complex! New interior paint, kitchen light fixture, and cabinet makeover. New bathroom floor and mirror. “
That first picture is my nomination for the worst, most useless photo on the MLS.
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I have stated on this blog that the leading edge of the decline is 15% to 20% off the peak. Here is more proof. The property above is priced 14% off the July 2006 purchase price. If they get their asking price, they stand to lose $82,294 — a little over 20% in about a year and a half.
Asking Price: $375,000
Income Requirement: $75,000
Downpayment Needed: $93,750
Purchase Price: $431,000
Purchase Date: 9/21/2006
Address: 105 Castero Aisle #258, Irvine, CA 92614
Beds: 2
Baths: 2
Sq. Ft.: 871
$/Sq. Ft.: $431
Lot Size: –
Property Type: Condominium, Attached
Year Built: 1989
Stories: One Level
Area: Out Of Area
County: Orange
MLS#: C07174665
Status: Active
On Redfin: 1 day
New Listing (24 hours)
From Redfin, “Short Sale, Indymac Bank has to approve sale amount. Seller is highly motivated. 2bed 2bath.”
Short but sweet.
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Indymac bank stands to lose $78,500, just slightly under 20%. Have you seen the new Indymac bank branch in the Oak Creek plaza. Perhaps it will help them process all the Alt-A REOs they have in Irvine?
This short sale is providing some competition to the first property. Since it is a new listing, the race has just begun.
What a dump. The place is absolutely hideous and hopelessly outdated. I’d rather have something built in 1925 anytime. Take in that ugly kitchen and that tiny, cramped living room. I can’t imagine Irvine denizens even wanting to rent this place.
Relative to other really attractive places you’ve featured on this blog, it’s atrociously overpriced at $431 per square foot, and while it is “affordable” to a buyer on an income somewhat lower than Irvine’s median, it is very much less than a “median” Irvine” dwelling.
$200/sq ft is really more like it, given what I have been reading of this blog and the comments posted to it by Irvine residents. At that price, you could afford to gut the nasty kitchen and bathrooms. God knows what THOSE look like. You’d have to renovate to make this a competitive rental.
Since I’m far away, I have no idea how the neighborhood rates. How is the neighborhood?
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Here in Fla, the cheap condo generally starts at 1000 to 1100 square feet. You have to make 75 grand to afford that? Nonsense.
I love the picture of the “cathedral ceiling” LOL! It’s hard to tell what they were modeling this after – St. Paul’s in London or San Marco Basilica in Venice. Why would anyone in their right mind take and then post a picture of a ceiling?
“Why would anyone in their right mind…”
Asked and answered.
The down-payment requirements are what will drive housing prices more, unless some alternate structure is found. How many people with $80,000 – $90,000 in cash will want to put it into a cramped 900 SF condo? It makes no sense whatsoever.
IMO, the bottom will be below the rental breakeven point because of downpayment requirements. It doesn’t matter if you have the income if you don’t have the downpayment. Right now, everyone is so used to downpayment financing that few believe 20% downpayments will return. I think they will become the norm again, particularly in the face of a declining market.
I have a single teacher friend who lives in this complex. Three years ago, she bought for fear that she’d “be priced out forever,” in the hopes that this would be a stepping stone into a detached home. With her salary, she had to procure a roommate to comfortably afford this 900 sq foot dwelling.
Aside from RE investors, THAT is who is buying these.
The complex itself is well-kept for being built in the ’80s. It backs up to a bike trail and has lovely parks surrounding it. It’s very close to most Irvine businesses and I don’t recall hearing any noise pollution from Main or Jamboree.
The 2 full bathrooms and bedrooms aren’t anything to write home about. I believe that the main master has a garden tub. Again, no granite or fancy pedestal sink.
These condos would each get one slot in a carport. It is very much like your typical Spanish stucco apartment from the ’80s.
Also, I forgot … you get a tight, detached garage that most people use for storage. I don’t know that you could fit anything much more than a mini-Cooper in there.
Just came to post that “Wonderful Christmas Time” is by far the worst Christmas song ever.
NO NO NO… “Do They Know It’s Christmas” is the worst Christmas song ever…
I completely agree with you. So few are used to DP & savings that the housing market across the US has a lot farther to fall.
What’s likely rent? $1400? I’m just guessing. But if the new IAC properties are going at $1800, this one needs a heavy discount.
Not to mention that those people with sizeable down payments typically acquire the cash on hand from the equity in their previously owned house.
This condo is definitely a starter so whoever buys it is most likely going to have to earn the down payment the hard way.
