Everyone needs to watch the video above. It is one of the most hilarious parodies of the housing bubble I have ever seen.
This Thanksgiving, be thankful you are not one of the many people going through what is shown above.
Downfall — Children of Bodom
Greed. Pure, unbridled greed motivated many buyers during the Great Housing Bubble. Greed is one of the seven deadly sins, and it is responsible for the downfall of flippers, specuvestors, and ordinary homeowners who thought they could make a fortune buying and selling homes. In the movie Wall Street, Michael Douglass’s character, Gordon Gecko, famously opined, “Greed is Good.” Our entire capitalist system functions on the belief that individuals doing what is in their own best interest will result in the most efficient allocation of capital and the greatest good to society. Trial and error has shown us that sometimes this is not the case. Monopolies and other market price manipulations are one example of capitalism gone awry. Ponzi Schemes, like witnessed during the Great Housing Bubble are another. To prevent these abuses, we regulate the free market. Of course, our attempts to regulate and manipulate have their own problems. Maybe, someday we will figure it all out. Of course, we have been living under the delusion that we had it all figured out for many years. It takes a series of events like we are witnessing today to humble us all and make us realize we still do not know what we are doing.
When the Titanic set sail in April of 1912, the world was suffering from another mass delusion: the belief that our species had overcome nature. The Titanic was unsinkable. They considered the possibility of disaster at sea so remote that they did not even provide enough lifeboats for all the passengers. The sinking of the Titanic was a paradigm changing event. The world’s collective feeling of security and control over their lives was shaken to its core. The same is happening today.
The collapse of our economy and the inability of our leaders to prevent it is spooking everyone. Our concepts of financial security are being called into question; they should be. Our financial leaders respond to our calls for ever-increasing asset prices. They found a way to do it for a while by steadily lowering interest rates and creating massive debt structures supported by dubious insurance contracts and blind faith. We act like meth addicts taking economic stimulants one after another until our financial body bursts. There must be a better way.
I see angels burning, falling down in ruins
Looking down I see me, I’m my own enemy
We saw in yesterday’s post how stupid lenders in Quail Hill inflated house prices by offering 100% financing to property flippers. I wrote back in February about how Quail Hill was going to become Quail Hell for those who bought there. Today we have another property on the same street. It is a bit larger, but it is also in distress, and the decline from the peak is extraordinary.
Asking Price: $650,000
Income Requirement: $162,500
Downpayment Needed: $130,000
Monthly Equity Burn: $5,416
Purchase Price: $964,500
Purchase Date: 1/16/2007
Address: 76 Passage, Irvine, CA 92603
| Beds: | 4 |
| Baths: | 3 |
| Sq. Ft.: | 2,265 |
| $/Sq. Ft.: | $287 |
| Lot Size: | – |
| Property Type: | Condominium |
| Style: | Contemporary |
| Year Built: | 2003 |
| Stories: | 2 |
| Floor: | 1 |
| Area: | Quail Hill |
| County: | Orange |
| MLS#: | S532174 |
| Source: | SoCalMLS |
| Status: | Active |
| On Redfin: | 189 days |
 Unsold in 90+ days
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builder’s model home. This beautiful open floor plan has Master bedroom
w/walk-in closet, High ceiling, recess lighting & ceiling fans.
Master bathroom has 2 separate sink areas and vanity w/granite counter,
separate tub & shower w/custom tile. Family/living rm w/fireplace,
built-in media cter. Beautiful Kitchen w/upgraded cabinets, center
island, breakfast bar & granite counters, wood flooring. Bedrooms 2
& 3 have mirrored wardrobe, buyers can convert the loft/office to
fourth bedroom. Upgraded carpet & wood flooring , custom paint,
crown molding, plantation shutters & recess lighting… Walk to the
parks, pools, spas, barbecue areas, amphitheater, fitness center, sport
field, basketball courts, tennis courts, tot lots, school, shopping
& dining You will love this home and living in Quail Hill! Quail
Hill is minutes away from the beautiful Laguna Beach as well as Orange
County s entertainment center The Irvine Spectrum
Overall, that is not a bad description. I do wonder why the writer used “w/” instead of the word “with.” Was it important to save those two characters? Also, it contains one of my favorite goobledygook phrase “highly upgraded.”
This property was purchased on 1/16/2007 for $964,500. The owner used a $771,600 first mortgage, a $96,000 HELOC, and a $96,900 downpayment. Ouch! If this property sells for its asking price, the total loss will be $353,500 after a 6% commission.
This property is being offered for 32.6% off its peak purchase price.
One of the contributors to my book has asked me to keep an eye out for a certain type of property. This one very nearly fits the description of what is sought. So far, properties like this have not seen huge discounts. Like many looking for properties in Irvine, it has been discouraging to watch prices hold steady over the last several months. Properties like this one should give some hope. Even the nicer properties are starting to come down in price significantly. This one isn’t quite there yet, but it is getting much closer.
