The flippers are back. Will they make a buck or be crushed by the falling market?
Asking Price: $949,000
Address: 26 Desert Willow Irvine, CA 92606
{book7}
Hear the drum pounding out of time
Another protester has crossed the line (Hey!)
To find, the money’s on the other side
Can I get another Amen? (Amen!)
There’s a flag wrapped around a score of men (Hey!)
A gag, a plastic bag on a monument
Holiday — Green Day
I hope you are all enjoying your holiday.
I have profiled a number of properties on this street: in May of 2009 I featured 14 Desert Willow in Desert Willow Did Not Fall, on April 30 of 2009 I featured 30 Desert Willow in Nine Months as REO, and in July of 2007 I featured 28 Desert Willow in Weeping Desert Willow. Today we are moving one more house down the street and featuring 26 Desert Willow.
Columbus Grove was the first Irvine neighborhood to see a collapse in its mid to high end pricing. There are many theories as to why this happened, and many readers who believe it is because the neighborhood is not desirable. I believe it was something else.
Lennar starting building and selling in this community near the peak. Since these properties were new, they sold at WTF price levels. Since Lennar did not want to try waiting out the market, they continued to build and sell during the early stages of the credit crunch. Their continued production of must-sell inventory drove prices down quickly.
One can argue that prices would not have dropped as much if the neighborhood was more desirable, but even in desirable neighborhoods, they are still subject to short-term fluctuations of supply and demand. Columbus Grove is a classic example of what happens to any neighborhood when large amounts of must-sell inventory is dumped on the market. This will be the fate of all mid- to high-end neighborhoods as the defaults continue and the REO piles up.
Asking Price: $949,000
Income Requirement: $237,250
Downpayment Needed: $189,800
Purchase Price: $742,500
Purchase Date: 4/28/2009
Address: 26 Desert Willow Irvine, CA 92606
| Beds: | 5 |
| Baths: | 4 |
| Sq. Ft.: | 3,168 |
| $/Sq. Ft.: | $300 |
| Lot Size: | 5,189
Sq. Ft. |
| Property Type: | Single Family Residence |
| Style: | Tudor |
| Stories: | 2 |
| View: | Greenbelt |
| Year Built: | 2006 |
| Community: | Columbus Grove |
| County: | Orange |
| MLS#: | S578809 |
| Source: | SoCalMLS |
| Status: | Active |
| On Redfin: | 7 days |
Highly desirable Plan 3, the largest Alexandria model within theColumbus Grove community in Irvine. This spacious Tudor home features 5
bedrooms plus a Den , 4 bathrooms & $$$$$$ in upgrades! Open floor
plan including: High volume celling,Dining room,Butler’s Pantry,Euro
Style Kitchen w/ a huge center island, Great Room with fire place and
Media Niche, covered patios,Master Bedroom with Retreat, and gas
burning fireplace . Upgrades include:European Medallion, granite slab
counters,S.S.GE Monogram appliances,wrought iron stair rails,
Travertine floors on 1st level, built-in media Niche, Multi-zone
speakers,8-jet,jacuzzi tub,Crown & Base Molding
throughout,plantation shutters,Built-in Closet system & custom
paintings, cherry-wood cabinets, French doors, recessed lighting,
garage cabinets, 2 Bay Garage w/epoxy floors, maintenance free lawn
hardscape front &back yard,fire pit w/bench, spectacular water
feature and built-in BBQ island. Ideally located with parks &
Tustin District nearby.
Highly desirable? Do I need to be told this? Is anyone going to go see a listing because the realtor says it is highly desirable?
$$$$$$ in upgrades! Poor saps wasted their money.
Someone paid $1,349,000 for this property on 4/28/2006.
Sometimes when I see these peak prices, I am dumbfounded.
Three years later almost to the day, the property was purchased at auction by a flipper for $742,500…. Does anyone else feel a schadenfreude dose coming?
