Some properties take longer to go through the system than others. This one has been shadow inventory for about 9 months, but now it is seeing the light of the MLS.
Asking Price: $409,800
Address: 24 Salton #63, Irvine, CA 92602
The boys of summer
Nobody on the road
Nobody on the beach
I feel it in the air
The summers out of reach
Empty lake,
Empty streets
The sun goes down alone
Im drivin by your house
Though I know youre not home
The Boys of Summer — Don Henley
Nobody in the house, nobody pays the loan, the bottom’s out of reach…
The original owner who was foreclosed on stopped making payments in early 2007. This was a 100% financing deal that went bad that I first profiled and updated here: Salton ** Update 1 **. I have speculated on all the reasons for the buildup of shadow inventory, and some have argued that it does not exist.
Shadow inventory clearly exists.
Today’s featured property was foreclosed on by CITIBANK NA, ; BEAR STEARNS ALT A TRUST 2006-5 MORTGAGE back on 9/12/2008. For the last 9 months, this has been part of the shadow inventory. For the last two years, this property was occupied by a deadbeat and then empty. Nobody has been making either rent or debt service payments during that time; two years as a non-performing asset. No wonder the banks are in trouble.
You can expect to see this trend continue. The lenders have been accumulating REO. Some resisted taking the write-downs because their balance sheets could not take it, some were hoping the Obama Administration would buy these toxic mortgage assets so lenders would not have to recognize the loss at all, and some were simply overwhelmed by the size of the problem. Lenders are now in the mode of foreclosing on defaulting borrowers and selling off their REO. Look for this trend to accelerate in the coming months.
Asking Price: $409,800
Income Requirement: $102,450
Downpayment Needed: $81,960
Purchase Price: $605,000
Purchase Date: 4/27/2006
Address: 24 Salton #63, Irvine, CA 92602
| Beds: | 2 |
| Baths: | 2 |
| Sq. Ft.: | 1,400 |
| $/Sq. Ft.: | $293 |
| Lot Size: | – |
| Property Type: | Condominium |
| Style: | Contemporary |
| Stories: | 2 |
| Floor: | 1 |
| Year Built: | 2002 |
| Community: | Northpark |
| County: | Orange |
| MLS#: | S572648 |
| Source: | SoCalMLS |
| Status: | Active |
| On Redfin: | 51 days |
park. Large floorplan with open living area and kitchen combo. Attached
2 car garage. Close to schools.
If this property sells for its current asking price, the investors in the MBS being serviced by CITIBANK NA, ; BEAR STEARNS ALT A TRUST 2006-5 MORTGAGE stand to lose $219,788. At first glance this looks like an ordinary loss for an Irvine property, but when you factor in the two years as a non-performing asset, the loss is at least $50,000 greater.
This property is being offered for 32% off its peak purchase price.
And still another 30-50% off before this hits bottom.
I’ll have to look and see how the takeover of Bear Stearns is doing. Maiden Lane LLC was actually doing ok at 12/31/08.
And it’s back off the market again. I take it those photos were from the earlier listing?
Back into the shadows? Or was it just that much of a screaming deal? Hmm, back into the shadows.
The photos were from the earlier listing. The pictures were the same except the clutter was gone. This unit hasn’t sold, so I don’t know why they would remove it from the market.
The earlier listing was the previous owner selling it as a short sale prior to being foreclosed upon. Different owner of the property, different listing.
And the third property listed yesterday was also taken off the market by the time the blog started. 2 off the market in 2 days. Wonder what’s happening?
I am going to hang out with the Realtors today at ReBarCamp. I hope that doesn’t become literal….
http://parrots4parties.com/images/prop-party/gallows.jpg
No red carpet for IR?
The banks and news media act as if the banks must go out and must show the condo, townhouse or house. I’ve never seen a banker show the house! The showing is by a RE agent. The foreclosure is filled by a lawyer or paralegal, etc.
The delays are to keep:
1. the banks’ books looking good to keep them solvent and bonus coming. Too bad the investors will be paying for vapor profits.
2. show the federal govt is doing a good job with the bailout. Too bad the citizens will be stuck with poor leaders.
