I wasn’t sure how to title this post. It could have been “Why You Don’t Want to Catch a Falling Knife” or “10% Off a 2003 Price.” There are many stories to tell.
Today’s property is below its 2003 purchase price hovering at 2002 price levels.
Asking Price: $299,900
Address: 8 Eastmont #46, Irvine, CA 92604
We are scheduled to have another IHB Block Party on Monday, March 9, 2009, at J.T. Schmids at the District. Everyone is invited.
Knife Fight — Lemon Demon
But wait, are we not civilized gentlemen here?
I challenge you to a battle of knifes!
If this property looks familiar, it is because I have profiled it before in the post Option ARM Hell. In that post from July of 2008, this property was a short sale asking $389,900. How would you have liked to have been the knife catcher that paid that much? If you would have, you would be $90,000 underwater right now. My equity burn calculation said this property would only lose $3,241 a month in value. The asking price has declined $90,000 in 9 months for an equity burn of nearly $10,000 a month.
Price declines like this on low-end properties are nearing their conclusion. Price declines like this on mid- to high-end properties are yet to come. All those high end short sales I have been profiling lately will be REOs sporting 20%-30% reductions 9 months from now.
Asking Price: $299,900
Income Requirement: $75,000
Downpayment Needed: $60,000
Monthly Equity Burn: $2,500
Purchase Price: $443,000
Purchase Date: 4/26/2006
Address: 8 Eastmont #46, Irvine, CA 92604
REMODELED 3 BEDROOM , 2 BATH CONDO, BANK OWNED, in WOODBRIDGE WITH GRANITE COUNTERS AND UPGRADED FLOORING.
That description is ALL CAPS except the word “in.” Why?
Check out this listing and sales price history. The asking price is 10% below its 2003 purchase price. I think we could call it 2002 prices.
| Feb 27, 2009 | Listed | $299,900 |
| Apr 26, 2006 | Sold | $443,000 |
| Oct 25, 2005 | Sold | $425,000 |
| Dec 02, 2003 | Sold | $337,000 |
This property is really causing some pain to a young family (I think). This property was purchased on 5/19/2006 for $443,000. The owners used a $354,400 Option ARM with a 1% teaser rate for a first mortgage, and a $88,600 downpayment. Looking at this place, it doesn’t seem like a move-up where this $88,600 was equity from a previous sale. I am guessing this was either savings or a gift from relatives. In either case, it is gone now.
If this property sells for its asking price, and if a 6% commission is paid, the total loss on the property will be $161,094. The owners are covering half, and the lenders are eating the rest. Neither party is going to be happy about it, but I feel worse for the borrower. Not just did they lose their substantial downpayment, they have ruined their credit: very sad.
{book1}
I tire of your mind games.
I’m sick of playing Don’t Wake Daddy.
Good sir, no more Rock, Paper, Scissors for me.
But wait, are we not civilized gentlemen here?
I challenge you to a battle of knifes!
KNIFE FIGHT,
You’re gonna fight for your life!
KNIFE FIGHT,
You’re gonna fight with a knife!
KNIFE FIGHT,
A really really really sharp knife!
YEAH, KNIFE FIGHT!
I’m a crazy (crazy) son of a *****!
I’ma cut you! (Cut you!)
Swish swish!
In a knife fight! (Knife fight.)
Knife fight! (Knife fight.)
Knife fight! KNIFE FIGHT!
KNIFE!
FIGHT!
CUT!
STAB!
KNIFE!
OW!
POKE!
KNIFE!
Knife Fight — Lemon Demon
Unlike 90% of the properties profiled on this site these people didn’t use the home as an ATM. They didn’t pull their equity out nor use the condo as a 2nd paycheck. As a taxpayer bailing out those who made those loans I’m glad. But it seems these people tried to do the right thing and yet they are in same boat as the serial MEW abusers. I don’t feel as much schadenfraude on these people.
An option ARM with a 1% teaser rate is essentially pulling phantom equity / down payment money out of the home…. if the loan was not increasing in value every month I might agree with you. A 20% down payment and a 1% negative amortization smells fishy… there is more to this story.
I suspect this was a young family that took out the Option ARM because it was the only way they could afford the mortgage. The family gives them the downpayment money and tells them they must buy before they are priced out forever. They use the only form of financing that allows them to buy the smallest and least desirable 3/2 in Irvine, and they hope for pay raises in the future (and of course appreciation). They might have been able to afford $245,000, but at $445,000, they had no chance.
