Little House — The Fray
The distress at the low end of the market doesn’t bode well for the high end. In a normal, healthy real estate market, small condos generally sell for the highest prices on a per-square-foot basis. When single-family detached homes where going for upwards of $400/SF, small condos were selling for $450/SF and up. Small properties cost more on a per-square-foot basis because the inexpensive square footage in bedrooms and living areas are much smaller, but the expensive square footage in kitchens and bathrooms are still present. Right now, in our market, the smaller condos are selling for much less on a per-square-foot basis than the larger, single-family detached homes. This situation will not persist. Either small condo prices will increase, or larger home prices will fall. I think it will be the latter.
Asking Price: $349,876
Income Requirement: $87,469
Downpayment Needed: $69,975
Monthly Equity Burn: $2,915
Purchase Price: $424,000
Purchase Date: 8/4/2005
Address: 189 Pineview, Irvine, CA 92620
| Beds: | 2 |
| Baths: | 1 |
| Sq. Ft.: | 1,202 |
| $/Sq. Ft.: | $291 |
| Lot Size: | 760
Sq. Ft. |
| Property Type: | Condominium |
| Style: | Cape Cod |
| Year Built: | 1977 |
| Stories: | 2 Levels |
| Area: | Northwood |
| County: | Orange |
| MLS#: | S533137 |
| Source: | SoCalMLS |
| Status: | Active |
| On Redfin: | 9 days |
 Fixer-upper
|
|
Window.Enjoy View of Streaming Water!! Kitchen overlooks Formal Dining
and Living Room. Living Room with High Ceiling and Cozy Fireplace.
Enjoy the soumd of Bubling Water while Relaxing in Patio.Watch the
Ducks swiming and walking around! Laundry Area in patio. Spacious
Master Bedroom with two closets; one mirrored ,one walking, Separate
Vanity with two Sinks in dressing area.Full bath with tub upstairs, and
Half a Bath in first floor. Second bedroom is large enough for 2 beds!!
One Carport and one assigned parking. Associations dues include water.
Enjoy the association facilities;Pools ,Tennis Courts,ClubHouse, BBQ.
Minutes from Freeway 5,Walk to Shopping Center, Elementry School and to
Award Winning Norhtwood High School. Property needs some TLC.
One Carport and one assigned parking. That’s desirable…
Guess what? This property was purchased with 100% financing by a flipper. The music stopped playing, and he couldn’t find a chair. First Franklin is the big loser today. If this property sells for its asking price, First Franklin stands to lose $95,116. This sales price would leave the first mortgage unharmed, but it will wipe out the second. Some knife catcher might buy it for that, but it is still grossly overpriced even for an owner-occupant.
It is interesting to watch this first wave of knife catchers. These people have no concept of what a property is really worth. They are just as kool-aid intoxicated as the fools who bought during the bubble. As this group also gets their heads handed to them, the market will be open to a another significant leg down. I would look for this in the fall after the “spring slide” (there was no rally just a brief flattening.) When this group of buyers is exhausted, there will be very little support below the market, and there will be a huge number of foreclosures to absorb. This fall and winter should be very interesting.
.
She doesn’t look, she doesn’t see
Opens up for nobody
Figures out, she figures out
Narrow line, she can’t decide
Everything short of suicide
Never hurts, nearly works
Something is scratching
Its way out
Something you want
To forget about
A part of you that’ll never show
You’re the only one that’ll ever know
Take it back when it all began
Take your time, would you understand
What it’s all about?
What it’s all about?
Something is scratching
Its way out
Something you want
To forget about
No one expects
You to get up
All on your own with
No one around
Little House — The Fray
3% a year increase over 2000 price of $178k – $225,485. Then budget for TLC needs to be deducted from this.
Interesting that there are no pictures of the inside. Judging the sad picture of the front door, I have no hope for the inside being worth $200,000 much less what they are asking.
