Time In A Bottle — Jim Croce
Some time ago, I wrote the post Timing Does Matter, to document the financial impact of properly timing the market. Today’s featured property owners show how a family should manage their mortgage, and the benefits that can be obtained in retirement if you sell near the peak of a massive speculative bubble. I commend today’s sellers. They are the role models I will emulate in my own life.
Asking Price: $649,000
Income Requirement: $162,250
Downpayment Needed: $129,800
Monthly Equity Burn: $5,408
Purchase Price: $59,500
Purchase Date: 8/22/1980
Address: 14951 Elm Ave., Irvine, CA 92606
| Beds: | 4 |
| Baths: | 3 |
| Sq. Ft.: | 1,873 |
| $/Sq. Ft.: | $347 |
| Lot Size: | 5,301
Sq. Ft. |
| Property Type: | Single Family Residence |
| Style: | Traditional |
| Year Built: | 1973 |
| Stories: | 2 Levels |
| Area: | Walnut |
| County: | Orange |
| MLS#: | S544508 |
| Source: | SoCalMLS |
| Status: | Active |
| On Redfin: | 10 days |
This home shows with quiet elegance and is truly a Turnkey Home! Enjoy
living at its finest in this tri-lvel home in College Park community.
It features 4 bedrooms, 2.5 bathrooms, new beige carpet, new interior
paint, scraped ceilings, wood banisters & floors, custom entry door
and transom, new dual pane windows, recessed lighting, track lighting,
crown molding, wide baseboards, new energy efficient air conditioner,
and a cozy family room with a fireplace. The newly remodeled kitchen
features granite counter tops, new microwave, tile backsplash and
flooring, recessed lighting, and a garden window overlooking into a
neatly groomed back yard with a spa and built in barbeque. Plantation
shutters in master bedroom, study(bedroom) and master bath. Light and
bright with skylight in hall bathroom. Don’t forget room off master
bedroom allows for plenty of storage. Only walking distance to
elementary school. The HOA has 3 community pools with active swim team,
clubhouse, and parks.
Today’s sellers will have to pardon my irreverence, but “Turkey Homes” and “light and bright” are something I can’t resist.
These people bought this house almost 30 years ago and paid off their original mortgage. They have two small HELOCs which appear to have been used to redo the kitchen and the roof. This should help them sell the property. These people did not participate in the borrowing orgy while everyone around them was. The HELOCs are through a teacher’s credit union, so one or both of the owners are probably teachers. The additional $550,000+ will go a long way toward supplementing a teacher’s pension.
This is how I want to manage my house. They got to live in a nice Irvine property for many years, they paid off their housing debt, they are selling at an inflated price (relative to fundamentals,) and now they can downsize and have some significant cash to enjoy in their retirement. What a great plan!
I don’t intend to make my house my only retirement savings. I set aside money for that purpose irrespective of what might happen with housing. If kool aid intoxication takes over after I buy, I am certainly not above taking advantage of the greed and stupidity of my fellow man — I am not counting on it, but if it should occur, it would be a nice pile of cash to play with when I am ready to stop working.
I salute you Mr. and Mrs. Financially Conservative owners. You have shown the rest of us the way…
I hope you have enjoyed this week at the Irvine Housing Blog. Come back next week as we
continue chronicling ‘the seventh circle of real estate hell.’ Have a great weekend.
.
If I could save time in a bottle
The first thing that Id like to do
Is to save every day
Till eternity passes away
Just to spend them with you
If I could make days last forever
If words could make wishes come true
Id save every day like a treasure and then,
Again, I would spend them with you
But there never seems to be enough time
To do the things you want to do
Once you find them
Ive looked around enough to know
That youre the one I want to go
Through time with
If I had a box just for wishes
And dreams that had never come true
The box would be empty
Except for the memory
Of how they were answered by you
But there never seems to be enough time
To do the things you want to do
Once you find them
Ive looked around enough to know
That youre the one I want to go
Through time with
Time In A Bottle — Jim Croce
Well, I applaud their fiscal prudence, but they may not have timed it right at all, now have they? If they would have sold 3 years ago, then they would have done EVERYTHING right.
Hopefully they will be able to sell this house soon at a price close to their asking – they deserve it!
Yes, they probably could have quit work two years earlier with the additional windfall from selling in 2006. Their timing isn’t perfect, but it is still very good.
True, still good timing. However, since the tide has turned, they do have to be aggressive in terms of hooking knife catchers to get it done on this down slope.
Do not play cute and chase the market down.
Holy catfish Batman, there’s no evidence of conspicuous consumption.