It’s a little depressing to think that a first time buyer has to stash away 1100.00 per month for 7 years just for a down payment on an old small starter condo. Ugh.
This 90,000 “down payment” would have bought my similar style condo straight cash in Tucson with money left over to save(in the year 2003).
With the first time buyers effectively priced out, people are going to have a tough time tapping that equity which will move them up into that next level house.
This condo most likely belongs at 60K to 70K in a normal market where the first time buyer can save up a much more reasonable 14K down payment in around a year’s time.
With the return to 20% down, these types of prices will have to come back to being the norm otherwise there will be nobody buying the start homes and nobody moving up.
Jim the Realtor down in San Diego went to the Countrywide dog and pony show. His read out on what the Countrywide divisional President said was plain vanilla FHA loans will be the market.
Even at 10% down, without the fear of being priced out of the market, people will pause before they sink $20,000 down on a down payment.
“With the return to 20% down, these types of prices will have to come back to being the norm otherwise there will be nobody buying the start homes and nobody moving up.”
That is exactly how I see it.
OMG $430 pr sq ft WTF?? It looks like the inside of a “EZ Storage” facility. Jeez.
Down payments will be the new chic thing to do soon. PMI companies are getting slaughtered. 2nd mortgages are going the way of the dinosaurs. That means equity has to come from somewhere….oh that’s right the BUYER”S POCKET. How could I be so silly to forget.
DP’s were truly forgotten. When people calculated whether they could purchase a home they automatically assumed 100% financing and just cared about the payments.
I can’t tell you how many people would call me tell me they wanted to get “pre-qualified” to buy a home. They still do, just not as much. Naturally I’d ask them what is the purchase price. They’d say…”we’re not sure can you tell me what my payments would be on say 350k?”
unbelievable.
But what is the norm on these? They were built at the peak of the last bubble and most where held for a decade or more to get out even or at least at a tolerable loss.
Condos were so bad in the last downturn, they simple didn’t sell. Look at the sales history on the two units profiled. The first held 9 years and still took a small loss of 10% before sales costs.
What is the real base price? Is it the $113K listed in 1988 (apparently bought on spec?) How bad would the loss have been if the buyer in 1989 sold or needed to sell in 1996, 1995?
By the way….Indymac Bank just did away with their stated income HELOCS just like Wells. So even if you can get approved for a stated income first mortgage up to 90% CLTV you can’t really do that because a 2nd mortgage is unavailable. You may be able to do one loan at 90% but PMI is so damn expensive.
In Westpark, what were they modeling it after? Probably a Tastee Freeze or an IHOP. I can’t wait until they paint that whole neighborhood anything else than pink and yellow.
I would guess that the picture of the ceiling is to show you that the “popcorn” was scraped off the ceiling. I am surprised the real estate agent didn’t list that as an “upgrade”.
Dano
$75k and have a $90k sitting in the bank for a downpayment. Yikes.
Why would any lender still do a Liar Loan? I never understood it in the first place (oh, the APR is 5.25% but if you don’t want us to check anything you put on your application, the interest rate is 6.00% and an extra half point). Who except a liar would pay the higher rate?
With all the write-offs banks and investors are taking on these flakey loans, why is anybody still offering them? The elimination of these crappy loans is what will truly drive prices back to something reasonable.
Hey IrvineRenter, do you have the downpayment and income reversed? Downpayment is 20% down right?
Indymac is nearly toast. If I had one of their loans and couldn’t make payments I’d be tempted to just stall–if they really do go BK I’m guessing it would take months for whoever takes over to process all the foreclosures, during which time I could live rent free, and perhaps stuff enough cash into my mattress to pay first+last+security on a legit rental.
I think the downpayment/income requirement numbers are reversed (a 20% downpayment on $369,000 is $73,980, not $92,475).
Either way, yikes.
Not exactly sure what a “junk” rating is but it doesn’t sound very good.
Winced when I read IndyMac. Recently moved money over there from Citibank.
Picked them over E-Trade and Countrywide which at the time were offering similar yields. Of the three, thought they could weather the storm, maybe not.
113K in 1988 dollars seems pretty outrageous for these units. I’m pretty amazed by that.
A reminder and word of advice to everyone…balances are NOT excused if your bank/lender goes bankrupt.
Anyone remember NextCard, the .COM credit card company that went belly up in 2000? Some people thought that meant they wouldn’t have to pay the balance anymore and went on a spending spree. Then they got nice shock in the mail when a letter from their new “bank”, the FDIC, arrived and informed then that their CC statements would continue on time.
The FDIC has service branches and/or outsourced service providers that take over payment collection from failed banks to continue debt collections. The Gov’t is quite efficient when it involves collecting money and the FDIC, like the IRS, is not an agency you wanna screw around with.