“Property needs some TLC”? Judging by the missing panels and the horrible front area, I suspect that the inside looks as if Hunter S. Thompson had camped out there for a month. (And just out of curiosity, what is it with the illiterate listings? I know realtors are on the evolutionary ladder between jackals and candiru, and generally wish that they had a sibling who was a child pornographer or a weekly newspaper music critic so they could have someone to look up to, but the misspellings and general sodomizing of the English language just amazes me. I’d ask if any of them ever graduated high school, but I know from personal experience with far too many MBAs that they probably got through four years of college without anything actually sinking in. Blues.)
I’m curious to see a “walking closet” though!
Hummm…can you really have only one mirrored closet? Or is that the sound of one hand clapping?
$2,915 monthly equity burn rate: what a bargain! Almost half off the normal burn rate for Irvine.
IR –
Interesting thoughts on low end pricing on a per square foot basis. I agree with you – without move-up buyers the middle and high-end can’t be supported. These are the basics of housing fundamentals. As we have discussed before, if we couple these forces with any kind of local recession or significant inflation and higher rates we will see much lower prices.
What do you think? If we do see the “perfect storm” (recession, inflation, and higher rates with our current over priced housing market) where could we see housing prices? 2002? 2001?..earlier..?
Thanks for all of your incredible work!
BD
That is what I am seeing shaping up. I think we will still have low rates through the fall. This should entice the last of the knife catchers. When either the economy picks up a little or inflation picks up a lot, the FED will raise interest rates, and it will ripple through to higher mortgage interest rates. I see a slow, steady increase in interest rates beginning this fall/winter and progressing for several years. The continued inability for people to refinance will wipe out all the overextended Alt-A and Prime borrowers as their mortgage reset. This will make for a flood of REOs at a time when few can afford the inflated prices. I now strongly suspect we will fall below rental parity, and we may stay there for some time.
The scenario you are describing is exactly the reasons rates will have to stay low. The inflation genie is out of the bottle, however the cause if not the expansion of M3 as the conspiracy theorists would lead you to believe. The source of inflation is the evolution of emerging markets from mercantilist producers bent on creating economic infrastructure into modern consumer oriented economies. This transition is driving inflation (not the surfeit of cheap money). The distinction is important because U.S. central bank policy is decreasing in importance from a global macro perspective, limiting the ability of the Fed to achieve any meaningful impact on inflation without coordination of other central banks. Ergo, Fed rates hikes may not have the intended/desired impact on headline inflation. Furthermore, if inflation is beyond the power of the Fed to tame, its mandate becomes one dimensional: maintain stable growth. In reality, GDP growth is slowing already, and even trend growth has moderated over the past decade (hardly inflationary). No, I believe the Fed will stay the course with low rates for an extended period of time.
So you believe the FED will abandon one of its stated missions and admit their impotence with regards to inflation? I have a hard time imagining that, particularly with the growing dissension among the FED governors with Bernanke’s aggressive lowering of rates.
I believe the Fed’s primary objective is to maintain stable growth. Faced with recession/depression versus reflation, I believe they will focus on the former.
CW, I think the Fed may not have a choice but to stay the course with low interest rates for a prolonged period simply because raising rates may be the last nail in the coffin for banks struggling to stay within their capital ratios. Even the loans that are performing were issued with record low rates. So, a bank is pulling in 5.5% on some fixed rate mortgage, but has to pay out 8% on their CD’s. This is the very reason banks were pushing ARMs so heavily. Too bad the ARMs aren’t performing.
I would like to see the Fed raise rates by half a point to scare speculators and prick the commodities bubble. Then they can shave that half point off and buy the banks some more time before really raising rates.
I just realized my CD statement is stupid. The banks don’t have to pay out more to customers just because the Fed raises rates. So, replace the CD rate with the rate the bank has to pay to borrow money from other banks and I think my statement starts working again.
Wouldn’t rising interest rates generate some short term profits for banks/institutions engaging in arbitrage?
Our discussion is precisely why this one is hard to call. So much has changed and the financial markets have transformed (notice I didn’t say evolved, IMO they’ve devolved) to the point we’re all speculating what the FED’s reaction to certain indicators will be.