In 1980, the 60K price was most likely in the upper range of 4x of one person’s income (assuming a 15K yearly salary – no dual earning houshold would be necessary to buy this house)
Is today’s asking price of 650K within 4x the income of a single school teacher?
Keep going. Paying 650K for this place should leave you with extreme buyer’s remorse.
would you really want your kid being taught?
by someone who was dumb enough
to live in the OC on a teachers salary?
the OC is only sustainable
if enough trust fund kids
make it their mission, to teach
suburban spoiled brats
or enough liberal eductated surfers
agree to live in squalor for teacher hours
oh yeah, or home prices could drop
substantially
My question is –
Why the hell would you take our an equity loan for anything when you only paid 60K for your house and it is now the year 2008. Your house is 93% paid off and your monthly mortgage payment is in the neighborhood of 500.00 per month.
They shouldn’t even sell it. Just rent it out to the local Irvine Kool-Aid drinkers who will stomp all over each other to pay 2000.00 a month the rent the place.
I suspect, the primary reasons for getting the HELOCs to do the work is that (1) it was easier than saving up for it. (2) it will be easier to document the cost of the improvements for the purposes of capital gains on the house once it has sold, keeping it closer to the $250k limit.
My understanding of the capital gains exclusion could be wrong though.
I think you are right with your first hypothesis.
It was just easier than saving up the cash for it.
What I don’t understand is if your payment is only 500.00 or so per month then what is so hard about saving up some money?
The overall point I am trying to make is:
If these “fiscally responsible” homeowners cannot afford to pay cash then WHO CAN?
First, capital gain exclusion for a married couple is $500k, single is $250k, if they have lived 2 of the past 5 years in the property. They paid 60k for the house, but we don’t know what the downpmt was, probably 20%. Interest rates were extremely high at that time, between 15-18%. We bought our second home around the same period, but it was refinanced twice as the rates fell. They probably did the same. In 1982 our rate ‘lowered’ to 12.5% and in 1985-6 refied to 8.5%. Reason for the HELOC – probably the interest rate was good and it was deductible on their taxes. Interest payments on the morgtage should have been very low at the time of the HELOC.
So you think that RE prices will go to hell BUT that someone who has a chance to unload their house for $600K now almost free-and-clear, and might not have that chance again for many years, should rent it out?
Why hold through the depreciation? If you are right, couldn’t they just buy it back for $300K cash in a few years and rent it out for $2K then… Yes, they will have $3-4K more in property tax then, but they will have saved hundreds of thousands in equity burn.
How does your recommendation make any good financial sense?
The “they should just rent it out” comment was more in jest than professional financial advice. You could try to cash it out now and make some money are bet that rents will not drop and try to milk some sow into renting. There are risks either way.
Renting out a property can be a major headache; Not for everyone. Maybe they are going to use the money to sail around the world? The last thing you want to worry about is some renter skipping out on you. Want an easier way, put the money in a handful of well run REITs.
mav,
hate to go off topic, politics should stay in the forum, “but by someone who was dumb enough
to live in the OC on a teachers salary?”
CA teachers had the nation’s highest average salary in 2002-03, at $55693.
$50,000 is considered median for the middle class in the USA.
Don’t know what planet your from, but after the bubble finishes bursting, there will be plenty of affordable homes in OC again. Not everyone in OC makes $250k/yr.
californians are very creative
we could modify the russian bride business model
select young, global, discrete individuals
focus on third world countries
send them to liberal finishing schools
like yale, harvard, and princeton
then betroth them to OC executives
require them to teach for 20 years
this could be a sustainable
positive feedback loop
every company would move their HQ to irvine
this bubble just needs a little ingenuity
and we can get this baby inflating again
alan, you need an open mind
be more flexible in your thinking
Having the highest teacher salary in the country does not matter if the local cost of living is among the highest in the country as well.
Seems to me that it would “cancel out” all those high salaries.
There was that clown on here for awhile going by the name “25w100k+” who loved to make claims like this. He would even go so far as to say that the workers were paid more because they were more “talented” and failed everytime to consider the fact that perhaps the higher salaries were higher because renting a studio apartment costs the same as renting a house in most other parts of the country.
Beg to differ AZ,
Costs are higher in CA only because of this bubble. After the bubble bursts, costs will come down.
You can’t pay overly inflated salaries now because of the recent bubble. That’s why Villejo pays $150k + for police and fire and is now in bankruptcy.
Things will correct, they always due.
25w100k+ posts on the forums now.
I like his posts.