If this flipper can manage to sell for asking price, and if a 6% commission is paid, the total profit will be $149,560. Good luck with that. Do you think he will get it?
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.
🙂
The listing agent left out the best upgrade of all:
http://www.crackthecode.us/images/HeCouldDestroyUs.jpg
A house just isn’t a house without your very own personal marble Star Wars kneeling pad and for those long talks with your master.
Wow – best upgrade yet!
So that’s why so many McMansions have those kind of floors. Their owners belong to the Sith!
. . . or maybe they’re just geeks.
No, wait, they’d need brains to be geeks. Definitely Sith.
Your command of the force is strong, but the force of the market may be stronger.
That’s a pretty good one Dave…where do you come up with these ideas?
Is it beer-thirty over there is AZ?
Have a good weekend!
I have a strange imagination, I guess.
beer-thirty, I like that. 🙂
🙂 Turn about is fair play.
…..schadenfreude does coming.
I think he meant dose….
Oops! Spell checkers don’t catch mistakes like that one.
Nothing but the best for these folks. This house is only worthy of the most sophisticated among the living.
http://www.crackthecode.us/images/kfc_check.jpg
I was wondering when the KFC bucket would return!
yeah.. David doesn’t realize that KFC don’t do it West of the Santa Ana Fwy (I5).
I think I better let him know that this Faux Chateaux is about a mile or so from Costo… so instead of KFC, that would be a take out Rotissery Chicken from Costco. Or maybe a pizza… or maybe a polish dog… but KFC? no way man….
The is a KFC on PCH in CDM.
Love the photoshop David!
Sooo, did 14, 30, 28 Willow Grove sell? Foreclose?
What are the comps here?
I’m thinking since this guy bought the property in April for 742K, that is the best comp available, no?
You can check them on redfin
-14 DW still on market @1.05M, 200k price reduction 225k below 06 sale
-30 DW sold for 860 6/09, almost 400k below 06 sale, but 10k above the price listed in IR’s post.
-28 DW sold 5/08 for 920, 330k below 06 sale, 70k above list from IR’s post
30 DW is probably the better comp, and the list price for this property will make 14 DW much less attractive as it’s a 4/3 with less sqft. I’m sure that comparison would be in an agent’s sell.
One problem with the second sale of a home is that the second owner does not get to customize the way the original may have with the builder. While you might love travertine floors, I might prefer wood, etc. Original buyer pays full price, second buyer will pay less for those types of things.
It’s obvious because they were foreclosed, but buying a new, $1.35M home requires a large, stable income, or a huge real (not paper) net worth. From what I’ve seen in FL builders sold a lot of $1M+ homes to people that shouldn’t have been buying them.
The profit won’t be as large due to the $$$$$ spent on upgrades. Maybe they will get someone paying enough to break even. However, I see tons of forces lining up to make it more difficult. Rising interest rates, rising unemployment, other bad economic news, etc.
It’s a race against the clock.
I toured these places when I lived across the street in Westpark and I think most of the upgrades were completed by the builder so this flipper probably hasn’t done squat to the place other than calling the maids to clean (if that!)
The flipper bought it for $740K and that’s about what it will be selling for in 2015. Now it’s time to find the sucker…. I’m willing to bet they do… one with a couple hondo grand in cash no less.
What is IR really trying to do & say? The amount one pays for a home, and their ability to service the debt associated with the home are very, VERY important. Warren Buffett is a buy and hold investor, but he would laugh at you if you said the price you buy an asset at isn’t important, and would laugh louder if you wanted to fund your purchase with debt you could not easily service. What is a good investment at $50, is not as good an investment if it costs $100. Buy that $100 asset with debt, and it can be doubly dangerous.
Some have the notion that you should not try to market time, and would probably use stock market timing as a counter-example. The big difference between buying a home and investing in stocks is that with a home, you are committing to an asset price for 15 or 30 years, while long term stock investors are only committing 1/30th of their money each year. If one year is excessively bubbly, they only lose a fraction of 1/30th of their money. While money you put in in 2007 has Dow-wise lost 40%, money you put in in 2003 is down 10%.
