I Don’t Wanna Be a Loser — Lesley Gore
We are starting to see an interesting phenomenon in the housing market: knife-catchers changing their minds. The first one I noticed was in Quail Hill back in October. It was purchased by a flipper who put a large sum as a downpayment but then tried to sell quickly at a breakeven price. The only reasonable explanation is that it was purchased as a flip, and the owners changed their minds.
Changing your mind on a stock purchase is relatively easy. Stocks are very liquid, and transaction costs are very low. However, changing your mind about a real estate transaction is not so easy. Real estate is very illiquid in a declining market, and the transaction costs are very high. If you quickly change your mind about real estate, you will lose money. Of course, it is common to price it just above your purchase price and hope someone just a little more foolish than yourself comes along to bail you out. In a declining market, the greater fool is harder to find.
In the world of large real estate transactions, buyers do an enormous amount of due diligence to completely understand what they are buying and the state of the market they are buying it in. It is not uncommon for buyers to spend hundreds of thousands of dollars on property research and still walk away from the transaction. This is prudent because wealthy real estate investors know how illiquid these investments are, and they know how costly it is to change their minds later. Small-time residential real estate speculators know none of this. For many, the extent of their due diligence is walking the property with a salesman. Some will get the necessary inspections to accurately determine the status of the property, but many will not. Most amateur speculators simply don’t care: real estate always goes up you know.
The comedy of errors is amusing to us, but it must be very troublesome to the speculators who lose tens or hundreds of thousands of dollars of their own money. Many of the knife catchers who have been speculating have invested large downpayments, mostly because the banks wisely forced them to. The bagholders for the next leg down in the markets will be the knife catchers, and the money lost will be their own.
Today’s featured property is one such knife catcher who appears to be changing his mind on the viability of this investment. Is it too late?
Asking Price: $799,000
Income Requirement: $199,750
Downpayment Needed: $159,800
Monthly Equity Burn: $6,658
Purchase Price: $770,000
Purchase Date: 1/28/2008
Address: 21 Meadowsweet Way, Irvine, CA 92612
| Beds: | 4 |
| Baths: | 3 |
| Sq. Ft.: | 2,670 |
| $/Sq. Ft.: | $299 |
| Lot Size: | 3,200
Sq. Ft. |
| Property Type: | Single Family Residence |
| Style: | Other |
| Year Built: | 1967 |
| Stories: | 2 |
| View: | Mountain, Park or Green Belt |
| Area: | University Park |
| County: | Orange |
| MLS#: | S555235 |
| Source: | SoCalMLS |
| Status: | Active |
| On Redfin: | 21 days |
viewing and/or accessible to a huge greenbelt at the rear of the home,
creating an awesome extension of visual and physical space. Enjoy
sunsets from the private rear patio deck and winter snow-capped views
of Mount Baldy from the master bedroom. Newer interior and exterior
paint.Double paned windows with Low E rating. Newer installed carpet.
Newer wood flooring at entry area. Dacor oven and microwave. Bosch
dishwasher. Granite countertops in kitchen and Corian countertops in
master and secondary bathrooms. Generous wardrobe and storage areas.
Close to schools, library, churches/synagogue, convenience shopping and
recreational amenities. Low property taxes with no Mello-Roos. Attend
University H.S. Live in the quiet Village 2 section of the Master
Planned City of Irvine…..where, over-time, real estate values are
maintained.
Live in the quiet Village 2 section of the Master
Planned City of Irvine…..where, over-time, real estate values are
maintained. ROFLMAO!!! I had to profile this property because I couldn’t stop laughing when I read that description…
This is a nice location. You can walk to a great pool less than 100 yards away, although the sand volleyball court in the back would be annoying if it were ever used.
This property was purchased on 1/28/2008 for $770,000. The owner used a $417,000 first mortgage (conforming limit), and a $353,000 downpayment. The only question now is “How much is this owner going to lose?”
If this property sells for its asking price, and if the owner did not put a lot of money into renovations (it looks updated), they stand to lose $18,940 after a 6% commission. Of course, that is assuming they get this asking price which doesn’t seem very likely. I suspect these sellers will lapse back into denial and wait out the recession. Prices will rebound in 2010, right?
What is it worth?
Based on my calculations, this would cost someone $4,361 per month to own. I would estimate it might rent for $3,000, although it might only fetch $2,800. Based on that rent, it is worth less than $500,000. In short, I think this property has a long way to fall.