{book}
The night of timeless fire is drawing near
I flee… Throughout the years of throe
Watching through a mirror, as I fall apart
I see a wreck, I’m burning
I see angels burning, falling down in ruins
Looking down I see me, I’m my own enemy
Watching myself decaying, falling from high spirits
I flee… Throughout the ruins of me
Longing for finding my way out
Leaving myself, there’s nothing left for me
The ruins are about to crumble down.
The flame is dying by shivery winds of jet black skies
It reflects hatred in my eyes
I see angels burning, falling down in ruins
Looking down I see my ashes scattered around my grave
Angels whispering fire, no longer I’m alive
Settled down I’m done with the trip to my kingdom come
Downfall — Children of Bodom
“..it has been discouraging to watch prices hold steady over the last several months.”
IPO was right. My own research confirmed there was not enough “distress” in distressed sales. I was really hoping the sharp drop would hit this area similar to the inland. So I decided to “move up” to leasing a nice house. There is definite softening in lease rates for those willing to look. Renters with high credit scores are in demand.
At least we won’t be wringing our hands over a “Money Pit” during the holidays.
Developers should be imprisoned for building 2265 sq. ft. condominiums, why would someone needing this much space opt for a mega apartment instead of a SFR.
Oh I see, now I know why.
“You will love this home and living in Quail Hill! Quail Hill is minutes away from the beautiful Laguna Beach as well as Orange County s entertainment center The Irvine Spectrum”
I agree with you. This one sure is nice, but a condo for 650k?? And don’t forget to consider the association dues. No thank you.
I think these have a very limited market. Older or jet set bi-coastal types that don’t want to bother with maintaining a SFR but want some space.
A VERY limited market because many of these types will go for the NYC penthouse or Westwood pad. But I am sure there are a few out there drawn to the cultural mecca we know as Spectrum.
The whole concept of buying a hugely expensive condo is just beyond me.
For a housing investment, it is the land that appreciates over time. The “improvements” only depreciate. And especially so with an “attached” condo.
Over time, SFRs appreciate because they sit on valuable LAND! In contrast, how many people are looking to spend 3/4 million dollars on a 20 or 30 year old condo?
Much better off renting.
But they installed granite in the kitchen and bathrooms; The Housing Fountain of Youth.
Housing corrections take years, especially when the eventual losses are so large. The fact that the government keeps throwing life rafts to the drowning markets gives hope the drowning home owners is slowing down the process.
In Q3 2009 we will see the housing market start to correct. So far all that has happened is a minor slow down.
People still think real estate is a good “investment” for the long term. They think that real estate will at least keep up with inflation. There is a belief that home prices are in some way tied to median income and rental values. The correction will begin when these “beliefs” are shaken and people buy homes for one reason, to live in them and raise a family.
Good, I hope the slide takes a few more years so I can save up a bigger down payment.
“There is a belief that home prices are in some way tied to median income and rental values. The correction will begin when these “beliefs” are shaken and people buy homes for one reason, to live in them and raise a family.”
Home prices are tied to median income and rental value. Even when people buy a home to live in (and not as a speculative investment) the sales prices are usually dictated by how much they can afford, which is tied to income.
I would love to buy a home for my young family but only something I could afford. At the moment I’m pissing money away in rent, but if I was to buy a house, I’d be pissing even more away with property taxes, interest, and other fees that come with homeownership, along with living in fear of a continuously (for the moment) declining home value.
Depending on your tax situation, you could likely buy today and piss away the same amount of money as renting the equivalent. But you’re right, it’s not worth the constant worry about your home’s declining value.
If you’re fortunate (hopefully I am too), your income during this downturn will remain stable and your savings will increase while your prospective desired home’s price will keep coming closer to affordability.
In the meantime, there’s plenty to find to worry about. I’m really good at this.
Aside from falling prices, the main reason I’m not buying right now is because I will not be living where I am right now 5 years from now.
Perhaps if home prices were appreciating even at a modest 5% per year it wouldn’t be such a bad idea, but even if prices were to hold steady (which we all know they won’t) it still makes more sense for me to rent. Besides, in this shaky economy, if I was to lose my job which is very likely I could pack up and leave at a moments notice without much trouble.
I lived in Irvine for several years, then after college I settled down in the South Bay area (Torrance/Redondo Beach) which I find much more enjoyable than Irvine. I’m working in the New York metro area now which is interesting, but it’s definitely not for us. Maybe with a 7 figure salary it would be more exciting (along with the upscale NYC apartment), but even then we’re outdoor nature types and NYC doesn’t have a whole lot to offer us.
Don’t forget the fear of possibly getting laid off. I don’t know what you people do for a living, but I’m on my 3rd job in 2 years, and I have a master’s degree in economics & finance. I can’t take on a 30 year mortgage with this kind of no-job security, as much as I hate renting.
sorry, I answered the wrong thread
I can top that. I had three jobs at the same firm. They were a client. Then my largest client. Then offered me a job. Then laid me off. Then a different division hired me. Then that division laid me off. Now I might be rehired.
But, it gets stranger. Each time, I’ve been given a raise. Each layoff, I’ve been given severance. I haven’t had an income disruption. Bizarre.
Correct me if I am wrong but wasn’t that the predicition?
First wave Subprime, second wave when option arms’ recast?