Although I agree growth or at least “flat growth” is important, it seems to me interest rates must rise in response to inflationary pressures or at least to stall the severe devaluation of the dollar. I tend to the the devaluation of the dollar is the most serious issue we face now and in the future. It could have long lasting impact well beyond what we’re seeing now. For instance, the crude oil exchange could shift away from the dollar as it’s standard and toward the Euro or perhaps even the Pound. That shift alone could seriously harm our economy long term as we’d be forced to acquire more and more of our oil on an open market AND concern ourselves with currency fluctuations.
[quote]What do you think? If we do see the “perfect storm” (recession, inflation, and higher rates with our current over priced housing market) where could we see housing prices? 2002? 2001?..earlier..? [/quote]
I think more like 1999-2000 prices by 2010/1.
^
Except rates are low and should stay low due to the weak economy.
10 yr treasury is up north of 4.1% today
“Except rates are low and should stay low due to the weak economy. ”
Then WHY is the 10 yr T Note yield maching UPWARD ?
Rates ARE NOT going to stay low for very long, even if the dopey US economy tanks.
Ughwrong –
I agree with you. Rates are moving higher despite what the Fed is doing because the markets smell serious inflation in the pipeline. What will happen to housing prices when a 30yr fixed jumbo goes over 9 or 10%? Inflation is here…regardless of what happens to the economy the Fed and the markets will lift rates to fight inflation. What do you think?
Thanks,
BD
“What do you think?”
The bond market is on borrowed time, and will soon
IMPLODE, sending yields through the roof. (ie. 10% or higher)
Because Treasuries were overbought in the fear driven flight to quality. The increase in rates is part of the normalization process. Note that Munis yields are marching downwards along with IGC and HY, demonstrating that fear is abating from the capital markets.
It would be foolish to extrapolate a trend from the recent repricing in Treasuries.
Yes…but what about 5% headline inflation…?
What about it?
Without going into a ton of economics, this is simple. Treasure rates have been held down for years because the Chinese are investing their trade surplus back in our t-bonds. To keep from losing money due to exchange rates, the Chinese pegged their currency to ours. Now the gig is coming to an end. Inflation in China is raging and they have to do something about it. If China revalues their currency now, they will lose tons of money on their treasury holding. Currently, they are cutting their treasury holdings (causing rates to rise) in preparation for a massive revaluing of their currency. Invest accordingly.
Yup, treasuries were overbought. Now the market will normalize. That does not mean that our economy will recovery or than endogenous US growth will lead to spiralling inflation.
See my comments on GDP growth above. And sorry for the typos.
That’s one craptastic condo. Lousy pictures and none of the inside, the front looks terribly ghetto as it is.
$299 HOA fees too! I would pay $100K tops for this hunk o’ junk and of course it would take thousands more to do the TLC it must need to make it livable/rentable.
Someone paid $424K for this piece of shit? Well, what the hell, it wasn’t the buyer’s money anyway. The guy who sold it for $424K must have nearly killed himself laughing all the way to the bank. Let’s hope he didn’t use that windfall to leverage more flipper properties…
The first wave of knifecatchers will be upside down, but I don’t know if they’ll get their head handed to them. What does the current mortgage mix look like? We’ve already seen it, the shadow inventory of want to sell but can’t sell and thus don’t list or remove from the list. The market is below the price they have to get.
The thing that was killing everybody was the option-ARM resets and runaway HELOC payments. Even if they get blown out by resets and upside down, how far out is it? 3 Years? 5 Years?
The urban legend of walk-aways? What percentage of spring slide buyers put no money down? Less than 10% down?
No, I’m afraid these buyers aren’t getting out, they’ve signed over their rights with the purchases and have committed themselves to a multi-year stint in Bellevue.
Oh my! $350 for that pile o crap no way Jose! Seriously, that’s insane!
this is part of the reason why there’s a long way to go yet in the RE implosion… lots of asking prices are high, way too high, and in WTF and beyond territory. Desperation has still yet to truly set in, particularly on the part of those institutions holding REO properties.