Stupid question, but are these former apartments that have been converted? Stupider question: Unless the description tells you or you know from living in an area long enough, how does one know whether a particular condo development is a conversion from apartments or was built as intended condos?
Terry
Any version of Little Drummer Boy is the worst Christmas song (even the Bowie/Crosby version).
Last rental in Tiempo tract for that model was $1,750 in August. Currently, one on the market for $1,800.
I believe these were built as condos by William Lyon.
Good question on the condo conversion. As far as I know there is no easy to get database of condo conversion info. I think you need to ask the county recorder.
I wish I remember what property it was, but I saw a picture of a toilet with the toilet seat up yesterday. That’s marginally worse.
Over $400 sq/ft is all that you need to know about these places. Ludicrous.
I assume that it’s for writers, actors, freelancers, entrepreneurs, scam artists, drug dealers, and used home salesmen. The Non-W2 crowd.
I remember a funny incident – The first time I went to look for a house, I was in Aliso Viejo. I saw this nice 1100 sq ft home at that time selling for about $500k. After I had toured the home and thanked the hippy looking realtor, I received a voice mail late that weekend. It was the realtor and he wanted to know when we could sit down to do the paperwork for the condo. My wife and I were so flabbergasted at his comment that after laughing hard we decided this was not even worth a response. I just want to underline the kind of people who were selling houses during the bubble and the kind of jack asses who were buying these like there is no tomorrow. I mean even when I think of buying a home, I am thinking “This is the biggest loan of my life. Do I really think I can repay it?”. Do people really ever think hard about how comfortable they might be to repay? Or whether market risk is high enough that they will go under water? The situation suggests, that a large proportion of people don’t think. They do not discriminate between buying a TV or buying a home. To me this is just poor consumerism.
First, thanks again for the excellent posts and site.
One thing I find interesting about these recent posts is the ratio of down-payment to income requirement. Today, it is around:
Income requirement: $75K
Downpayment: $94K
I think its interesting to ask how long, realistically, someone making $75K/year needs to save $94K.
Even for an aggressive saver, I think saving 1.25 times your income is a big undertaking. The federal tax on $75K is around $15K, which takes you down to $60K. CA state tax would be around another $5K, I think, taking you down to $55K, assuming rent of $1K/month and living expenses of $1K (which seems pretty low to me), you are down to $30K/year in maximum after-tax savings, and at around 3 years to save the $94K down payment.
Elsewhere on this site, there are some insightful comments asking “who is the buyer who will buy you out?” One way to express it is “you need a buyer with $94K in the bank.” Another way to express it is “you need a buyer willing to live an ascetic lifestyle for 3 years to get into a house.” I’d say the supply of americans “willing to live an ascetic lifestyle for three years”, for any reason, is pretty low.
Of course, some will get gifts/help for the downpayment…
Years ago the goal was to saving up about 1/2 your annual income for a down payment.
If median income in Irvine is 89K that would be about $45K.
Condo’s like this are targeted towards the 30-40K/yr crowd.
That means down’s of 15-20K and prices in the $110-120K range.
I think you are being a little too pesimistic, FHA 3% down has been around for 20 years and will continue to exist. What first time buyers really need is good income and a decent payment history and there will be a loan for them.
These condo’s are not that bad. In relation to the newer ones, they have a low association and no Mello so they save the 1st time buyer. Fair value for these would seem to be between $275K and $325K
Stupid question #3: In general, would you say that construction quality is better on apartments (built to last thru lots of turnover and less gentle tenants) and thus better on the condo conversions, or better on the built-as-intended-condos? Or does it all just depend on when they’re built and who built them?
Terry
Our whole economy is supported by the “monthly payment” syndrome. As much as you will never know the true cost of the car you just purchased [it really does not matter as long as you can fit in the “monthly for the car”], we should start to analyze the real estate market strictly based on monthly payment capability.
A percentile curve could be developedd with “monthly house payments allowance” capability, and then somewho try to “fit” the housing stock on the curve.
Ignoring at this time the 30% or so homes that are fully paid, we can then “slice” the rest of the housing stock into “starter”, “middle-class”, “high-class”, “upmarket”.
I suscpect that most stock housing at this time is way out-of wack with the monthly payment capabilities of most working stiffs around here. The solution is either to upsize the payment capability [highly unlikely] or “reset” the housing stock appropriately.
Any economist out there to bite?
You’re really out of luck if you want to get a loan over $650,000, then you can’t even get PMI…right?