And don’t forget the mortgage broker that told them, “don’t worry about the teaser rate, when it resets, we will fix you up in a new loan”.
I have some family members that fell for this, and now they are in a ugly place. When I tried warn them off, they replied that surely the real estate professionals know more then I do. Now that I am a Realtor, and everything I told them in 2005 came to pass, they are listening. The bummer, all the people I know that fell for this are young families.
“Real estate professionals” – classic!
I guess it depends on how “professional” is defined? Someone with a HS degree, who passed a simple multiple choice exam, and who simply escorts people through homes is not a “professional” IMHO. After a couple decades on the job, they MAY be very skilled at what they do, just like a cashier at a grocery store, but they are not “professionals.”
An interesting way to assess a profession is to determine
what the “errors and omissions” premium costs; higher
premiums tend to parallel societies view of their degree
of responsibility. Then compare with annual premiums for other
professions.
The bummer, all the people I know that fell for this are young families.
At least they have more time ahead of them to recover.
“might have been able to afford $245,000, but at $445,000, they had no chance”
What?? But I thought every family in Irvine made $150,000/yr.
The problem that I have with these “these people tried to do the right thing” arguments that are made on the blog from time to time is that that type of argument is incredibly subjective. I think that what is implied more often than not is that the person making this argument believes that because the buyer has a down-payment and did not 100% finance – they were “doing the right thing”.
Affordability has nothing to do with the size of your down payment, people.
It seems equally justifiable to me that “Doing the right thing” could also mean “renting vs purchasing overpriced real-estate”.
On the contrary, it seems like these people did precisely the wrong thing. Just sit back and think about this for 1 second. Let’s keep it real – this place is no prize. The Irvine median income is supposedly 85K in 2006 and these people paid almost 5.25x the median income for an apartment that should have fetched maybe 2x median income (170K is still too inflated, but I am humoring the sacred land believers on this one).
The conclusion that I arrive at is that these buyers were speculating by being foolishly optimistic that real-estate could go up forever. They knew how much money they were borrowing, but it didn’t worry them because real estate never goes down. They did the wrong thing by engaging in the groupthink.
Doing the right thing would be to come to the conclusion “I am not paying 443K for a little piddly ass apartment – get out of here. That’s a lot of money!”.
It should be basic common sense that if you need financial voodoo to afford a place like this (even after putting down 88K) – you cannot afford it.
“They did the wrong thing by engaging in the groupthink.”
Accepting the kool aid was their mistake. IMO, this was more of a fear purchase than a greed purchase. When you see people overpay yet they don’t pull out equity, you have to suspect they bought because they were worried about being priced out. We all see the folly now, but there were few who saw it during the bubble.
Yes, I agree that buy now or be priced out forever is a likely motivator on this one.
I don’t think that this was a greed purchase either. It was just incredibly foolish and reinforced by a lot of groupthink that real-estate never goes down.
Hell hath no fury, like that of a “buy now or be priced out forever” buyer.
“Fear” purchase? LOL! “fear” of what? Renting? Give me an f-in’ break. I think that we’re so used to seeing so many egregious HELOC abusers that we may feel inclined to feel pity for these poor souls who were *forced* to buy property they couldn’t afford in order to escape the condemnation of… *GASP*… renting. The horror!
Sarcasm-free version of my response: these idiots made a very foolhardy decision, and are now getting what they deserve.
Fear as induced by the (literally) Apocalyptic language of both Realtors and those who had already bought (and were ATM refi-ing):
“PRICES HAVE NOWHERE TO GO BUT UP! UP! UP!”
“BUY NOW OR BE PRICED OUT FOREVER!!!”
“DON’T BE LEFT BEHIND!!!”
Hammered in over and over without letup.
I’m a veteran of an end-of-the-world cult. I recognize the pattern. Build The Fear until the mark is overwhelmed, then offer The Salvation. With me it was Late Great Planet Earth and Jack Chick. Nowadays it’s pretty much everything on Discovery, TLC, History, or NatGeo. With the housing bubble, it was financial ruin. Being Left Behind while watching everybody else ride their ever-increasing equity to Paradise.
“They did the wrong thing by engaging in the groupthink.”
So folks here who did the right thing by NOT buying RE a few years back and put all the nice savings into the stock market thinking stocks will outperform, yadi, yadi, yada, don’t do groupthink?
Geez…I didn’t know that. Thank you AZ for your insight. I guess your SKF, SRS, etc are paying you handsomely for the last few years.