Here is an AWSOME video of the Alt-A and Option Arm tidal wave thats a comming. This video has lots of JUICY info. I watched the whole thing 4 times already, and after each time Im shocked at what’s comming…
Yeah, those who are buying houses now, WILL be the new knife catchers.
”
If The April Foreclosure Report did not convince you that the RE bubble bursting is just in its 1st/2nd inning because the main street and stock market seem to be saying the sub-prime problem is nearly over. Then, you need to watch this Alt-A report:
Mr Mortgage – HERE COMES THE ALT-A CRISIS ”
https://www.youtube.com/watch?v=pmeBSWI9sF8&feature=related
Wow, has ANYONE else seen this video ?
Thanks for posting that one, it’s an eye opener !
No doubt IR is right, anyone who is buying now will be a knife catcher for sure !
IR linked that video a couple of weeks ago on the blog. Mr. Mortgage is great!
My conclusion is that ANYBODY who is relying on an appreciated house value to refinance in the coming years is toast.
It will be like the referee of the “Game of Life” will blow the whistle and announce that anybody who bought a home in the past X years actually did NOT buy a home and must “start over” at square one.
We will remember this era in our old age.
If you find a house you like at a price that you can afford, and plan to stay there for 5+ years, then buying now would not be knife-catching.
Most, if not all, buyers in today’s market will be underwater 5 years from now.
“If you find a house you like at a price that you can afford, and plan to stay there for 5+ years, then buying now would not be knife-catching. ”
Yeah, but your equity (if any), would be GONE.
I find it unlikely that a houses nominal price will be much lower (if any) 5 years from now. And, if it’s a house that you enjoy and can afford, what difference does it really make? My car will be worth less in 5 years also. I don’t understand why a home has to be a profit center.
My point is that, yes, it would be nice if a house appreciated. It would be nice not to be underwater. But, the goal of a house is to put a roof over your head. If you can afford it, and you like it, you should buy it and not worry about trying to time the market exactly.
I would be pissed if I bought a home today and then two years later, some schlepp buys the same model across the street for half what I paid. Oh and cars DO appreciate. Ever see how much classic cars go for at auction?
” Oh and cars DO appreciate. Ever see how much classic cars go for at auction? ”
Ok genius, I have a “classic” 1982 Honda Civic with 220k miles on it that I will sell to you for $50k.
I remember looking at units in that complex, it’s a pretty quiet area. No koi in the pound though. 🙁
If memory serves, in 1999 the 1 bed model were $130k and the 2 bed model $180k’ish asking. I ended up buying at Oak Creek instead for brand new units.
The HOA fee is a bit high.
What a mangy slum. Not even in SoCal should a dump like this sell for more than $140K topside.
How much would I get paid to live in it till it sells?
[b]My Offer[/b]
After giving this property a thorough look, my offer today is [b]$122,700.00[/b]. I believe this is what this property is worth.
Boy, you are feeling generous today.
Yes! I added a whole $700 extra.
IR…
Looks like an apartment building to me. Do you know if this was originally built to be condo or was it converted from apartment in the 90’s.
Yeah, it’s only worth 100-150k. tops. I a real world scenario.
I can understand why an invester would purchase an apartment like this as a rental as long as it was cash flow positive. But I still cannot understand why anyone would purchase an apartment like this to live in unless the cost to own was significantly less than a comparable rental. I didn’t understand it back in 2004 and I still don’t understand it. Of course I would feel different about a nice SFH but for a crappy apt? no way.
April housing sales strongest since September 2005
April’s housing sales marked the strongest year-over-year showing the Coachella Valley has seen since September 2005.
The 912 homes sold in April reflect a 3.8 percent drop from the year before – a marked improvement compared to typical year-over-year declines that have hovered around 30 percent.
The sales also mark a 25.1 percent increase over March, according to a monthly analysis of the valley DataQuick Information Systems released this week.
A bulk of April’s sales were resale homes, which made year-over-year gains.