Harvard, Yale, Princeton – “liberal” finishing schools? Hmmm….
George W. Bush, Yale ’68
Richard ‘Dick’ Perle, Princeton ’67
Donald Rumsfeld, Princeton ’52
Bill O’Reilly, Harvard ’96
Or do you consider something like ‘Bob Jones’ University to be a ‘moderate’ finishing schools. ROTFL…
i’m pretty sure they would all agree with me
i doubt they got along with very many profs
but more on topic:
irvine has changed alot since 1980
do you think these people
even want to live here anymore?
or do you think they are moving
to a place that is more like
1980 irvine
that was in response to seatme
Personally I think….
Husband and wife teachers is a pretty awesome combo. After tenure you make over 60K per year each, you get a 3 month summer vacation, 2 weeks for Christmas, a week for Easter, and every other holiday known to man.
You are respected in your community, get gifts from parents that want to make sure their kids get a leg up, excellent medical benefits and a retirement package.
Dont forget the 1/2 days, donuts in the teachers lounge and the fact that it is almost impossible to get fired.
The teachers that own this house are likely making $90K each, not $60K, and still get those long vacations and doughnuts…
“After tenure”
When my mom taught in the 60’s it took 5 years to get tenure. Now they get tenure after only 2 years and there is no way to weed out the bad ones after that. Arnold put an initiative to change it back to 5 years and was soundly defeated by the CTA.
I figured as much.
I work out at the gym with a lifelong administrator in the Santa Ana school district.
He got so much vacation time that he never used his real vacation time or sick days.
He finaly retired, with a pension, and got paid for over 3 and half years of sick and vacation pay that he never used.
At least he would laugh about it and admit he was on the dole, most of them cry like they are living out of refrigerator boxes.
Administrators are the parasites of education. check any school, from a kindergarten to Harvard, and you’ll find that, with the exception of ESL teachers, teacher/student ratios have grown in the wrong way every year while administration flunkies are added to the payroll. What an Admin type would need a summer off for I don’t know.
As for 90 grand a year, last weekend at the driving range I overheard a father express admiration for his son who gets 90k a year right out of college and recently shut down a local factory and sent its jobs off to Mexico. He did laugh uncomfortably about that, to his credit. If someone has to make 90 grand a year, I’d rather it be a teacher in CA where home prices, as we know, are insanely high.
IUSD teacher pay scale
http://iusd.org/human_resources/documents/salsch07-08-b.pdf
Mav,
Don’t wanna pile on or anything, but my sister is an OC junior high teacher making 80k. True she’s been in district for 12 years and has a masters, but that ain’t bad cheese for a lowly public servant.
Anyway, IR thanks for the positive post about some responsible folks. Even my nearly insatiable desire for schadenfreude needs a vacation every once in a while.
Keep up the good work.
puhleeze, $80K, that can barely afford $2300 a month in rent, let alone the type of car you need to drive to be a real person in irvine. the chinese won’t being giving us debt indefinitely, we need to come up with an alternative strategy, and we need to do this fast!
or home prices have to drop
substantially
A salary of 80K is not sufficient to afford today’s listed property at 650K.
How does that make your sister feel that she has worked hard for 12 years, put in all those hours on her education and now she still cannot afford a plain average house?
Something is not right.
Welcome to the American Public school system.
BTW, the teachers in the OC are the highest paid teachers in the USA.
Now if that doesn’t make you spin, I don’t know what will.
“A salary of 80K is not sufficient to afford today’s listed property at 650K”
No argument here. My sister has been saving dilligently for 10 years and still can’t afford (20% down, 30yr fixed) anything at today’s prices. We’ve both been bubbleheads for the last 3-4 years, and are enjoying this correction both for the abject schadenfreude and hopeful prospects it’s creating for us both.
This 1980 price may have been in line with 4x income. The problem is in 1980 mortgage rates were 18%. Over the next few years the rates fell somewhat (11.5% in 1984) but it still made affording monthly payments a tough proposition. Homeownership has never been easy in SoCal in my memory. But even with today’s falling prices and low rates, it’s still tougher way out of wack. That’s why I think prices have to come down a bit more even to get in in line with SoCal’s historically unreasonable levels. A weakening economy adds more pressure to prices.
I know this is an irrelevant point, but you don’t have to be a teacher to be member of the teacher’s credit union. I was able to open an account at OCTFCU just by having a student job when I was at UCI, and once you’re a member it’s pretty easy to have other family members join.