I live a few condos down from 105 Costero. I’ve lived here for going on 5 years now and it’s not bad. I have one of the largest units and it faces the park. My neighbors are nice and quiet. I pay less in PITI + HOA then I would pay to rent an apartment across the street.
I have never met the occupants of 105. They are a young hispanic couple, probably in their mid 20’s with a young (1 or 2 year old) child. She doesn’t work; I have seen her out pushing her son around multiple times during the day. I have attempted to say “hi”, giving the usual pleasantries one would expect when passing on the sidewalk. She never says anything back, she just keeps prancing, fairly rude, but typical for SoCal. I rarely see the husband, he’s usually dressed in business attire when I do, I’m sure she’s got him working 60hrs a week to pay the bills.
I can only imagine the conversations they had about buying the house. I bet they went something like this…
https://www.youtube.com/watch?v=Ubsd-tWYmZw
Wonder what the conversations are like now?
I’ll just happily stay in my single-wide that cost a scant $15/sq ft.
I’m from a rural area in Tennessee and it’s just amazing looking at all these. I remember looking at a condo with my wife back in ’02 that was around 1,500 sq ft and it listed at $70k.
I would say “it depends” is the best answer. It seems to me the longer a unit is an apartment, the worse condition it is in as a condo.
I have also seen the recommendation that you should never spend more than 3x your income on a house. If you are buying for 3x income with a down payment equal to 1/2 your income, you are putting down 1/6th, or around 17%. Accounting for closing costs, maybe its 12-15%. Still, it seems vaguely reasonable.
I think what the high down-payment to income ratio really indicates is that these prices are still far too high. As the prices come down, it will become more realistic for people to save a down payment that is a reasonable percentage of their salary.
I agree completely with AZDavidPhx. “Move-up” homes have almost exclusively been financed with equity from multiple years of 7-15% appreciation. Now that that has stopped — and reversed — folks who have the income and credit and want to buy still can’t move because they need to sell their existing house in an impossible market to generate the down payment. I see a number of homes listed that are “pending cancellation of existing escrow” — REALTOR-speak for the buyers can’t sell their house and the seller is looking elsewhere. I’m not a renter, but this is another factor that will give the prudent renters (like those on IHB) an advantage when (if) they decide to enter the market. Gotta love having no sale contingency in a dead market. Sellers will eat up your low ball offer.
Seconded. Heard that one last night. What a self-righteous load of crap. And a bad song to boot.
OK — to be clear, I was seconding “Do They Know It’s Christmas.” My post didn’t show up where I thought it would. Little Drummer Boy may be a lot of things, but I wouldn’t call it self-righteous 🙂
I have to second for “Wonderful Christmas Time” as the worst – it’s like 2 or 3 half-baked motifs squished together with no segues.
I wish sellers were eating up non-contingent lowball offers. They sure aren’t on 2,600-3,000sf SFRs, at least the few I have lobbed offers to…
While we do own, we are non-contingent up to around the $1M mark (a function of being able to rent out our place for more than we pay to own it) and I’ve tried to get a couple of places at market price + 5% off and haven’t had any success.
Maybe things have grown worse enough that sellers toward the 75-80th of median would now be more receptive, but that sure wasn’t the case in the summer and late summer.
In a rational world I agree with $110-$120k. That’s still over $100 sqft though, so maybe even less. Even at $100k I don’t think I would want to buy this and call it home.
It sounds like you and I are in a similar situation. We’re hanging on to our current house after we buy, it will do slightly better than break even as a rental. I haven’t found anything worth making an offer on yet, so my theory is based on discussions with listing agents and other anecdotal evidence. My take is you need to find a seller in the right circumstance — they need to have the equity to move down on price, but they need to be motivated. That rules out pre-foreclosure sellers, who can’t move much. Anyway, good luck to you. I hope you find someone to take that lowball offer.
Anytime I hear the first few notes from that Casio keyboard intro, I run to change the channel. I never knew until today a former Beatle was responsible for that rubbish. I just lost a lot of respect for the dude.
Resident,
I love that Century 21 commercial. It is a classic.
“We can do this.” “Suzanne researched it.” My favorite part is Suzanne listening in on this couple’s private conversation through the speaker phone.
And the commercial is so right on… How many husbands were strong armed by their wives and their “nesting urges” into buying a home they could not afford I know about 4 or 5. So sad.
Wow. I had to watch that one a few times before it sunk in that it was a real ad. I thought it was just another youtube satire at first. Scary.
Our problem was that the first one was motivated, but a 2005 buyer, so they psychologically were stuck on that price even though the market was very close to passing them by. They found a sucker though that got them out with a little profit.