3. trick the taxpayer to foot the entire loss of the loan and non-preforming portion. Vapor profits might turn into real profits at this time. Too bad the taxpayers will be stuck with the debt.
4. show how compassionate the govt is by passing delays on foreclosures. Too bad the taxpayer will be stuck with the bill.
5. Free HOA payments for the banks. Too bad the paying HOA members must make up the difference.
Everybody benefits, except the taxpayers, those that pay their debt and especially the paying renters.
I agree with MalibuRenter–another 30% to 50% to go. Rents will also need to go down along the coastal regions in CA. CA wages are about 10% higher than in TX and 15% to 20% higher than the mid-west, but housing 2X to 5X higher in the CA coastal regions (30 miles within for the ocean).
I enjoy Mish’s creativity:
Dr. Seuss On The Economy.
“Clearly Dr. Seuss knows far more about the economy than Bernanke, Geithner, Obama, Barney Frank, Krugman etc.”
From the Big Picture:
NAR, NAMB Fighting Appraisal Reform.
“I am beginning to suspect that the Realtor’s association and the Mortgage Broker’s association are pro-fraud.”
Bring back the bubble….
Not pro-fraud, but a pro-industry alternative reality. As one administration and George C said: “It’s not a lie unless you believe it’s a lie.” What is your defination of fraud and what is your defination of is?
The question remains, why does the banks foreclose quickly on some and very slowly on others in the same town?
Nobody has been making either rent or debt service payments during that time; two years as a non-performing asset.
I have a theory, and the more we get in to this debacle, the more I think I’m at least partially on the right track.
Why is it, some home-debtors get their NOD, and within a few months, the sheriff knocks at the door, and they’re forced to get out. Yet other home-debtors (many in upper-class, white collar, communities), stop paying, and live there rent free for months, without a forced eviction.
I think the big banks are (have been) trying to divert a systemic problem by deferring an overload of distressed sales. This is all about psychology … the banks know if they can keep that REO from the MLS, it makes it more likely that Jones’ throughout the neighborhood will continue to pay. The banks are sacrificing fingers in order to preserve arms.
Anyone who thinks this is not possible, I say, why is there no shadow inventory in Stanton & Santa Ana? Why is all the shadow inventory I hear about in the higher dollar communities?
Watch this video.
Might be a supply/demand thing. The banks know there is more demand on the lower end right now than on higher priced properties, so they are more likely to get them on the market. Plus, they usually don’t bother to fix up the low end properties but frequently make repairs on the higher end ones, which takes time as well.
However, I’ve seen no hard data that indicates that the banks are selling low end properties faster than high end ones. Do you have any?
Might be a supply/demand thing.
Oh, I think it absolutely is a supply demand thing. The banks know, if they add more high dollar supply, there will be little demand because buyers can’t get jumbo, Ponzi scheme, mortgages anymore.
The banks are in a real quandary … they own big ticket assets, and they can’t finance the people to take them off their books. It’s a shell game.
Once a bank takes in a foreclosure, they have to take the loss. As long as it’s not yet identified as a foreclosure, they can live in their fantasy land and pretend the prices are still back in 2006. The shadow inventory makes it so banks can cook their books and keep wall street happy.
This is the whole mark to market problem. The government is letting the banks mark to fantasyland.
My understanding is that the bank does not have to record the actual value until the property is sold, not simply foreclosed. The problem is that the govt is allowing banks to mark to fantasy as long as the loan is outstanding; i.e., until the property is sold.
thanks for the correction. I really don’t know anything about realestate. I actually jacked that idea from the comments at calculated risk.
Are the banks actually doing this? ….who knows…
I would think the banks have to acknowledge ownership as of the foreclosure date. At this time they would shift from simply reporting a fantasyland valuation of the loan (delinquent loans leave a lot of room to massage the numbers) to recording a loan loss for the difference between the face value of the loan less the price of the home the bank paid at foreclosure. This is where the rubber hits the road. The incentive would be to avoid foreclosure particularly with homes that are unlikely to quickly be resold without a further loss (ie. upmarket properties).
