A lifeless object, alive
Awaiting reprisal
Death will be their acquisition
The sky is turning red
Return to power draws near
Fall into me, the sky’s crimson tears
Abolish the rules made of stone
Raining Blood — Slayer
.
.
Trapped in the purgatory of their home, awaiting repossession, the slow death of bank acquisition. The sky is falling; it is raining blood; the return to renting is near.
Asking Price: $695,000
Income Requirement: $173,750
Downpayment Needed: $139,000
Purchase Price: $778,000
Purchase Date: 7/28/2005
Address: 21 Carriage, Irvine, CA 92602
First Mortgage $622,400
Second Mortgage $150,000
Downpayment $5,600
| Beds: | 4 |
| Baths: | 2.5 |
| Sq. Ft.: | 2,250 |
| $/Sq. Ft.: | $309 |
| Lot Size: | – |
| Type: | Single Family Residence |
| Style: | Traditional |
| Year Built: | 1998 |
| Stories: | Two Levels |
| Area: | West Irvine |
| County: | Orange |
| MLS#: | P615321 |
| Status: | Active |
| On Redfin: | 11 days |
Quality shows throughout in this beautiful Fieldstone home. The great functional kitchen with walk-in pantry and glistening black granite on counters and center island opens into a huge family room with fireplace, and French doors lead into the broad backyard. Off the vast master bedroom is a bath suite with separate tub and shower and giant walk-in closet. Upstairs are three more roomy bedrooms and even a walk-in linen closet. Myford Elementary and Pioneer Middle are both California Distinguished Schools and this beautiful, nearly new community has NO association dues!
That is a well-written MLS description.
Do you see how the “r” and the “i” run together to turn carriage into carnage?
.
.
How much will the lenders lose today? Well, assuming a 6% commission, the total loss on the property will be $124,700. The people who have been renting from the bank — sorry, the owners — will lose $5,600. The lender will lose $119,100. This gets worse. There is a HELOC for $192,500 issued on 3-8-2007. I have no idea how much if any of this money has been borrowed. If the owners were smart, they would take it all out and hide the cash somewhere. Of course, a HELOC is a recourse loan, and they would still be required to pay it back, but if it is already borrowed and spent…
There has been plenty of carnage in our real estate market, and if you are in to that sort of thing, there will be plenty more as Armageddon approaches. The God of bear markets is hungry, and he is consuming everyone in his path. He gives new meaning to “Credit Crunch.”
Come back next week as we continue chronicling ‘the seventh circle of real estate hell.’
Surprised that 9AM EST and nobody has posted the big new of the day yet:
Bank of America to Buy Countrywide
Bank of America Corp. said Friday it has agreed to buy Countrywide Financial for $4 billion in stock, a deal that both rescues the country’s biggest mortgage lender and expands the financial services empire of the nation’s largest consumer bank.
“Countrywide presents a rare opportunity for Bank of America to add what we believe is the best domestic mortgage platform at an attractive price and to affirm our position as the nation’s premier lender to consumers,” Bank of America chief executive Ken Lewis said in a statement.
http://apnews.myway.com//article/20080111/D8U3MGBO0.html
Thoughts anyone?
—–
IR:
Good morning and good find. I was thinking to bid $600k on today’s feature property at 21 Carriage. It has got 4 bed and a nice back yard. Then I looked into gmap, I have changed my mind and reduced my bid to $502,000. I did not like backing to Jamboree and so close to 261 and the ramp.
This is my paper trade. Please comment and criticize.
SLAYER? LoL
I wonder if the Tan Man is packing his desk today?
IR:
Congrats on making it to Slayer. I thought the Steve Morse Smoke on the Water video was the best yet but this tops that by far. Especially love the vintage L.A. Raiders sweatshirt the guitarist is wearing. I have never heard another song that conveys today’s theme so well – CARNAGE.
Can anyone on the board share details of any jumbo loans they closed within the last 30 days – APR, points, amount, % down req? Thanks.
No according to BAC CEO. Better yet, the Tan Man will walk away with at least $87 cool millions when he does walk and have some good time around closing of the deal? (BAC CEO)
Only in America. When you screw up so big, the whole nation (Fed) kneels and begs.
If all Countrywide’s mortgages are worth, say 40 cents on the dollar, then if they pay 30 cents on the dollar-they’re getting a deal!
Yesterday I guessed $8/share, Alan, you said less than $6. Based on yesterday’s closing prices it was $7.16/share. I win! Woohoo!
He may need that money to pay for all the lawyers he’s going to need in the coming years.
Maybe we shouldn’t be so hard on the Tan Man, after all, the politicians had been after him for 2 decades to open up homeownership to everybody, and now we’re all discovering something I knew a long time ago … some people are destined to be life-long renters.