Care to celebrate your success by giving out free beer :-)?
If you think this one is bad, I was reading another financial blog this Am and they featured a property in Vista. It sold for $169Kin 1989, $520K in 2005 and is now listed at $100K.
Not Irvine, I know, but still pretty amazing.
This place is back to the 80s in terms of nominal pricing. 35% below its 1991 price!
This is exactly what the FED is hoping to prevent by engineering 4.5% interest rates. Investors need to step up and buy these properties as rentals, and providing cheap long-term financing is a method to make that happen. Ultra-low interest rates are not going to jump start appreciation in our inflated markets, but it may prevent markets like Lancaster from rolling back to 1980s pricing.
The FED needs to do 1% fixed with 5% yearly amortization on the principle.
Oh yeah, that’ll do the trick :-)…is Obama surfing this site?
Plenty of those in Palm Springs and Santa Paula too.
am i reading that correctly? $4300 at auction? I still don’t think I’d want it 🙂
Maybe they’d be able to sell it for more money if they had photos other than that one that appears to have been taken with a toy camera from the 50s!
Did everything right? I think not.
Mixing a real downpayment with an option-ARM teaser interest rate. What a hangover. Conservative DP’s put you on the hook, and do not play well with non-amoritizing loans. This had to have been a gift or an inheritance, it doesn’t compute otherwise how they could have saved up that much and yet not been able to afford an amoritizing loan.
I agree with you: down payment was either a gift or an inheritance. You’d hope anyone with the brain cells to accumulate that much money on their own, would understand how the deal wouldn’t work in the long run.
Asking Price: $299,900.00
Not 300,000.00 or even 299,999.99.
299,900.00!
A grand savings of $100.00.
These pull-a-number-out-of-a-hat pricing specialists sure know how to get a fence-sitter like me to fall off and commit.
When I am making a purchase for hundreds of thousands of dollars – the bottom line is always going to come down to how many hundreds I can save.
Keep up the good work.
My .02 cents ~ I don’t think price declines are near their conclusion for low-end Irvine housing. As the higher end properties rollover, it applies more weight and pricing pressure on lower end properties like this one.
We’re dealing with new factors here … new economic rules. After watching the collapse of asset prices in everything from commodities to equities, it’s very obvious that markets are searching for new values based on new economic unknowns. Real estate is obviously much less liquid than commodity futures or stocks, but that doesn’t dismiss the fact that it has its day coming too … it will just take longer for the market to reset under a new economic paradigm.
People in Orange County have been spending way too much (%) of their income to live here. The weather/lifestyle premium argument is true about Orange County, but it’s less true than the real estate industry wants us to believe. Prior evaluating tools like rents and income are gonna be less applicable as we continue to slide into the abyss. JMHO ~ The old rule of the Orange County premium will still be applicable, but in a vicious reevaluation of markets, the OC premium will be less than anything we’ve seen in a very long time.
I know my outlook and assessment is gloomier than most, but this collapse in everything from OC real estate to stocks is far worse than even I imagined it would be 2 years ago. I think it’s gonna get worse for low-end real estate in all of Orange County.
lee, I just hope that your gloomy assessment hits faster/sooner than expected. I want this to happen quickly and get it over with.
This price decline (in the prime areas) has been like watching water boil.
The last Orange County real estate bubble lasted from 1991 to 1997. This bubble will likely last just as long (if not longer) with the bulk of the decline happening last year, this year and next year. I guess what I’m saying is we’re 2 years into this collapse, with the big discounts coming in the next 18-24 months. If you buy in two years, don’t expect appreciation to happen for several years after that.
BTW, I’ll likely buy my home (probably Turtle Rock) in 18 to 24 months knowing that it hasn’t bottomed yet. I’m okay with that because the price will be manageable and acceptable.
Lee wrote: “The last Orange County real estate bubble lasted from 1991 to 1997”.
Did you mean decline or bubble. My guess is you meant decline.
I have to agree. The thought that places like these bottom at 300K is beyond any logical reason that I can see. Specifically – the down payment. If you expect financing terms to return to the 20% tradition then a first time buyer will need to save up 60K which might be a reasonable expectation on a detached house – but certainly not an old apartment.
Secondly, interest rates are still way too low and prices are always going to be affected indirectly proportional to which way the interest rates are adjusted by our government’s ministry of finance.