Nothing is ‘always’ a good investment or buying decision. If something really was, someone else would come in and put money into it taking out the easy money.
The people who claim you cannot time the market are generally those who need to make a living from market transactions. They need people to buy and sell even when it is not in their best interest to do so.
Market timing is very difficult for most people because it generally requires people to act opposite of what their emotions tell them (see Speculation or Investment?). Even the pros do not time the market perfectly, and many completely miss the turning points, but it certainly is possible to take advantage of market timing to improve on buy-and-hold investing.
Market timing also requires some degree of wealth and/or a great degree of risk. As the housing decline progresses doom and gloom will fill even the Nancy’s and Janet’s of the world. The wealthy have a cushion to survive and prosper in the periods making bets when others can’t…. less wealthy investors need to be willing to take on the risk that things can get even worse and they can lose everything.
As our family combined salary would now qualify us for this price home, we do not have nearly 190k saved for a DP. I’m wondering how much as a % of cash savings or net worth people should or do put towards a DP. If we did have a 200k emergency fund, I wouldn’t want to put it all into one basket. I know in the bubble people just took the gain from one home and traded up, and others just used 100% financing.
One thing that is related to market timing is liquidity. People were excessively long real estate and stocks in the bubble, and short liquid savings. People neglected the rainy day fund to make the payments or play the market. Things turn and you’re stuck. It’s counterintuitive, but you should put more into your rainy day fund when it’s sunny, because you only draw it down when it rains!
You don’t need to time the market perfectly, but 20% YoY gains should raise eyebrows.
My philosophy is at least 1 years living expenses in cash, in addition to your long terms savings and 401K….. but you can adjust based on your risk tolerance. At the end of the day it’s all about jobs and your particular job outlook if you are not independently wealthy.
The conventional RE wisdom seems to be trade-up-up-up, ignoring the idea that you don’t want to have your most expensive home when you’re retired. Personally, we are waiting to ‘trade-up’, and I’m trying to figure out when someone in either trade-up/down would be best to wait in either rising or falling markets. I figure if our home is $X and we are looking at 2-3X a 10% overall decline would be a net gain of .1-.2X. I’m thinking wait to buy on the downturn, but sell quicker on the upturn. That just works out to lean towards the less expensive home, and a roundabout way of realizing I’m cheap.
I can’t remember who said it, I think it was one of my professors. Anyway, when you buy something on the open market you will pay $1 more than the next biggest fool. He was talking about business acquisitions, but the same goes for buying on the court house steps. If there isn’t something that is special just for you and nobody else, then chances are that the price is going to be bid up to where only a fool would buy it.
Don’t look to time a market…although it’s usually easy to spot if a market is rising or failing, it’s those damn peaks and troughs that are hard to spot. Look at the value of ownership vs. renting.
Even if this flipper does get $949,000 for this house, the damage to the neighborhood is significant. This is a certified Comp Killer.
I don’t know why any investor would take a chance at something priced in this range. There are better opportunities now outside of Orange County.
But these other areas lack the glamor of flipping in Irvine.
I have been to see a handful of properties in beaten down areas. The average Irvine socialite would fear for their life in those areas.
If this house was in West L.A. the price would never have come down. There are 102 buyers for every house that is put on the market in West L.A.
Yes, it is different there because everyone wants to live there and they are running out of land. If you don’t buy now, you will be priced out forever.
Nancy might be right.
The traffic on LA’s West Side is gridlocked. There really is no way to go file miles under an hour except during “drunk hour”.
So maybe the locals haven’t heard about market declines because they’re all stuck in their SUVs with the radio tuned to KFWB listening to Michael Jackson’s “news”.
To be serious, though, Nancy is full of it. Just last week (two weeks?) ago the LA Times ran a column about the market on the West Side. It’s hosed.