Something does not look right with this place. On the one side, the neighbor is too close. I mean come on, give a little bit of room here. It almost looks like the neighbors house is attached to this one.
On the other side we have one of those weird driveway things where the front of the neighbors house on the other side is facing the side of this house. Look at the overhead.
Of course there is the Jamboree issue too. I would pass on this place.
Actual evidence of foreigners buying up property!
Unfortunately, it’s Canadians (specifically Albertans) buying property in Arizona-if you live in Edmonton, Phoenix weather is an improvement!
Sorry link here:
http://ap.google.com/article/ALeqM5ho9-gdWWYBnCmAYWpDj_WGXR9y9QD8THOU000
Why even have a downpayment of $5,600??? Something like 0.7%? That’s just insulting all around – why even bother?
Downpayment $5,600
Less than 1%. Why bother?
I live in Hong Kong and just started following this blog. It is so addicting! Great stuff though. I’m not technically a foreigner (used to live in Cali) – just living/working in HK at the moment.
I would like to buy something in Irvine or Newport Coast, but only when the rentals can cover the mortgage and all the expenses. I hope that’s not wishful thinking.
Does anyone know how difficult it would be to rent out homes in the 1.5 to 2 million range? Is there even a rental market for those types of homes? thanks.
What are you smoking…
Yesterday I said I tried to place a short order w Etrade after the close when it was $7.75 w a limit of $7.50 (the latter numbers are more info than I gave you) but Etrade told me it wasn’t taking short orders on CFC anymore because there was no stock to borrow.
Then I said that I was betting it would end up at $6
Just checked trading price (8:20 am pacific time) and it’s now at $6.44 and falling.
If I could have gotten my short filled at $7.50 I would have been in the black.
You guess is off by $1.65 wheras it’s within 50 cents of going below $6.
Depends on how long you are looking to stay… 6 months/ 1-2 years.
If 1 year or less you probably want a fully furnished place.
I have an agent who rents my condo out furnished for short-near term vacation rentals.
or you can check http://www.vrbo.com (vacation rental by owner)
I guess BOA wasn’t content with losing 1.4 billion and counting on that preferred stock and wanted to lose a lot more. Countrywide’s portfolio won’t bring BOA down but I think it will end up being worth net negative. Maybe Lewis saw all the awesome severance packages going to people like Prince and O’Neil and figured he need to lose BOA a couple billion to get one of his own?
I think the BofA takeover of Countrywide was engineered by some higher ups in Treasury. CFC is so laden with toxic paper it was going down – and soon.
Problem was/is this paper, if priced by the market, would be either worthless or pennies on the dollar. Most of the debt – the SIVs, the CDOs – is still sitting stinking up many a portfolio of banks, credit unions, pension plans – in short the whole financial world.
If pricing is marked to market instead of the way they’ve been doing, fantasy mark to theory, the sky falls.
I’m not one who subscribes to conspiracy theories, but the puppet masters have their hands full on this one.
I love this blog! I have been reading this for the last two months and I agree, it is addicting!
I would eventually like to buy in the 92603 zip code. The schools are wonderful! However, SFR pricing hasn’t moved down to anything reasonable.
Shady Canyon is completely out of my price range, but what is happening over there??? 50% of the homes are for sale? Are they foreclosures, relocations, builder owned?
Thanks Alan. Actually what I meant was that I would like to purchase a high end home (say over 1.5 mil) and rent it out to cover the mortgage and expenses. But my plan would fail if there really isn’t a rental market at that range. If someone can afford say $7500 per month, wouldn’t they already own a home? Just wondering if anyone knows if there is such a high end rental market in Irvine or Newport Coast. Thanks.
I imagine it is mostly specuvestors who bought the illusion of real estate only going up. Now that they have realized their mistake, it is a stampede to the exit door.
Here’s what you said yesterday Weird Al, and it was not about CFC’s stock price:
“Just tried to short some CFC on Etrade, I’m betting that BofA ends up with it at 6 or less…”
Based on BOFA’s trading price right now, they would “end” up with it at $7.14. It doesn’t matter where CFCs stock price goes. It’s a stock swap deal based on BOFA share price. BOFA’s share price would have to fall 15%+ for them to be paying less than your $6 per share figure for each CFC share.
Amazing you can’t even remember what you posted less than 24 hours ago. Looks like I’m not the one smoking something this morning. I can at least remember the discussion correctly.
I have been watching CFC over the last couple of months, and it is so volatile and unpredictable that I could never find a place I was comfortable going short. If I had tried, my position size would have been so small it would have bee difficult to make any money.