They haven’t hit recast yet so these properties aren’t distressed Yet.
Yes, that is exactly right. We will see many more distressed properties in the years to come.
Today’s post is a nice appetizer for what you’ll be seeing toward the end of next year. Today’s property will easily hit 500K by this time next year and will be well on its way back to 350K by 2012.
True, IF recent monetary policy hasn’t caused massive inflation by 2012.
The Hitler video is pretty good. It was good, too, when Hitler was a Cowboys fan.
https://www.youtube.com/watch?v=M_9UTvESBIc
That clip was hilarious!
Love the clip.
Why “built-in media cter.” but no trouble with “center island” or “fitness center” later on? In addition to dropping the price, they have to drop a few letters too? Clearly there is plenty of room to fall farther!
I would at least say that it is closer to actually being worth $400k than yesterday’s offering.
I was going to point out that there are reasons for preferring a condo rather than a house, like not having to do yard work. Then I remembered, Irvine mansions don’t come with yards anyway.
How in the world did someone justify paying almost 1 million dollars for a condo during the peak of the bubble. This is pure insanity. For that inflated price you could have bought a very nice Turtle Rock home. I’m sure TR prices are down too, but nowhere near the slaughter that has/will take place in Quail Hill.
Read between the lines. This owner paid $96,900 for this condo, not 1 million. Nobody ever expected to actually have to pay off their mortgage in ’07.
Although this owner looks like an idiot compared to the speculator who obtained possession of 35 Calevera, Irvine, CA 92606, a million dollar property, for only $100.
I bet he thought he was getting a smoking deal in ’07 too. Probably telling all of his buddies how then was the time to buy.
Those falling knives hurt!
you mean falling CHAINSAW 😆
I know this has already been said but I can’t help it–a four bedroom CONDO? Weird…
Interesting article about unemployed homeowners needing help to avoid foreclosure:
http://money.cnn.com/2008/11/20/news/economy/unemployed_foreclosure/index.htm?postversion=2008112007
“Homeowners are often left in the lurch. Take Dave Breitenbach, who lives in an upscale condo apartment with ocean views in Fort Lauderdale Beach. He had no trouble making his $5,000-plus monthly payments when he was employed. But now that he’s lost his executive job at a fitness chain, he’s struggling. “They said we can’t help you because you don’t have any income,” said Breitenbach, who has started his own business and is trying to sell the place, but has seen little interest. “You don’t qualify. They said once I get a job, I could call back and they could try to help me then.”
Um, yeah you’re probaly stuggling. You lost your job. This article smacks of the pervasive attitude that nothing should stand in the way of the lifestyle you DESERVE. You shouldn’t have to downgrade just because you lost your job! Why should you sacrafice the lifestyle you have “worked” so hard for? I don’t take joy in these types of situations but I find it frightening that no one is prepared to deal with REAL LIFE and sacrafices you sometimes have to make.
Scary. Scary. Scary.
650K and you have to share a wall with your neighbor. I love it!
A very interesting read on what could happen if we end up having a Depression. Irvine being one gaint suburb, some of the points there may even come true here:
Depression 2009: What would it look like?
http://www.boston.com/bostonglobe/ideas/articles/2008/11/16/depression_2009_what_would_it_look_like/?page=full
I have been reading this blog for quite some time and I am appalled by the association fees most of these homes carry. Based on my understanding, people buying this property will have to pay $286 association. Then if you add mello roos and tax, you have to pay ~$1000 over your mortgage. That is just ridicules. How did these people afford to stay with such high payments is beyond me.
They couldn’t afford it — that’s why IR posts them on this blog. And there seems to be an endless supply of them. Oh well…That’s Entertainment!
:snake: 1st of all, I took a dump on the US economy, 2nd, I took a dump on the titanic b4 it sank, but I got 2 tell u, not everyone thought it couldn’t sink, u must have watched that stupid movie with Leo De-Crappio, well even in the move the designer and the Capitan know it could sink, most people even back then knew it was just a boat and could sink especially with all that doodoo in steerage, and most people here knew housing was getting pretty bubbly under the watch of my bitch-on-a-leash, little Bush, yes I took a dump on the housing market very nicely, and I took a dump inside all your houses, right in your fireplaces, Santa Clouse will not come down ur chimneys this x-mass, its like I would send all you bastards $300 or $600 checks, but u had to pay $300 more a month to put gas in ur SUVs, this was after I was in control of the Iraqi oilfields, did I mention I took a huge dump on Iraq? I ran the big 3 US automakers into the toilet, I also took a huge dump right inside ur mama’s car, yes right into her cup-holder, haha, I helped her out, when she puts her little cup down my doodoo will hold it nice and secure, and I can rest assured that everytime she pulls it up to take sip she can get a nice wif of my doodoo, then after all that, I took a dump on SS and ur mama’s Medicare, yes I squeezed the doodoo out of all you bastards, u can’t blame me, I had to secure me and my gay daughter’s future, I shall end with letting you doocky-brains know that I took a humongous dump on the entire world economy. :snake:
Kirk’s replacement doesn’t seem to have Kirk’s skillz
However based on how they spell dookie it looks like they may be a realtor…