It comes as median prices are down to $301,000 – the lowest since September 2004 – and as local real estate agents are touting the Coachella Valley as a prime buyers’ market.
“We’ve seen little baby steps, little baby steps (in the market upswing). Now you’re starting to see full strides,” said Sam Schenkl, executive officer of the Palm Springs Regional Association of Realtors, which represents 1,500 agents and brokers.
DataQuick’s April analysis also shows:
The resale market continues to drive housing sales.
A total of 496 existing single-family homes sold, up 2.5 percent from April 2007. There were 276 resale condos sold in April, up 1.5 percent from a year ago.
New construction continues to struggle, though sales rose over previous months. A total of 140 new homes were sold. That’s a 27.1 percent decline from April 2007.
The valley’s median price of $301,000 was down 22.8 percent from April last year.
The most expensive home sold in April was a $7.7 million home in Indian Wells.
April’s sales continue an upward swing that began in the fall. It’s the highest number of monthly sales since July.
Coldwell Banker’s local offices recorded about 300 open escrows in April, regional vice president Ron Gerlich said.
The company is “right on track” to see the same in May, Gerlich said.
He noted there continues to be a number of people looking at homes but not quite ready to commit to a purchase.
“Second quarter, I’m sure we’ll be in better shape,” Gerlich said of the increasing sales trends. “There’s all sorts of activity.”
Experts credit renewed confidence from investors, notably Canadians, for helping boosting April’s sales.
Many visitors who have enjoyed the desert all season want to buy before they leave and summer starts.
“People have been holding off; now they’re ready to make the move,” Schenkl said.
Wow, that’s some pretty optimistic spin on some pretty grim news.
[b]Bad News Banks[/b]
[url]http://www.forbes.com/wallstreet/2008/05/29/banking-fdic-regulation-biz-wall-cx_lm_0529fdic.html[/url]
Hot damn!!!! The mounties to the rescue, those Canadians are going to be in a bidding war with the Chinese speculators. Happy days are here again and now I have to go polish my Heloc ap. Not.
Does anyone have info on what the $/sqft was back when prices reflected “reality?” For those of us who aren’t real estate wizards, that helps put where the market is into perspective.
[b]1997[/b]
$96/sqft, this is reality price!
Yikes.
So, allowing for inflation of, let’s say 2% per year (because housing has also gotten bigger while housing values have tracked income pretty well HISTORICALLY)….that would mean that coming back to reality might be $124/sqt. 3%= $138, 4%= $154, 5%=$171.
So, I’m going to be more charitable than picflight and offer $185K.
This just in …
WASHINGTON — For every new building permit issued in California last quarter there were three foreclosures, and foreclosure-related notices now account for one in every 20 mortgages in the state, according to a report from First American CoreLogic Inc.
Despite recent upbeat assessments by some banking executives that California’s housing market is beginning to stabilize, the report, released Tuesday by the unit of First American Corp. in Santa Ana, Calif., found that the growth of seriously delinquent loans is accelerating in the state, an indication that “foreclosures and REOs will continue for some time.”
In addition, California cities are experiencing the largest price
declines in the nation, accounting for 16 of the top 20 markets with falling home prices, the report said. Eight of the 10 riskiest
mortgage markets are in California, First American CoreLogic said; the remaining two are in Florida.
Delinquencies of 90 days or more tripled in the first quarter from a year earlier, to 4.8% of all mortgages, the report said.
As home prices fell an average of 5.2% nationwide in the first quarter from a year earlier, the decline in California was 18%, and 28% lower than their peak nearly three years ago. “California home prices are not expected to recover in the near term,” the report stated.
More than 320,000 preforeclosure notices were initiated in California in the 12 months through March, up 28% from a year earlier. A total of 450,000 foreclosure-related notices were initiated in the state in this period – one for every 20 loans, according to the report. The declines in California’s housing market have fed a “self-reinforcing negative feedback loop” in which lower prices lead to more defaults and excess inventory, causing demand to plummet and prices to fall
further, the report said.
What is the deal with painting roofing material? Trying to look like Huntington Beach?