Starter-pads like this need to drop down to the 100K range. People can horse laugh at that all they want and I say go ahead and buy this place for 300K and then watch what happens when the FED begins jacking up interest rates in the coming years.
100K?
These places haven’t been there for at least 20 years. And they’re not going to be ever again. I read you posts frequently and find them interesting at times, but sometimes you have no idea what you are talking about.
These places haven’t been there for at least 20 years. And they’re not going to be ever again. I read you posts frequently and find them interesting at times, but sometimes you have no idea what you are talking about.
20 years? I think not.
http://www.crackthecode.us/images/8Eastmont46.jpg
This place is getting ready to party like its 1999.
I see the Zillow estimate (estimate, not selling price) from 1999 for 150,000. That was just out of a low point in orange county during the 90s slump. This would have sold for around $150-175,000 in 1989-91 (in 1989-91 dollars), I was condo shopping in Irvine at that time and remember the ranges pretty well, and with ordinary economic inflation would be around $225,000 today. If this ever sold at 100K in absolute dollars, it was in the 70s when it was built. That still would have been the equivalent of almost $300,000 in todays dollars.
100K today or in the future, not happening.
“This would have sold for around $150-175,000 in 1989-91”
I think homes like this one are going to revisit those figures quoted above, but this time it’ll be 2012-2013 dollars. Now I could be wrong, kinda like I was wrong about underestimating the severity of this financial crises, and how it placed our economy in unprecedented peril.
BTW, according to Redfin, 46 Eagle Pt #25 Irvine, CA 92604 which is very similar to the apartment above, sold for $239,250 on 1/12/2009. Ouch, that’s hard on the comps.
I don’t know about Zillow, but I have a place just down the street from this condo. Same floorplan. I bought it in 1993 for $120k. In 1997, I had it appraised and it came in at $90,000. At the peak of the recent bubble it was probably around $400k. I’d be surprised if it’s any more than $250k now, possibly lower. But who the heck knows. I don’t think many properties are selling right now. Thankfully, I’ve got a small, affordable, fixed mortgage and am simply watching the carnage from the sidelines.
Interesting side note: if you live in a place long enough, the association dues eventually overtake your mortgage as your biggest monthly expense. Village Green Assoc. dues are $299/mo. My mortgage isn’t quite THAT low, but you get the idea. The mortgage remains fixed, but the dues don’t. I suppose the same could be said for a place with no association. The cost of flooring, paint, windows, appliances, and other items goes up over time, but a fixed mortgage remains the same in absolute dollar terms. $750 a month seemed like an enormous burden when I took out the mortgage back in the 90’s, but today it’s comparatively small.
–Ron
Can anyone imagine all of the horse laughter that would have been going on over here had someone earlier proclaimed that 2009 would be the year that the Dow Jones dropped to the lowest level since 1997?
Imagine all the folk who would have said things like
“7000?
The DOW hasn’t been there for at least 12 years. And it’s not going to be ever again.”
That’a a cuter observation than your first, but the djia was just under 3000 in 1990, which was 1000 points more than 1987, with a crash bracketed in between. It’s been on its own bubble ride also, 7000 might be the appropriate level, or lower.
The proprietor of this site has been astute in tying the value of housing to the underlying ability of the income levels in that area, average income levels would have to come down to an average family income of around 40000 to make prices like that possible. Its in the 80000s now.
100K, not a chance ever again.
IR is a brilliant writer and knows more about real estate than me, and 99.9% of the general public. However, IR is somebody who has never seen an economic event like the one we’re witnessing right now.
Under a normal housing cycle, even during a recession, income ratios and rental valuations serve as fundamental price evaluators. Kinda like a p/e (price to earning) does for a stock. But this ain’t no normal housing cycle, and this sure the hell ain’t no typical recession.
Throw the fundamentals out the window. They’re simply less relevant in this train wreck economy.
Assuming $84k (Irvine avg household income from a few years back) is somewhat accurate. And this is a “starter home” (1 income?)
$84k/2 * 4 = $168k ….
So you are saying that a single person on half the avg Irvine income would be able to get a 3/2 for less than $168k?
Methinks this would be a bad thing. Imagine what that would do to the US economy? Another 50% off of the currently lowered price? OUCH.
I HOPE you are wrong.
Yes, I like to assume 1 income just because that seems like the non-foolish way to determine affordability. People who use dual incomes to support a debt service on a house are juggling nitro and are the same people who need bailouts when their cushy job gets flushed and they cannot find another seat on the gravy train in time.