Again, the above post wasn’t by me, but by a hacker.
IrvineRenter – please consult your IT staff on safeguarding your blog from hackers. A blog that allows hacking cannot function as an honest blog; it’s not worth participating.
Safeguarding the blog is not that hard, really, assuming you wish an “open” forum rather than a hacker’s forum.
Or is this IHB neutralizes opposition?
This sounds like the “hacked” Nancy again.
Nancy: you need to give us your zip code. There is money to be made there. I wouldn’t venture outside of it, however; there is a big recession surrounding you.
If there’s 102 buyers for every house in west LA, why is there no difference in the days on market between Irvine and West LA?
West LA days on market: 98
Irvine days on market: 99
As Piggington says: In God we trust. Everyone else bring data.
gay doods have double the male income, thus more money.
This is troll.
Over $900k to live in a flight path. In how many years will this area begin to look like Inglewood? Yes, it’s a planned community. Yes still. It’s in a flight path! At least the beach areas bordering LAX have the beach to fall back on. What does this flatland have that other areas do not in this price range? I can think of a few… lower taxes, bigger lots, low or no HOA, peace and quiet…. What people pay today to live in OC is a mystery to me.
“Soylent Green… my kind of People”, Bender The Robot.
This house is not on the flight path to John Wayne. The flight path is north, alongside the 55 and then crossing over the industrial park between the 55 and Red Hill.
In fact, the flight path to John Wayne is quite a bit north from ALL Irvine houses. Santa Ana and Tustin are a different story.
The beach areas are LAX are nuts! Smelly Gundo… yuck!
It’s a nice house, but not at that price.
Hey Californians, is there fear on the streets yet?
Depends where you’re at. IE maybe.
Irvine not really…I just sold my condo for above asking in 2 days.
Thanks for checking in.
I have been sadly neglectful. It all started when I forgot my password.
Don’t let it happen again!
It’s just wrong to only see your comments on CR, and not here.
Above asking? Wow.
Glad to see you back, Liz. How is Miami these days? I miss the place.
However bad it is, it couldn’t be worse than the South Loop of Chicago. Or my nabe on the north side, which is Foreclosure Central of the northland.
And bad is maybe good here. Prices on some properties are approaching rent parity.
I think you should write a haiku about it Solent.
Unless you are haiku-ed out?
To reverse the downturn in the housing market the government needs to replicate West L.A. If you took everything that is West L.A and placed it in Riverside, property values would surely follow. By everything I mean the great people, restaurants, and entertainment. If you transplanted a few longtime Santa Monica residents and put them on any block in any neighborhood in Riverside, the community would improve starting with the block in which the Santa Monica residents were first placed. It would look similar to an atom shockwave as it spreads out from the center, but in a positive way. I have written a letter to president Obama asking the he study my proposal.
Thanks for the laugh, Kirk.
Won’t work.
The resulting gridlock from Santa Monica Bay to Moreno Valley would prevent fresh sushi from reaching Riverside County.
With no organic, low fat, brown rice futomaki how would you feed those transplanted Santa Monica residents? They’d be back on San Vicente Blvd within six months.
Ha ha ha ha!
Maybe they’d airship if they wanted it bad enough?
IR is wrong.
This property is headed down the toilet because Columbus Grove is a shithole built on a superfund site. Oh, and it’s under the flightpath for John Wayne.
(hat tip SG)
Q: What’s the difference between Columbus Grove and Inglewood?
A: Inglewood has a casino.
I say both of you are right. Keep dumping superfund product on a declining market and you get CG.
Actually, Inglehood has a lot more black people.
Call me ockirk today.
The supply of people who can afford 3,000+ square foot homes for around a million is finite and shrinking, as a downward spiraling economy combines with tighter lending standards.
What we’ll continue to see is a buyer’s market, where the small number of people in this market have a very wide range of choices, and tremendous leverage.
Who really needs a house this big?