The 2nd place we made a run at had plenty of equity but the sellers were slightly whacko (talked to us about how their lot was so great because they were far from the “radiation” coming from the electrical transformer – all I could hear was “cuckoo, cuckoo” in my head during this discussion) and were trying to get peak pricing. They were fishing with little motivation I think… They never found a buyer and pulled their place off the market.
I think by this Spring or Summer the market will have softened enough that the owners on the larger SFRs will be more motivated. Just need this kind of meager sales volume with lots of sell season inventory coming on to the market.
Let’s not forget about all the husbands that were “financial wizards”, telling their wives…”Honey, don’t question me. I know what I’m doing”.
Assuming 4% appreciation from the 1998 sales price, this home should be valued at $225,737.
Trooper,
Very true, I will have to say I know more husbands that convinced their wive to be “real estate investors” than the other way around.
In this case, I can tell by the attitude she has, she just “has to have it”
I have never understood why anyone (not specifally you) seem to use an arbitrary rate of return over an arbitrary period of time. I know that over the last 50+ years home have increased 3-4% per year, but that doesn’t take into account changes in interest rates, financing terms, inflation, or the substitution effect. I think the IHB way of valuing property is the best. How does buying compare to renting a similar home today. Not looking backwards, that’s the only choice an individual has today, “should I rent or buy?”
And not to beat this dead equine too much but history may not make much of a difference. The last handful of years have been way off the historical charts. It’s reasonable to think that the correction is going to be similarly disproportionate. I don’t know. But like resident and IR, I keep coming back fundamentals. This is the baseline where things begin to balance and we’re way off that.
I could be completely wrong but I’m not unsure of my opinion.
New Laguna Beach RE blog
http://www.bluemove.blogspot.com
The FDIC is a relatively small organization, they don’t do much of the work themselves, they just hand a failing bank’s assets over to another, presumably healthier bank. Right now even the healthiest banks are buried under the foreclosure workload. And unlike credit cards mortgages (the purchase kind anyway) do have an out, you can give the collateral back and owe nothing. You can take that step voluntarily and promptly by mailing in the keys, or you can wait for the note holder to foreclose. A short sale is a little less damaging to your credit, but probably costs a lot more (and can give you a nasty tax bill). In this case I think waiting for the foreclosure may not be the worst move.
Thanks, IR! This is the first posting I can recall with places that (I hope) I will be able to afford one day. I am looking for a 2+2+garage in an area that’s safe, just like the two condos you profiled today. I’ll be very happy if and when it goes below $300K. Other posters seem to think even that’s too high. I hope they are right, but it seems almost unimaginable given what’s happened in the last 5-10 years. I’m just really happy to see this kind of condo being offered at a price that starts with 3. Used to be 5. Waiting for 2. Am I dreaming? LOL
The only thing that I worry about in the analysis is the exclusion of exogenous buyers to the local real estate market. If the only market participants were the local buyers and sellers then I would have no doubt that the floor would be all the way down to where renting would be marginally more expensive than buying. However I suspect that there is a point on the way down where investing in this real estate looks attractive to off-shore petrodollars looking for a place to recycle. The holders of these vast hordes of cash do not want to see a major deterioration in the American credit fueled consumerism that drives the trade deficit that fills their immense coffers. If they do not invest directly in the market then they will pump further tens of billions into American financial institutions as a way to prime the pump for easy credit. Watch for a further string of sovereign investments in American financial institutions. What does this mean to me? Not much, I am still trying to save that 20%, however I do think that I need to temper my optimism as to how far my desired 3BR 2BA family home near a great school will fall.
I toured a lot of the TIC rental communities and all of them would brag about the buildings built to condo standards. I think the condos are built better than most apartment buildings.
It’ll come down more than you think. Feel free to quote me.
Seems to be a bit ridiculous. Bad gauge of market price.
Real Estate Listings/property listings for free http://www.ihomedb.com
wonderful christmas time – WORST CHRISTMAS SONG EVER
i had the pleasure of living in tiempo from 2004-2006. having carports is so-so, but they were assigned, and it’s still better than seeing endless rows of cars parked alongside the curb on both sides of the street. the only nuisance was that some inconsiderate neighbors would park in the open parking for days on end.
bought a plan E (1032 sq ft) for 350k. wasn’t good, wasn’t bad. this was before the markets exploded.
neighborhood wise, this is very quiet. however, you CAN hear the eternal WHOOSH of the 405 freeway.
residents-wise, lots of young people, LOTS OF COLLEGE RENTERS (though i never had a bad experience with them)
considered the “cheapest” of the westpark condo tracts, it’s still a decent place to live, but for these current prices, i think i’d rather rent.