This place is going to go below 200K eventually and probably down to 150K (hopefully lower)
It’s not a bad thing at all. Think about all the extra money we are all going to have to spend on toys and save for retirement without all the crushing debt? You should be more optimistic.
Actually I think you’re spot on Lee. This economic crisis is still really a child. By the time it’s graduated from college, we’re all going to have learned very different axioms about asset prices.
I agree. The OC premium will always be there, but that does NOT mean if R.E. values are going up (over the long run) at an average rate of say 2% per year nationwide, OC should go up by 4%, because the OC premium is already accounted for in the base price being already double (say $200K vs. $400K) what it is nationwide. If prices are going up at 2% nationwide, OC should go up at 2% as well and will still be double! Just do the math! I hope I did not confuse myself or anybody 🙂
We could fall a long way and still have a nice premium to Detroit:
“The median price of a home sold in Detroit in December was $7,500, according to Realcomp, a listing service.”
http://www.chicagotribune.com/news/nationworld/chi-detroit-housingjan29,0,5435392.story
Remember last year when T Boone Pickens was talking about the purchase of oil being the largest wealth transfer in human history?
He may have been right. However, this crash will surpass it. There are several major transfers going on:
1. Taxpayers to financial institutions, in hopes of saving or stabilizing them.
2. Recent home purchasers and those who refi’d to renters who want to purchase.
3. Bubble era lenders to all kinds of people. The people with outstanding mortgages who are getting interest or principal reductions. The buyers of foreclosed homes. The realtors selling foreclosed homes. The loan administrators. And there are more…
4. People who owned a lot of stock in 2007, and people who will buy it in 2009 and 2010.
I’m losing due to 1. and 4. Hopefully, I (as a renter) can make up lost ground this year or next on 2.
We’re dealing with new factors here … new economic rules.
Just like the New Economic Rules of the Dot-Com Boom?
Your monthly dues are approaching 400 a month! Holy crap! That’s alot of $$.
-bix
It takes a lot of money to hire illegal aliens to cut grass and trim hedges. There may even be a pool that requires a chlorine tablet or two. Oh and let’s not forget about those INSURANCE premiums that are always conveniently used to justify jacking up the dues each year.
Agreed, that is a lot of cash for such a small space. I wonder what the HOA is doing with all the money?
Additionally, 3 bed/2 bath in just over 1000 sq ft? Must be tiny rooms.
well, with these high dues, hopefully there is money to cover deferred maintenance! A few days ago, there was a post on this site about HOA’s not having enough reserves! I think the near $400 is for two HOA’s serving the complex. These dues are high regardless! I think Woodbridge lakes fee is only $60 per year or so.
HOA fees are always higher for the lower price proptery while the more expensive home pays less-
the little guy pays more–the little guy also has no mouth to question this thus it continues on.
These people probably just got caught up in the frenzy, and screwed themselves in the process. I know a similar couple who bought a 2/2 condo (really an apartment) for $400k in Van Nuys. In this case their relative who’s a realtor fed them the kool-aid and down payment money, and they fell for it. It’s a bummer but something they’re going to have to deal with for many years to come. As someone who’s been renting throughout this whole mess I can’t imagine the stress of being stuck upside down in a crappy condo. But if you ask me these prices are still insane. Would any of you pay $300k to live in that??
For those of you who like Daniel Gross’s writing:
Dumb Money
The Dumb Money creed rested on four pillars: perpetually low interest rates, perpetually rising asset prices (especially for housing), borrowers of all types remaining perpetually current, and perpetually strong markets for debt. The high priests of this cult were the nation’s central bankers.
2009=2002
Wait til next year. 2010=1996. Nominal prices, not adjusted for inflation.
You really have become bearish. In the fringe markets, prices are not far from that now, and the stock market is already there.
I wonder how many times the stock market has seen a 12-year low? I imagine it has not happened since the Great Depression, or perhaps 1974.
I don’t know Larry. I think we are only 2/3 way from hitting bottom. The option ARMS tidal wave hasn’t hit the high-end market yet. Banks still have no idea how much toxic paper they are holding, and as long as we keep throwing money down the black whole…I don’t see our Zombie banks changing anytime soon.
BTW who would pay over 200k for an old condo under 1100sqr/ft?
Once again, where are these Irvine condos putting that 3rd bedroom or bathroom with in 1000sqr feet??
These must be “little people”.