Lots of folks have been concerned about sustainability, predicting Peak Oil, Peak Soil, and Peak Debt (which appears to have won the race).
Places like Columbus Grove may represent Peak House.
As people scale back to what’s affordable, and these 3000+ square foot houses on 5,000 foot lots will become the deadest section of the market, while buyers with money will focus on much smaller houses that are easier to maintain, clean, heat, and cool.
You’re wrong, IMHO.
A big home like this would be perfect to rent. Can you imagine how many illegal aliens you could put in there?
The only problem is that you will need to figure out how to park ten clunkers.. I guess if you could make a drivethru you could pour concrete on the backyard and they could park and fix at least then trucketas back there.
Let me see… five familes, @ 800 bucks a month rent, that’s about 4000 per month. You’ll need to add a fifth bathroom (one per family) and enclose the garage into additional bathrooms..
Do able.
Columbus Grove… Irvine’s new working community. Heck, they could take the bus to work on TR.
You’re killin’ me today Tony!
LOL!
How’s it over there in TR? Getting the nice ocean breeze like we are in NC?
Yeah, it’s been breeze but we also got the morning cloud cover.
Keeps the weather nice but wrecks the tomatoes. Good for cucumbers and green peppers though.
Happy July 4th everybody.
Hi Lawyerliz, it is good to see you again.
Thanks. I really have to get the password thing straightened out to get on the forums again.
CaliboomsDay soon?
Almost all stock people say don’t try to time the market. Almost all the stock people are market timers themselves. Do you want to buy GE for $100 today? I don’t think so. GE at $100 is not a good time to buy. The price does not support the earnings. Being a market timer doesn’t mean buying a the lowest point. Just at a reasonable price and trying to avoid an almost certain loss.
How much was the outstanding loan on this house? What was the discount on the house?
The house is nice looking. The flipper might make a profit or not. Auction buyers help clear up the FC/excess debt problem. Cash and not another bad loan for the bank. Is the buyer a RE agent to lessen the selling cost?
Soylent Green Is People and NoVas… BTY: Inglewood was a up and coming place in the late 1950’s and early 1960’s. Lots of expensive stores and great jobs. Inglewood was special.
Agreed on the market timing. You DO want to time the market…you just don’t want to try to hit the EXACT top or the EXACT bottom. 5% variations are fine. 20-30% downside is not fine.
As for the flippers, I’ll disagree with the idea that they are clearing up the foreclosures. This house is still on the market, isn’t it? The only way to clear out inventory is to find long term owners. These guys are just retailers. Why buy from the retailer when you can buy from the wholesaler for cheap?
We call them Fundamentalists (price/income ratio subscribers), and Market Timers, those waiting to hear the Great IR tell his loyal subjects to BUY!.
Remember, *Prime* is defined by what is in Demand, and what is *Prime* will NEVER be at Fundamental value, no matter how much we wish it or attack it by showing losers herein this blog. Prime may depreciate from peak, but *relatively* less than other areas. In areas where people sell once every 30 years, “peak” is meaningless to homeowners; noone loses sleep over losing $100K from peak, since they don’t HELOC or need that money. Prime will NEVER be at *absolute* Fundamentals, so using this approach for market-timing buying may get you fast into Compton ganghouse before it sinks below fundamentals.
Let’s keep waiting for our European Vacation at $1.1 USD/Euro.
BTW, I wonder if IR’d profile the *Prime* home he’d be living in long after his BUY call, for the benefit of your schaedenfreude?
Dan at least the flipper is removing it from the taxpayer paid bailout of the bank to an “investor” who will either make a profit or a loss. Hope it not GS, etc., then the profit will be private and the loss socialized on the backs of the taxpayer.
some more green shoots:
http://www.rgemonitor.com/687/Real_Estate_and_Mortgage_Finance?cluster_id=12859
Not as bad as expected only 2.9% of prime loan are seriously delinquent.
NR: 40% with loans are underwater.