It gapped down today. It has been trading between $6.34 and $6.85. All the people who bought the euphoria yesterday afternoon are sporting 10% to 15% losses.
Awesome idea, George. We should all play Fantasy Real Estate League with these listings and bid whatever we think it’ll eventually go for. Whoever gets closest when a real offer gets accepted, wins.
Put your virtual money where your internet mouth is, so to speak.
I was reading an article about SIVs and CDOs and how financials that own them can’t sell them for anything less than fire sale prices. Then it occurred to me that ‘well, if investors won’t pay anything less than fire sale prices for the paper that backs the loans on those homes, why would I buy the homes for anything less than fire sale prices as well?’ I know that SIVs/CDOs don’t directly own any particular house but does that really matter. If the paper price isn’t worth much, why should the actually asset?
I could have bought to cover/close out at $6.50, the current trading range and made a buck a share on the transaction. I never said I was planning on holding.
Anyway, it’s not at $8 and the BofA buyout will take months to go through.
I kinda think this song fits the blog’s general outlook on why the economy is where it is…
I Can’t Stand It I Know You Planned It
But I’m Gonna Set It Straight, This Watergate
I Can’t Stand Rocking When I’m In Here
Because Your Crystal Ball Ain’t So Crystal Clear
So While You Sit Back and Wonder Why
I Got This F*cking Thorn In My Side
Oh My, It’s A Mirage
I’m Tellin’ Y’all It’s a Sabotage
So Listen Up ‘Cause You Can’t Say Nothin’
You’ll Shut Me Dow With A Push Of Your Button?
But I’m Out And I’m Gone
I’ll Tell You Now I Keep It On And On
‘Cause What You See You Might Not Get
And We Can Bet So Don’t You Get Souped Yet
You’re Scheming On A Thing That’s A Mirage
I’m Trying To Tell You Now It’s Sabotage
Why; Our Backs Are Now Against The Wall
Listen All Of Y’all It’s A Sabotage
I Can’t Stand It, I Know You Planned It
But I’m Gonna Set It Straight This Watergate
I Can’t Stand Rockin’ When I’m In This Place
Because I Feel Disgrace Because You’re All In My Face
But Make No Mistakes And Switch Up My Channel
I’m Buddy Rich When I Fly Off The Handle
What Could It Be, It’s A Miracle
You’re Scheming On A Thing; That’s Sabotage
Beastie Boys “Sabotage”
These CDOs are also highly leveraged, so a small decline in overall value makes for a large decline in the equity position and market value. It is very similar to equity on one’s house: if you have a very high loan-to-value ratio, small increases or decreases in the house’s value have a huge impact on your equity.
A friend at work turned me onto this blog. Good stuff.
I currently own in Quail Hill (92603) and can tell you that there are a number of homes around mine for sale. A couple are “short sales” I believe the term is. I don’t get the impression that 50% of the homes are on the market but you never know. Quail Hill has “restrictions” on the type of sign that can be put in the yard. I think some of the realtors don’t even bother putting one up because of this. Good luck on your move if you end up doing it. We may be neighbors!!
I think Mozilo is actually the monster in JJ Abrams new monster movie “Cloverfield”
BofA is actually a loser. BofA is one of the worst banks to deal with while banking with their associate or home loans. With Acquiring of CFC, they got garbage in the process. I think they did it on purpose to lift the values of CDO that is in hand iwht CFC, to boost its $2 billion initial capital investment. Fed’s involvement cannot be ruled out. We are running full steam into recession and Fed is in panic now.
Imagine, this blog did not forecast home loses due to recession job loses and consequent losses of homes regardless of prime or subprime.
Shit floats. The biggest screw ups at the places I work for always seem to get promotions.
Think of it this way, BOFA is averaging down on their first purchase. $2 billion for 20%, now they get the rest for $4 billion and it costs them zero cash. A big risk to be sure, but Countrywide is a gigantic loan servicing monster. If they do their proper due diligence on CFCs balance sheet, might come out nicely for BOFA in the end, especially if RE stabilizes by 2009. The BOFA CEO will be in the financial history books one way or another – either a goat or a god.
For some reason this property doesn’t annoy me as much as recent others. The house is reasonable, and even though I think it’s overpriced, it’s price doesn’t make me want to strangle the person who listed it. Still, $700k for a tract home build on top of the house next to it. When I was in college, less than 10 years ago, I always thought I’d be well off making six figures. I thought wrong.
Good call on the Slayer, IR, this album is a classic. There’s a song on Megadeth’s ‘Countdown To Extinction’ album that you should consider, even if the title is a bit literal. Can you guess which song I’m referring to?