I applaud their discipline, but I still think the price is too high. There’s not much to fall in love with about the house. I like the window in the kitchen and the wood trim on the large windows in the family room, but that’s about it. And at least one of the bedrooms is tiny. So, while I appreciate their updates, the price per square foot needs to come down. At $250/sq foot this would be $470k, which is still a tidy sum for retirement (and over the capital gains limit, no?) but at that price right now it would be a steal, and I’m guessing these proud owners don’t want to “give it away”.
I agree, it is overpriced. The train comes blasting through around 150 feet away from this house. CP is a old value neighborhood with many a scary and poorly kept home, at least per Irvine standards, nearby…
IMHO, the market price for this home is probably $550K today.
Agree, the train noise is unbearable at this distance. Plus a lot of the houses around CP are very poorly maintained.
Bravo IrvineRenter! Finally, a post I can personally relate to! Apparently, there ARE more of us out there – I thought I was one of only a few fiscally responsible people left in the OC ;). I too, will be in the position to have my mortgage paid off within the very near future – well before I am of retirement age. Over the years, hubby and I have resisted the temptation to “move up” to a larger home, and it has paid off.
We should congratulate these folks for making all the right decisions. Yes, maybe they have overpriced their home a bit, but they will figure it out. What peace-of-mind they must have knowing they don’t have to sell at asking price!
I wish I could do more profiles like this one. It is one thing to learn from the series of failures I document, but it is another to see a story of success. I don’t see many properties like this one, not because they are not out there, but most likely because they are just not trying to sell them.
You don’t see many stories like this IR because you focus on Irvine. Irvine is a young community. When my folks bought in 68 most of Irvine was still Orange Groves and farming.
I know plenty of people like this who sell with big equity, but most of them are using that equity to move from the inland hills to Newport Coast.
selling prop 13 status is a big decision. you’re walking away from california weather and under a grand a year in property taxes. prop 13 status may be worth a solid 30% of price differential if one could put it on the free market, who knows.
Why all the backyard pools when there are 3 beautifully large HOA ones?
to avoid the people who bought in 1980
Huh? This house doesn’t have a pool… There is a shot of a HOA pool though.
IPOP
have been out. Did you buy your dream home? In North Park, Northwood Ponte, or Tustin Ranch?
Nope, I am a renter now, of a place 50% of the way there to dream home… Waiting for Irvine prices to fall some more, but things haven’t gone down much since the Spring. Hoping for another 10% off by next summer as we might be buyer’s then.
The thing I love about Irvine is all the public space………….that no one ever uses.
To see some families enjoying outdoor public space you need to go to Santa Ana.
Highly landscaped outdoor spaces in places like Irvine and Newport are just for astetiques and drive bys.
Get up earlier. When it’s hot during the day it’s empty, but at 8am on a Saturday morning, the fields are packed.
I went over to the park on the corner of Walnut and Harvard with my oldest to find a baseball field to practice on and every single one of them was being used. They had soccers games ending and softball teams waiting to use the fields when they were done… I wish those open spaces were empty but they weren’t.
HOW THE FUDGE DID YOU GET A “Q” IN THERE?
He/she was apparently trying for the French spelling. Didn’t quite make it, though — that’d be esthétiques.
Good for them. They did indeed buy at a hard time, interest rates were crazy which basically doubled your payment. That is one reason I could see a knife-catcher today buying. 6.0% is hard to pass up with a house back at 2002 levels and in a good neighborhood. BUT, this house isn’t at 2002 levels and has a cho-cho issue.
Alan –
We are not differing. We are saying the exact same thing.
The problem with this is that they sell and cash out the $500K and what do they do now? Move to Florida? Arizona? Montana? That’s where they’ll have to move if they want to keep any of their proceeds of the sale. If they buy elswhere in OC they’ll end up right back where they are now minus the fees that they spent on both ends of a sale and purchase.
I love a Kumbaya moment as much as anybody else as we celebrate these financially conservative owners.
But IrvineRenter, next week let’s get back to talking about those knife-catching/HELOC train-wrecks that made this blog so near and dear to my heart. A blog is part entertainment, baby, let’s see some housing bubble carnage (I’m sure there is no shortage of that).
;-P
oh sweet music…
They’re dreaming if they think a 35-year-old house is going to sell for $347 per square foot! Still, even at the more realistic selling price of $500K, they will come out way ahead, and they’re smart to get out now, before it drops another 30-40%.
Great post, IR.
I find it very encouraging to see financial responsibility rewarded. I would love to see more of these (if any more exist).
Please post a follow-up once they sell the home. That will make for a very happy ending.
I’m really enjoying Mav’s poetry. I never saw a real estate poet before.