{book}
I don’t wanna be a loser
I don’t wanna have a broken heart
Oh I don’t wanna be a loser
I don’t want another girl to tear us apart
Tell me, what can I do to keep from losin’ you
‘Cause I could never live without your love
I don’t wanna be, no I don’t wanna be a loser
I don’t wanna hear you say goodbye
Oh I don’t wanna be a loser
End up with a million tears that I’ll have to cry
Oh I’ll fight with all my might, kiss you & hold you tight
Until you say I’m right; I don’t wanna be a loser in love
I Don’t Wanna Be a Loser — Lesley Gore
Here we go again with real-estate agents giving people financial advice:
where, over-time, real estate values are
maintained
Perhaps Donald ********* should put his money where his mouth is and put this all in the contract:
If purchased property loses value within first year of ownership, Donald ********* shall personally reimburse the buyer for the full amount of the loss.
Part of the way out of this problem is that real-estate agents are held liable. If they want to dole out the advice to manipulate potential buyers then I think at the very least we need to add a check to balance the system.
http://www.firstteam.com/AgentProfile.aspx?agt=580
Don ******
Email Address: don***** @ firstteam.com
View Featured Listings
Highlights
Providing SLEEP LIKE A BABY real estate service
Member of the Orange County Association of Realtors (OCAR)
Member of the California Association of Realtors (CAR)
Member of the National Association of Realtors (NAR)
Bachelor of Architecture Degree, University of Southern California (USC)
Architect, Licensed in California
Board Member, Harbor View Knoll C.A.
Background
A native of the ‘Dutch’ farm region of South Eastern Pennsylvania, Don entered the US Marine Corps directly out of high school, mustered out and attended Pennsylvania State University prior to moving permanently to Southern California in 1960, graduating in 1965 with a Bachelor of Architecture degree. Don worked in various architectural and residential development capacities before his transition into residential real estate in 1994.
Don has incorporated his in-depth/ground-up understanding of the real estate industry to become one of the most experienced and knowledgeable REALTORS in the area.
He strives to provide all of his clients with complete professional real estate services.
His personal motto is: “Do it once but do it right!”
Don explains that the key to his real estate success is communication. “I always tell my customers that if they have questions, they should keep asking them until everything is answered“. Don says: “I’m an extremely analytical person who is very detail oriented, so I have no problem with people who want to know absolutely everything.”
For those who do not like surprises, this is a wonderful bonus. Don is always on top of everything, operating several steps in front of events as they flow through the process.
All of these characteristics blend into Don’s SLEEP LIKE A BABY real estate service philosophy. So, try Don’s impeccable honesty and integrity, mixed with his friendly smile and humorous wit.
http://www.crackthecode.us/images/landis_fortune_telling.jpg
How important is this guy? He has seven phone numbers and an email address!
Realtards must maintain an aura of self-importance and complete arrogance.
AZDavidPhx,
Once I stopped laughing, I thought it necessary to remind you that we don’t use names here. We need to allow this realtor to sleep like a baby at night. Please keep the names out of the discussion. Thanks.
You are right. Please edit my post and **** out his name (even though it is proudly displayed on RedFin).
No problem. The observations are just as astute without the name being mentioned, and like you said, if someone wants to know who it is, they can just look at the listing info.
“…where, over-time, real estate values are
maintained.”
Gotta love that “over time” pause. A not so subtle reminder that you will only have to wait until 2020 to get your money back, maybe.
Even if you get the purchase price back in 2020, there are other problems.
1. Money will probably be worth less. $100 in 2008 might be worth $80 12 years later.
2. The owner would have paid a lot of interest to the bank for the honor of “breaking even”. Breaking even on the price of a home means losing money, unless the cost of ownership was less renting while you lived there.
3. The downpayment, and the difference between ownership costs and rent, could have been invested. When I’ve run these numbers for overpriced SoCal real estate, the numbers have been shockingly large.
4. The owner would have sat on an illiquid asset for 12-13 years. Hopefully he avoided job transfers, divorce, job loss, etc.
The seller is hoping that you are sleeping like a baby when you make the offer.
Or sleep like Van Winkle for 20+ years before even hoping to get your money back… NCR
Yeah, sleeping like my little boy when he was a baby. As in, fitfully, crying frequently all night long!
I don’t know about updates/upgrades. It doesn’t look all that spruced up to me. And as far as staging goes, the furniture does not help showcase a place that is listed for $200k short of a million.