Sadly, karma has not yet dropped the hammer on the Tan Man. This from the Wall Street Journal:
“Despite Countrywide’s troubles, regulatory filings show Mr. Mozilo arranged a departure package that would let him walk away with $115 million in severance-related pay, continue to enjoy free rides on Countrywide’s jet and have the company pick up his country club bills until 2011.”
There is a rental market at that range, and it consists of two types: (1) executives who don’t plan to stay long, and (2) the superficial OC crowd who wants to appear rich and know they can rent a bigger, fancier place than they can afford to buy. With all the distressed properties on the market, you’d have tough competition for the small number of renters that exist in this price range. Every home we look at is also for rent/lease — someone trying to stave off foreclosure for as long as possible, I suspect. Also, know that at current valuations, you’d be losing money each month — rents will not cover mortgage costs anywhere in Newport Coast today (although it’s slowly improving). My back-of-a-napkin calculations indicate that you might cover 50-60% of your out of pocket costs by renting a place out.
“especially if RE stabilizes by 2009”
That’s a pretty big ‘if’. Seems like they didn’t want that $2 billion to turn into 20% of nothing so they bought the whole enchilada. Nobody wants to admit their mistake or take a loss, even if it means prolonging the enivitable for as long as possible.
Foreclosure of a Dream
I’d think they have to take the loss on the $2B once that puppy closes though… They are establishing a new FMW with the takeover. I assume the $1.2B charge they plan to take in 2008 covers that, but I haven’t read up about it nor am I well-versed in the sneakier side of accounting for M&A activity.
This house is way way north. The location is not so good.
I think 300 bucks a square foot is about right for a ‘newer’ home in irvine.
Personally, I’d rather be closer to the 405 so I’d pay more money for that, but overall I think the asking price isn’t so bad.
I’ll say it sells for 640.
I think B of A made a HUGE mistake. I am not sure why they didnt let them go BK and pick up whatever assets they wanted and screw the shareholders. I know it’s not because they feel generous.
There is something else at play here, CFC is a crap company. They are going to be in litigation for years to come when all their scams come to light. I believe it will wiegh like a mill stone around BAC’s neck.
I think it will sell in the $650K range. A couple of slightly larger 4/2.5 places in the same area got into escrow recently for $720Kish. Yes, it’s on the street, but then again the lot is bigger than most others in the area. Someone will probably view those as equitable trade-offs.
The listing realtor has been one of the dominant players in West Irvine over the years so he has a good handle on values there. He doesn’t usually bring things on to the market at WTF prices. He has sold a couple of other places in recent months there as well.
I’ve been reading this blog and the archive over the last few days, and all I can say is, Wow!
thanks, IrvineRenter for making financial analysis interesting, crystal-clear and well-documented for me. My educ. background is in the sciences and I’ve never had a business/econ class, but you really educated me about this housing bubble/credit crunch.
Question 1: Have you thought about having a “greatest hits” type of sidebar on your homepage that would provide a quick and easy reference for those theory-oriented posts where you’ve explained the bubble, the rent-vs.-own ratio, etc, so that people can read them without having to page back through all the archives?
Question 2: Why do you think Ben Bernanke is saying he doesn’t think there will be any recession?
My theory on Ben is that if he says he thinks there WILL be a recession, the MSM will be all over him saying, well what are you going to do about it? They will not like the (true) answer of “There’s nothing I can do about it” so he will continue to deny any recession is coming so that he won’t have to do anything major and can let the market correct itself.
I have no idea whether this is even a plausible theory or not, but I’m interested to hear your ideas.
thanks again!
“Do you see how the “r” and the “i” run together to turn carriage into carnage?”
LOL!
This blog has given me a guaranteed laugh every day since I first starting reading it back in April.
Your “reservoir of wit” is bottomless IR! Keep up the good work!
Welcome Jen,
At the top of the page, there are 4 tabs. One of them titled “analysis” will take you to the list of analysis posts. Also, you can click on the word analysis in the tags on the left of the screen.
Your theory on Bernanke is probably correct. There is very little upside for a politician or a political appointee to say anything negative even if it is the truth.
Jen,
Go to the “Forums” tab and read the documents under the sticky thread “Please Be Nice To Newbies”.
There you will find even more crystal clear financial analyses of this bubble.
Mandatory reading for the “Housing Bubble 101” class IR will be teaching (for fun) in a few years – after he retires a multi-millionaire because of the blog going public.
Hello there,
The median price for a home in 92612 is now $332,000. This is a year over year decline of 52.3%. What does this mean?
Well, it means the median price this time last year was $696,000. It means that the price has fallen $364,000 in one year. Good news for me since this is the area I want to buy in.