My estimates of equilibrium home prices haven’t moved much. In fact, I am becoming increasingly convinced that while at the margins rental rates will go down some, there will not be a collapse in the average rent being paid in LA/OC. It might go down 10-15%, but not 40%.
My belief in a faster fall and more overshoot arises partly from the recession being severe. A related point is that many people who were saving up for a downpayment have been watching their stocks drop. The $50k they had saved up in 2007 would now be $25k if they were only in stocks. Even for people invested in CDs and treasuries, their downpayment is often now serving as an emergency fund.
Just as importantly, my models show the enormous advantage of waiting when renters expect declines of 8% or more per year in home prices.
The delinquent loan ratios just keep rising. In an ok economy, people hold on longer to a home that’s underwater. In a really bad one, there isn’t another way they can save $3000-5000 per month. The effect of a married couple moving in with one of their parents is gigantic. Almost as large an effect is seen if they move somewhere that they can trade a spare car for a house. Somewhere like San Jacinto.
The Dec 2008 CS numbers were already 37% off peak for LA/OC. Using HousingTracker to get an estimate of current numbers, it’s about 41% off peak.
If the economy turns around by late 2010 and interest rates stay low, the bottom might just be 1999 prices (63% off peak). If the recession lasts through 2010, and either interest rates rise above 8%, underwriting standards tighten considerably further, or the stock market goes down below 5500, I have no problem getting to 1996 prices. That’s over 70% off peak prices.
Your logic makes a lot of sense. IMHO, the risk to your assessment is that the fed/lawmakers may engineer another R.E. bubble in order to avoid the perfect storm.
That’s a very low risk. Considering how burned people people got with the bubble.
During the housing bubble, the impulse to buy is just too great when you feel you’re missing the train. I know the feeling even though I did not surrender to it and did not act on impulse – as I usually do buying stocks 🙂 It never made sense that prices more than tripled in less than 10 years while salaries barely budged. It made much more sense to rent than buy at the time. Don’t get me wrong, because I do think buying is much better than renting over the long haul – just don’t buy at hugely inflated prices.
Citi to Allow Jobless to Pay Less on Loans
“Under the program, Citigroup will temporarily lower mortgage payments to an average of $500 a on their mortgage payments. Borrowers will be allowed to make the lower payments for three months. Citigroup will waive interest and month for certain borrowers who have recently lost their jobs and are at least 60 days behind penalties during this period.”
http://online.wsj.com/article/SB123604815369915983.html
Can I ask my landlord for the same deal? Oh, rats. Guess I’ll have to move then.
You gotta give it up to those philanthropists over at Citigroup for being such saints and doing the lord’s work.
I am 100% certain that the across-the-board interest rates on the rest of their customers have nothing to do with this and that this is not a shell game of any kind, No sir!
Kumbaya my lord, Kumbaya!
Off topic…I’m about to sign a lease on a house. Is there any way to find out what kind of financing the owner has on it? Is there some kind soul out there with access to such info who would be willing to help me out?
I want to know the same thing.
Isn’t there a government site where you can see if the property tax has been paid on the property you are going to lease.
That could be helpful to you in a more informed decision.
Ask around in the IHB forums. Many kind people in there who might investigate for you.
Zero down is not ipso facto evidence of “bad behavior.” Zero down was the only way my young family could afford to buy in Nor-Cal in 2004, but we insisted on a 30-year fixed, to the incredulity of our mortgage broker.
The point is that there’s a difference between leveraging yourself into a house you can’t afford, and a mortgage you can’t afford.
OK, the other point is it’s tough to judge based on public records. We look pretty bad on paper because Wells made us get a $60k HELOC when we just needed $5000 to install heat, which is actually a necessity here, if not in Irvine.
I’m with you on the “$0 down.” We bought with $0 down too. By itself, that’s sounds bad/risky. However, that doesn’t tell you that we bought a house less than 2.3x our income (granted, in this economy that could easily change) and that we had 10%.
We didn’t downpay 10% because the rate on the 2nd mortgage was 8.5% for an 80/10 loan and 8.75% for an 80/20 loan. With the effective rate being around 6% considering our marginal tax rate, we decided to keep the cash in savings.
You’re lucky, in Atlanta we are heading back to late 1990’s figures!
I bought a used BMW from a guy in Huntington Beach last February who lived in a scuzzy looking apartment…err…condo that looked exactly like that. I asked him how much he paid – $500k and said they were going for $300k then. At least he lived sort of close to the ocean…