The lack of pictures of substance like the bedrooms and bathrooms, garage….Why are they not included?
NO AC. The Fireplace is not pictured. In fact, the garage information is confusing. And without a picture of it, who knows what is going on with that.
# of Garages: 2
# of Spaces in Garage: 1
Covered Parking
Garage (Front Entry)
Garage (Single Door)
It is also nearly $300/square foot. What exactly makes this place “all that” for the asking price? I don’t think I’d even bother to look at this one for the price and the sales history. It looks like someone just wants to unload the thing.
I guess even people living in $800,000 homes shop at Ikea (note the chair in the living room).
As for the $300/SF, they must be ignoring the $162/SF their neighbors were asking…
IR bought your book, great info, so thanks.
Have you ever featured 525 Luminous. It’s back on the market for the third time in 2 years. Looks like they have raised the asking! $708 sq ft must qualify for the WTF Hall of Fame, surely ?
good observations–it looks like they put in a granite countertop but left the old cabinets (where the real cost is)…
$800K for an attached property? purely delusional. So I’m supposed to spend a doctor’s salary on the down payment and I get to hear my neighbors snoring.
I agree. Again, a condo for an astronomical price. And not even an attractive one. The owners are dreaming.
doctor’s salary provided you have a huge downpayment, good luck on that for this POS 😆
Why is it listed as SFH?
This is crazy…I wouldn’t even pay $400k to live there.
Uni high….BFD.
Agreed, $480K in Spring 2011.
$480K in Spring 2011…
…$280K in 2014!!!
It may be 2600 square feet, but it’s still just a condo.
I know, I’m an ultra-bear, but somebody has to factor a bit of reality into the equation! $480K might hold up if the economy bounces back and if the high-paying jobs remain. The entire landscape is rapidly changing.
there’s no one wanna be a loser right 🙂
It is a row house to me (I don’t see any condo association fees), and ugly from the street side. However I do like the interior atrium. Perhaps it is much more interesting to live in than the standard no-architecture boxes we usually see.
If the price comes down substantially it can be interesting. The staging furniture, not at all.
While no fan of banks, it’s nice to see the flipper really getting nailed with the loss for once.
Wait, sait, wait patiently. 🙂
The way I look at it is, what is the competition for the buyers $800K? There’s no way in H*ll, this going to even come close to $800K. If this guy, really has experience in RE, wouldn’t he know this?
Homeowners Association Information
* Dues #1: $103.00
* Dues #1 Frequency: Monthly
* Dues #2: $153.00
* Dues #2 Frequency: Quarterly
* Association Pool
* Association Sauna
* Association Tennis Court
very high HOA dues
This is an attractive Vintage Modern place with interesting midcentury mod architecture, but how does it get away with calling itself a SF dwelling?
It could have used more sprucing up and staging, too. This place deserves better decor more in keeping with the architecture. That chandelier has to go. That’s just one item that would have been really cheap to replace, where having done so would make the place look much better.
But it’s still an attached home, and it’s still 40+ years old, with the maintenance and mechanical issues a dwelling that age will have.
$200/sq ft is the most this should fetch, given the trajectory of prices in Irvine and elsewhere, and the of the economy nationwide. The worst is yet to come.
DataQuick just released the month ending figures for November, and they’re really, really bad (was that an echo?). I see what’s happening … if you’re seller, and trying to get a price exceeding the conforming loan limit, it’s almost impossible due to the lack of available financing. That isn’t to say you can’t sell your home to a buyer without the use of a conforming loan, BUT IT IS TO SAY you can’t sell that home without making huge concessions in the price.
BTW, The NEW median for Orange County is now $400,000. A freshly minted 66 month low!
http://lansner.freedomblogging.com/2008/12/16/oc-home-price-back-at-400000-in-nov/9264/
I would be curious to know what the OP’s assumptions were on this property. Did he think he was getting it for substantially under market and would be able to flip quickly or did he assume the market would turn around quickly and then he could flip it?
Agree this property has very little appeal.
I suspect the OP has significant regrets over this purchase.
The latest DQ News numbers are out. Not pretty, unless you are a first time homebuyer.
“The median price paid for all homes combined last month was $285,000, down 5 percent from October and down a record 34.5 percent from November 2007. Last month’s median was the lowest since it was $298,000 in April 2003, which was the last time the median was below $300,000. November’s median stood 43.6 percent below the peak $505,000 median reached in spring and summer of last year.