But, I have a question for IrvineRenter. Do you know where to get a list of the 12 properties that sold to come up with this median? I’m curious if these are just a bunch of crappy condos or if these are actually something I would like to buy at some point.
http://www.ocregister.com/money/housing-median-dataquick-1957854-numbers-homes
Ok, I posted exactly 1 minute and 40 seconds too late!
Now, back to work…
Correction: That would be 20 seconds too late! Now I don’t feel so bad. I will now stop this meaningless chatter.
Right now…
Sorry, not this time last year. December 27, 2006 to December 27, 2007. Probably an even better decline by now.
Thanks guys! Wow, do I feel like a newbie.
“Trapped in the purgatory of their home, awaiting repossession, the slow death of bank acquisition. The sky is falling; it is raining blood; the return to renting is near.”
Love the wordplay with the Slayer lyrics!!! Those of us who loved this album (and I do mean vinyl album) in 1986 certainly didn’t think we’d be on a housing blog twenty years later fretting about square footage, kitchen countertops, HELOCs, etc. Then again blogs didn’t exist…..
Another escrow entrant:
http://www.redfin.com/stingray/do/printable-listing?listing-id=1344712
My guess is $1.05-1.075M for sale price for this 2839sf gem. I guess the buyers and sellers of Northpark didn’t get the memo about the sky falling. Probably just broke about even on their 2004 purchase.
Need another 50% or so decline to get to your $700K on 4000sf in NP Alan. Still think a house like this will be going for $500K at bottom?
NICE! I’ll take Slayer over Christmas Elvis any day!
When I first started out in the music business one of my first assignments was to deliver packages to Slayer’s rehearsal space. I walked into this enormous warehouse and there’s the band, all standing on different risers, ripping away on this very song. Ear-bleed levels. I’ll never forget it.
Anyhow, a while back somebody posted a simple rent calculator. I remember typing in asking rent, bedrooms, baths, etc. and it displayed a little dial to indicate how comparable the rent was to the area.
Anyone know what I’m talking about? If so, can you please post that link?
You live to call me out don’t you IPOP..
I agree that $500k would be low for a house like that but not inconcievable by the middle of 09. No one knows how low comps will go.
I would estimate that $650-800k would be a more realistic price range when all things are said and done.
It is a very nice house, but still just an upgraded tract house with a small yard, like comparing a camry to low end lexus. Its not a high end mercedes.
Only on the most egregious of your Alanisms… I think you are right on with your high end of your range. Something like this in NP will probably drop to $800-850K eventually – 20% more.
Same square footage right across the street went for $1M around a month or so ago. Not nearly as nicely upgraded as this one though so the prices are in alignment. Given the dollars on landscaping, what appears to be a built-in for the office, nicer flooring, the Cal Closets organizers, etc. this one might have gone for less on an equivalent basis…
The backyard is small but someone drop some good coin on all stone work back there.
All I have to say is….
S L A Y E R R O C K S !
Irvine Renter you are the f***n’ man for posting slayer on your blog! I’ve been hoping you would post some metal lyrics for about a year now. Never suggested them because I thought everyone was too conservative…
Correction, these equity tranches of CDO are the least collateralized of any portion of the deal (also known a first loss pieces). The remainder of the deal is split out into increasing levels of collateralization (the cleansing mechanism) with each portion assigned a rating and yield. The banks who package CDO typically keep the equity tranche on their own books as a cost of doing business.
For the most part any CDO collateralized by subprime mortgage loan vintages since 2006 has already seen the equity tranche wiped out. The remaining portions of various credit quality are now trading with much less collateral support, this the decrease in bid price.
SIVs and CDOs are two terms that should not be used interchangeably. SIVs, are accounting investions similar to the Special Purpose Vehicles (SPVs), of Enron fame. SIV were used a a means of moving risky investment off the balance sheet. They operate using the traditional banking model which is: Borrow short lend longer, or borrow short lend riskier. The issue is this time is the riskier includes asset-backed securities funded with subprime…
Hey Jen. Welcome. Bernie actually is saying there will likely be a recession, at least in Fed speak:
http://www.federalreserve.gov/newsevents/speech/bernanke20080110a.htm
Here’s a key passage, “In light of recent changes in the outlook for and the risks to growth, additional policy easing may be necessary”. The Fed always speaks in terms of risks to this or risks to that. If they say there is a risk to growth, that translates to “we expect recession is a real possibility”. That is a significant policy shift from recent times when the Fed has been more concerned about the risk of inflation.
Apparently the Fed stands ready to drop rates as needed to avoid or soften any recession. They full well know that this will devalue the dollar and drive inflation up but in an election year, no one wants to see many thousands of people losing their jobs.