You may be right. However, I can find nothing to that effect. It appears that, as long as the loan is on the bank’s books, the bank is allowed to mark to fantasy. The final value appears to be realized only when the bank has sold the property to another party and recorded the actual sales price on its books. (If the bank takes the property back at foreclosure, it has not been sold).
Plus… If the high end areas start showing more and more foreclosures, who in their right mind is going to buy in the lower end areas thus making prices fall even further.
I believe this is what is really happening. The banks know the party is really over once they pummel the mid to high end.
Most important and informative thing posted on patrick in a long time:
Duetsche Bank Housing Outlook by MSA (pdf)
I’ve been looking over my neck of the woods, but you guys should check it out.
fixing broken link I hope
if not just go to patrick.net and look for it…
Here is the correct link…
http://matrix.millersamuel.com/wp-content/6-2009/US Home Px Outlook 15 Jun 09.pdf
that PDF (lets see if I can get it to link!) was very good. One interesting note I saw on there:
To begin, we calculated “equilibrium affordability.” Equilibrium affordability is based on existing home prices using the following assumptions:
*? The current mortgage rate – for our analysis, we are assuming a rate of 5.00%.
?* Mortgage qualifying ratios appropriate for the given MSA.
* An assumption of 0% future income growth over the next 12–18 months, consistent with an economic slowdown in most regions.
If rates go up to ~7 where they should be, that could be a game changer for prices.
cara, I think you found a bug in the comments code. it definitely doesnt like linking to something with spaces OR in the url!
Yup, I think it does a nice job of separating out the different causal factors, (1) affordability at current rates (2) their new factors of price momentum, unemployment, change in unemployment, and distressed inventory (3) allowing the reader to tack on their own loss estimates from changing interest rates or tightening DTI ratios.
In my local market people have been claiming for years that we aren’t CA, we don’t have that many Alt-A’s. Well guess what, DC was ranked 4th in the nation for percentage of the total outstanding Alt-A/subprime loans. Combine that with a 17.4% excess of distressed inventory, and you’ve got your next leg down right there.
So, yeah, I found this report immensely insightful.
Oh My, look at this.
Assessed at $2,583,612, needs to drop more.
I love how you’re calling 219k an “ordinary loss”. When was the last time you lost 219k and just shrugged it off.
-GM
IR- how far in advance do you post these? it seems that pretty frequently you blog on properties that are no longer on the market.
Jun 22, 2009 Delisted
He would have had to write the post on the 23rd or 24th at the latest. Probably found the property a few days before that. I say cut him some slack. It is must be very hard to produce a constant flow of fresh properties to profile. I am sure we will see some delisted ones now and again.
It happens.
Lately, I have been writing all the posts for the week on Friday evening and Saturday morning. I check them Sunday night and make final changes. If I have time during the week, I will check for delistings, but usually this is not a problem.
Thanks for letting us know!
The fact that they are being delisted may well mean that you were choosing correctly when using the listing as the post example!
Why is it that as soon as you profile a listing they take it down? This has happened several times. I wonder if the sellers are checking your site daily to see if their property will be the pick of the day. Stop being so sensitive sellers!
Isn’t that why the listing agent collects 3%?
I think this might be one of those shadow houses. I remember seeing this house on foreclosure.com about a year ago and now it is for sale. The house is vacant and the pool is drained. I’m not seeing any sales transaction history that would show it as a foreclosure but if memory serves me right. HMMM?
http://www.redfin.com/CA/Huntington-Beach/8501-Lois-Cir-92647/home/3508020
from page 20 of “http://matrix.millersamuel.com/wp-content/6-2009/US Home Px Outlook 15 Jun 09.pdf” Deutsche Bank 15June2009 Securitization Reports :
Affordability is based on a
30-year conforming fixed-rate mortgage (FRM) with 10% down and a 40% qualifying ratio7
for high cost areas (e.g., Los Angeles, San Diego). For the other areas affordability is based on a 30-year FRM with 10% down and a 28% qualifying ratio.8
The ANALysts still are in dream land. What are they smoking? 40% qualifying ratio? Just setting up the taxpayers to another round of fees for the bank and RE and then another FC and bailout. How many times can the industry repeat the cycle?