The median price has eroded consistently over the past 16 months as price depreciation swept the region, discounted foreclosures ballooned in inland markets and sales stagnated in higher-end neighborhoods. The latter have suffered from, among other things, a difficult financing environment for large mortgages.
Foreclosures have accounted for about half of all Southland resales during the past three months. In November, 54.6 percent of all the homes that resold had been foreclosed on at some point in the prior 12 months. That’s up from 50.9 percent in October and 18.8 percent a year ago.
At the county level, these “foreclosure resales” ranged from 44.1 percent of November existing home sales in Los Angeles County to 70.4 percent in Riverside County. In Orange County foreclosure resales were 44.2 percent of sales; in San Diego 52.1 percent; San Bernardino 67.8 percent and in Ventura County 47.8 percent…
The typical monthly mortgage payment that Southern California buyers committed themselves to paying was $1,323 last month, down from $1,413 the previous month, and down from $2,049 a year ago. Adjusted for inflation, current payments are 37.4 percent below typical payments in the spring of 1989, the peak of the prior real estate cycle. They are 48.7 percent below the current cycle’s peak in June 2006.” http://www.dqnews.com/News/California/Southern-CA/RRSCA081216.aspx
And yes, a 5% drop in the median in one month is an annualized 45% drop.
This has probably been brought up in the past, but I haven’t been here that long.
Isn’t the “median price paid” skewed low by quite a bit, since all that’s actually selling is the low end?
“Skewed” is a loaded term. It suggests that “but for all the lower-end foreclosures the median would be higher.” The same can be said of the peak median in 2005 – “The median is skewed upward due to crazy credit.”
I just accept it for what it is – the median price paid in a given period.
Yes, you are right. That is all people can really afford, so the median will stay around there, pulling the bigger more expensive houses toward it.
This place has zero curb appeal and the interior shows a complete lack of personality. $800K for this? Way, way overpriced. I wouldn’t call this an SFR either. I consider that to be false advertising.
Talking to my friends here in Irvine, I still get the feeling they are worried about me that I’m still renting. They keep asking why haven’t I bought something. To me, that tells me something about the psychology of the market, and that is, people are still relatively optimistic, and prices reflect that.
It still seems there is a quite a bit of “renters=losers” mentality out there, although that is slowly changing. I can now actually convince them, that renting can be better than owning. That would have been impossible a couple of years ago. My average friend still has equity in their home, which is why I think they are still a bit intoxicated with the SoCal kool-aid.
It will be interesting to see how that perception evolves over the next few years. It’s definitely alive and well.
A friend is renting an Irvine townhouse for $3k, and she still gets lectures from friends & family about how she’s throwing money away. Over the holidays she was asked by two family members if “everything was okay” because they were still renting when home prices had come down so much.
I agree with her friends and family that spending $36,000 a year on housing that you do not personally own is throwing money down the drain. (the owners of that property will probably disagree with me)
I am not suggesting that purchasing would be better, but there most be some sort of cheaper accommodation in neighboring cities, maybe even in Irvine.
Which is better spending 36k\yr on rent or 36k\yr on a home that is depreciating in value? Correct me if I’m wrong here but on a purely economic basis unless you are gaining equity then you are better off renting the equivalent home, no?
In my opinion, you are better off moving to a different city/state if you cannot find anything decent to rent under $36k a year.
Honestly, if given the choice between owning at that price or renting, I would choose owning even if I knew the value of my home would fall 20%. Spending 3k/mo on rent is incomprehensible to me unless I were an investment banker living in Manhattan.
It’s relative, isn’t it? My wife & I could move in with my mom and pay nothing. She has plenty of room and would love us there (wife, not so much). In that sense, any amount we spend on housing (rent or own) is “throwing money away.”
For my friend, $36k annually represents less than 20% of her household income. Is that too much for rent? For some, it probably is.
Once you’re within certain “rules of thumb” (e.g. buy a house less than 2.5x your income, spend less than 28% of your gross income on housing, etc.), it all becomes subjective judgment.
The family members are concerned about her losing her security deposits to foreclosure 🙂
My momma taught me not to say anything if I couldn’t say something nice, so here goes:
I like the little atrium and the location.
(Feel free to interpret whatever else I don’t like)
No no NO!!!!
If youse goys would just stay better informed you would have seen the news idiot on channel 9 today reporting that with the new interest rate changes and low low prices that:
…wait for it…
…wait for it…
“IT’S A GREAT TIME TO BUY!!!!”
Really you must try better to keep in touch-