Traders seem to agree with the future notion of a weakening dollar and higher inflation. You can see this in the pricing of gold, which has gone absolutely bonkers lately:
http://www.marketwatch.com/tools/quotes/intchart.asp?symb=GLD&sid=1867769&dist=TQP_chart_date&freq=1&time=1mo
Gold is a classic inflation hedge…
I was thinking the same thing….partial closing cost? It looks like a commission that needed to go somewhere fast.
The 10-year dropped another 2% today to another recent low. The yield is off almost 27% since peaking in the summer. Look for another dip down in mortgage rates next week…
Pretty soon, none of us will need a price drop to afford one of these $1M NP homes! Mortgage rates will be so darn low it won’t matter…
Ok, my parents bought a place in NP for 800 back in *99*. WAY before the housing runup.
Was that “way” overpriced then? If not, do you think equivelant rental prices gone *down* in the last 9 years?
For the house IPO linked, i’ll say 900k at the *very* bottom.
I’m clueless when it comes to M&A. There’s a guy at the gym who does that kind of stuff for a living. I’ll ask him about it.
I wrote ‘enivitable’, lol.
“I always thought I’d be well off making six figures. I thought wrong.”
Cruel, isn’t it? If you’d told me a few years ago, what I’d be making today, and that being doubled by the Mrs., I would’ve thought I’d be living in Newport Coast, not a median-priced home in Tustin.
They’re likely Avenue One sales. I was interested in Central Park West ’til their pricing was released. Now they’ve taken the homes off the market. We’ll have to see what the pricing is when they start selling again…
At 1% I would think about buying 😉
Did you see the sales history on this property, or do you just like to blow smoke. Unless redfin lies, this property sold for sub $400k in 01. $980k in 04… we are already getting down to 03 prices which would put this place down to $900k and I’m taking 1 1/2 years from now when excess inventory chasing too few buyers leads to a great fall.
03/26/2004 $980,000 38.9%/yr
06/14/2001 $392,545 —
No idea about the specs of your parent’s place 25, so I couldn’t comment there. I try not to opine without facts.
NP has been falling, slowly, but falling. Maybe only off 10% or so off peak prices so far based on the comps I see coming through there. A house like this one probably rents for $4500/month. Very hard to find reasons for how it could sustain a price tag over $1M given that many potential move-up buyers that would want this house (me being one) are being squeezed on equity.
I’d personally buy this place in a hearbeat if I could afford it. Problem is I have lost $150 of equity in my own home (20%)since peak pricing and this has probably only come down $150K or so as well. I own in the same zip code and my place was built around the same time. As things tend to move on the same percentage basis, I’d say a house like this has at least another $75-100K to go in terms of price drops just from the declines at the 50th percentile.
I may have to start doing heavy metal Fridays. I like to close on Fridays with some images of the circles of hell. Some good metal music helps set the mood.
Alan, the 2001 sales price is wrong. I repeated, what you see on redfin is not accurate.
How do I know that? Let me explain it to you… I closed escrow the same month, on a condo 1200sf smaller in West Irvine, and paid $335K. Trust me, houses like this were not selling for sub $400K in 2001 or I would have bought one. That is insano and if you knew anything at all about the local RE market you’d have realized that was either a bad entry somewhere or maybe a sweetheart price obtained by someone who worked at the builder.
Need empirical evidence, look at this:
http://www.redfin.com/stingray/do/printable-listing?listing-id=1271551
Same size house, next door, closed a day earlier in ’01, for $551K.
Need further empirical evidence:
http://www.redfin.com/stingray/do/printable-listing?listing-id=1160600
Much smaller house closed a eight months before at OVER $400K.
Sheez man, you have a brain, use it. Don’t believe everything you read…
I think you’re right. Avenue One and all the other condo garbage in the Jamboree area. There is very little in that area that I would pay over $200k for. I only call it garbage, because that’s what it is for the price they’re asking. For the low $100k’s it would be rather nice. Over $300 in association fees for 725 sqft? Would I also need to blow the association president every month?
Ok, I was wrong on when my parents bought, it was early 2000 and I guess their place is over thousand square ft. bigger than this place.
Still, I think your being a bit too bearish Alan. I checked and whie it does say this place sold for right around 400 in 2001, two other homes on that street sold for 530 and 680 in 2001 and 2002 respectively.
Still, i’ll agree that NP will take a big hit and continue taking a hit, partially because unlike Quail Hill or TR, there are just *so* many properties.
The problem I have with a lot of the doomsday folks here is they fail to see the difference between declining land values and declining “home” (as in structure) values.
If land values fall 50%, that doesn’t really change how much it costs to get a nice pool put in your backyard, marble flooring, or ‘granite countertops’ 😀
This is while I’ll continue to maintain that the high end will slip, but slip less than the rest.