A TR FC was only ~9% underwater (looked like no DP purchase). The bank people emptied the junk left over last week. Family had an orderly move out the two weeks earlier. No for sale sign yet.
http://www.financialtrustindex.org/images/Guiso_Sapienza_Zingales_StrategicDefault.pdf
Looks like the authors may be describing the start of similar situations in TR and Newport Beach. More on the negative price trigger instead of the percentage trigger. The average American has moral and social constraints against strategic defaults that companies have been doing for the last decade.
Those constraints are gone, totally vanished in South Florida. 9% underwater? A fleabite, a nothingburger, a bagatelle. I’m regularly seeing
45-50% and more underwater.
That 125% refi thing O is suggesting would do
nothing to help my clients.
Broward county, where I’m from, has some condo/townhouses selling REO for 75-80% off peak, and new 06/07 construction selling 50% off peak, and 02/03 selling below their new prices. I know of at least 2 sellers that sold at 45% lower than their purchase price but ate the loss AFAIK. Broward-Dade-Palm Beach is about as bad as it gets.
What initially clued me in to the bubble was the lack of enough high paying jobs in that area to justify the housing prices. I knew what people did for a living and couldn’t figure out how or why they could afford homes at those prices. Obviously many couldn’t, and with an area so dependent job-wise on real-estate it’s been hit doubly hard.
I am also from this area and you are right the high quality jobs left South Fla. a long time ago. And it just as could happen here in Irvine as well. It did back 1989 when Aerospace left The OC.
Irvine had a very large finance industry here as well and many places have closed down. Some are still alive and well as long as we have low mortgage rates. When those eventually go back up you will see more job losses because of less flipping, refinancing, buying of homes.
http://economy.freedomblogging.com/2009/06/30/oc-ranks-5th-in-us-for-job-losses/
Until we turn around the job losses this market will continue to go down.
Sorry, but I doubt their numbers.
In their intro the flippantly make the claim that as many as 50% of California homeowners have negative equity and they offer a link to zillow.
But that link does not support that claim.
A claim which I think it’s simply wildly untrue.
I was interested, but when I saw them make such fallacious claims I got turned off quickly.
Nice thesis, awful research. Give them a D.
I’ll just wait a few years to buy a home half the size of this one for 1/3 of the price with double the lot size.
Gosh, I thought you all would be mad at me.
Lawyerliz wrote:
“Gosh, I thought you all would be mad at me. ”
For what?
Unemployment numbers are not that meaningful unless your one of those numbers.
Comparisons of unemployment rate and “non-seeking/discouraged” rate would be more meaningful to compare countries.
A “greenbelt view” could mean that most of your windows look into the back of a hillside about 30 feet away, and there are more levels of houses above you.
Nancy,
Maybe you have the ability to lose $100,000 from a peak purchase price, but the TR condo was FC on only 9% underwater (~$80,000). You can tell the FCed TR family or to other families underwater by 50% what you wrote. Layerliz and winstongator can cite example, but I sure you can log on to the MLS and look into property underwater.
True premium areas are more resistant to downturns than subprime areas, but they are not immune. Recovering from buying at the peak is hard and may take a life time. Inglewood (city) and Adam St om L.A. were once prime areas. Poor person that purchased at the peak and sold 30 to 40 years later.
Even without a working crystal ball, I can say that playing Russian Roulette is a bad idea. Buy at unsustainable prices are unwise in the long run. Unsustainable prices benefit those that obtain a percentage of the sales price no matter what happens to the buyer. RE agents and HM brokers left the buyers and taxpayers holding the bag.
A better payment model for the RE agents and HM broker would be partial payments until completion of the loan. Dramatically reduced commissions for FC’s.
As for bailout and losing seasoned financial employee, one example that I know of is a NorCal bank employee in the stock/mutual fund sales side, retention bonus of million for a 6 year more years. He passed on it (hoping for a better offer), but now the new offer is $60,000 which he took. He has a BA degree, but it’s all BS. Buy before it goes up.