It appears that Countrywide has a $15-16B book value, so BOFA acquired them for a 3rd of book. Problem is that CFC has almost $60B on the books between pay option ARMs and 2nd mortgages. BOFA is essentially betting that the value of those mortgage assets will not fall more than 20% or so as evidently one times book value is a commonly held measuring stick for such acquisitions.
If there was a direct relationship between the value of those mortgages and the underlying assets, BOFA would essentially be betting that RE prices won’t fall by more than 20% before bottom.
As a practical consequence to any down payment savers that might be using Countrywide Bank to park funds, expect their great interest rates to not be so great as a result of the pending acquisition by BOFA.
Countrywide has offered very good rates to savers to attract deposits to fund lending, but with access to cheaper credit, maybe a bridge loan or two from BOFA, etc., they will be less cash strapped. I’d think that they will be able to reduce the rates they pay on retail deposits in an effort to improve their margins going forward.
I’m bearish because I have no vested ego thinking my property is worth a fortune, I paid a lot less when I bought, when I bought I thought it was a lot and I just shook my head at the sales prices in the early 22nd century.
That said, I believe in supply and demand..
Doesn’t matter how good a porshe is, at $80k + for a car, they can only sell so many of them.
Same for houses.. if inventory is more than 6 months supply, market pressure will force prices down. Current inventory for properties priced $750k or greater is 16 months (per Lasner)and this number is projected to skyrocket after the option arm resets start. Doesn’t matter how nice this house is, if it is competing against 50 other houses for 10 buyers, then the sellars are in trouble. While some sellars can hold out, those that can’t will lower prices and that lowers comps, downward spiral.
Irvine is not immune.
Laugh at my predictions all you want.
The end of the world draws near.
Update on blog feature:
https://www.irvinehousingblog.com/2008/01/04/already-gone/
Just reduced price by $50K to $749K after less than 30 days on the market. Maybe they are reading?
“Foreclosure of a Dream” is a classic, but the others on this album are also fantastic.
Just look at these song titles, folks. Heck, there’s at least a week’s worth of IHB material on this one.
1. Skin O’ My Teeth
2. Symphony of Destruction
3. Architecture of Aggression
5. Sweating Bullets
6. This Was My Life
7. Countdown to Extinction
11. Ashes in Your Mouth
Great find, Genius. This is a treasure trove indeed.
I laugh at your thinking that places like this one in NP sold for $392K in mid 2001… I wish that were the case. I’d be sitting pretty in one now.
The bubble was crazy, but prices didn’t triple between 2001 and the peak.
In Alan’s defense, there is no precedence for the current market. It is possible that prices will fall through fundamental support levels (Discounted NOI, GRM, etc.) at the very bottom. Certainly this is the case for financial assets.
That said, homes are not financial assets. Something tells me that it is far more difficult for real property to trade through fundamental support.
Anyone have any examples of real estate trading below low fundamental value?
Remember the decimal point IPOP.
So are you going to finally refi Alan with 30-year conventionals at a multi year low? I think you said you didn’t do it last time because you were too lazy… Your chance to get those same numbers again will be soon.
If you play this Slayer record backwards (the vinyl version) you can faintly hear them singing “the housing market is crashing”. Hellish, indeed!
Recording Date: 06/14/2001 Sales Price: $438,000
Document #: 20010390393 BK-PG – Type of Sale: Full-Computed from Transfer Tax
Document Type: Grant Deed
Heck… this “new” metal is like soft putty.
They were all upstaged by Spinal Tap anyhow.
And who could top The Sex Pistols, The Clash, Deep Purple, Cheap Trick or Ozzie Osbourne for being LOUD?
Nope.. these Newfangled Metal Bands are just but a poor echo of days past. Reminds me of those Hair Bands from the 80s on a “bad hair day”.
The glam metal guys just sang about chicks and partying. Hair bands were fun. Poison and Crue were my personally faves…
OCDreaming,
If rents could cover the cost of ownership anywhere in the area, we would not be talking about a real estate bubble.
Not to brag or boast, but I would like to point out that it was good ol’ shiny who named him “ipop.” it is much catchier than ipoplaya. ipop has smoked mucho of the “it’s special here” weed but you take your plaintiff as you find them.
That is just so wrong.
Nah, he’s good people. From what I get, he’s saying that everyone else is on the ‘it’s special’ sauce which is keeping home prices artificially propped up. That’s just my interpretation, I don’t want to put words in his mouth.
You kill me, CapitalismWorks. You say so many things that make me hate you, then come along and say something I absolutely agree with. Let’s have a little consistency.
Glad to be of service 😀
It isn’t my favorite Megadeth album by far, but it does seem to fit well into our topic of conversation.
Maybe I should change my name to Bullish_on_RE? That’d really get some people going… Kind of like ipop though. I thank reverend shiny for that. You get all the cred shiny happy.
Also they changed the description to state specific upgrades. The crown molding and plantation shutters were not mentioned before. The realtor is definitely reading this blog.
Although the towel is still thrown over the shower stall. And the carpet is still dirty. Perhaps after this weekend’s open house, they’ll take care of those things and drop the price another $50K.
12 to 4PM SEE U THERE
Oh, I gotta go to this one and check out the famous Friendly Neighbors in person. SEE U THERE!
Speaking of, Bank of America charges me for ridiculous things, like being able to access my account via Quicken.
They, like every other company I do business with, reverse the charges any time I call… And it’s so easy to do when they have a competitor that inspires them to murder. In B of A’s case, it’s Washinton Mutual. “Hi Bank? You know that $9.99 charge last month? … You’ll remove it, thanks! Oh, and that minimum balance requirement — Washington Mutual’s minimum balance is $1. Oh, thanks! You’ll do that for me?”
It works with everybody. Try it. Call up AT&T and say you’ll drop them … oh, you’ll switch me from a $35 flat monthly rate +$.10 a minute, to a no-monthly with $.08 a minute? Thanks! And that’s not even advertised anywhere.
And SBC (Now AT&T again) … I’m tired of paying $45 a month for internet access, and Comcas– Oh, yes $15 a month is a MUCH nicer number, thank you!
I love being a successfully cranky consumer.
Lee, I want you to understand I’m not taking issue with your comment personally but rather, I’m using it as an example of a sentiment I’ve seen expressed widely on RE boards.
To wit: “after all, the politicians had been after him for 2 decades to open up homeownership to everybody, and now we’re all discovering something I knew a long time ago … some people are destined to be life-long renters.”
Let’s be clear about something. There are some people who cannot afford a home. However, this isn’t a failure of the process to open homeownership to more people. It’s a failure of the system to regulate who gets a loan and, as importantly, how much they can qualify for. If we toss the (fill in this blank with whatever you think the right number to be) of “investors” (flippers), fraudsters and RE bulls that got in over their heads, I would opine that many of the people now defaulting wouldn’t be if they had been limited to borrowing what they could actually pay back. Yes, it would have severely limited their purchasing options but it would have, overall, put most of them in smaller home or condos where the odds of defaulting would be much less.
In other words, broadening the base of home ownership is still an excellent idea. The way to do it is not offer “free money” in nearly unlimited amounts to anyone with a pulse, the way to do it is to do it sensibly.
By the way, the side affect of this “limiting” would be to cool off an overheated market as buyers can’t buy over their heads. So pricier properties stay on the market longer, home builders can’t just build fields of mcmansions knowing that there is a huge pool of idiots just waiting to dive in.
It’s all about sensible, sustainable growth, not managed growth or, on the converse side, unlimited and unregulated growth.
“the politicians had been after him for 2 decades to open up homeownership to everybody”
Why would they “[be] after him” – he’s been trying to do exactly that for almost twice that long! His profile on the Countrywide website explicitly says so:
“… a company [Mozilo] co-founded in 1969 on the principle that every family in America desiring to achieve the dream of homeownership should have the opportunity to do so.”
So, either he believed in that principle and it wasn’t the politicians’ fault after all, or Mozilo’s a bare faced liar who claimed higher motives when he was really just in it the money. (I suppose it could be a mix of the two, but I don’t see any other options.)
IMO, Mozilo was in a bind in recent years when the common lenging standards slipped: really supporting borrowers would have meant maintaining higher-than-usual standards and losing market share. Had he chosen that, he’d have taken a lot of heat and maybe gotten booted out. As things stand, he’s getting the boot anyway, but CWF had a few great years in the meantime. Now he and Greenspan have the same problem: making sure they don’t get the blame for the bust after the bubble.
Regarding this idea that lenders were pressured into making loans to anybody: How many lenders were complaining about this during the boom? How many made loans they didn’t expect at the time to turn a profit on?
Their projections turned out to be dreadfully wrong. Suddenly the message went from “we can let everybody buy a home and make a profit in the process” to “we didn’t want to make all those risky loans, we were pressured into doing it.”
IR-this blog is great! Just started following yesterday and am now glued to my laptop.
Does anyone know how the housing market is Colorado is doing? I’m going out there for business in a few weeks and was thinking about looking at homes in the Denver area….
You can buy a nice, big house in a great area on a large lot for under $100/sqft.
No sunshine tax, I guess, even though 90% of the days are sunny there.