Resale values in the mid-rise, podium and tower projects are plummeting. When will they find a bottom?
Asking Price: $200,000
Address: 2217 Watermarke Pl Irvine, CA 92612
{book6}
‘Til you learn to bend the rules
Time respects no person
And when you lift up must fall
They’re waiting outside
To claim my crumblin’ walls
When the walls Come tumblin’ down
When the walls Come crumblin’, crumblin’
When the walls Come tumblin’, tumblin’ Down
Crumblin’ Down — John Mellencamp
The mid-rise towers in Irvine and in all of Orange County are crumblin’ down. Prices there are in chaos; people are either getting bargains or catching knives, but the discounts from original purchase prices are astounding.
These towers were ahead of their time. Irvine has not reached an income level where $700,000 condos are supportable. When $700,000 condos are the norm — perhaps 25 years from now — mid-rise condos will take over areas of Orange County where people can walk around. For now, they stand as broken dreams and monuments to the folly of the Great Housing Bubble.
From a land planning perspective, I question whether or not densities greater than 25 units per acre can be properly serviced without rail to relieve the road traffic. Since these properties are completely car dependant, there are few opportunities for walking to eliminate vehicle trips. Jamboree Road may become a major traffic issue as all the people living in these properties move back and forth between home, work and shopping. Traffic problems will impact long-term desirability and value.
The resale values of these properties are falling so far so quickly for many reasons:
- It is difficult to obtain financing in certain condominium situations (e.g. GSEs have occupancy requirements).
- The HOA dues are very high. This dramatically reduces the cashflow value because a large amount of the rent goes to the HOA.
- Buyer pool is mostly cash buyers “investing” in these properties.
- Buyers are afraid of the uncertainties (potential for overshoot).
Investing in this context means different things to different buyers. Those investors who are speculating on the recovery and future increase in prices. We call them knife catchers because speculative buyers will purchase early and with the least amount of data and analysis. They are “betting” that prices will move their way. At the bottom, a different style of investor will purchase for positive cashflow and a return on investment.
For most of these towers, rental parity is nearly 50% off peak pricing. Positive cashflow for investment value is 65%-70% off peak pricing. IMO, that is where these towers find bottom.
Asking Price: $200,000
Income Requirement: $50,000
Downpayment Needed: $40,000
Purchase Price: $310,000
Purchase Date: 8/26/2005
Address: 2217 Watermarke Pl Irvine, CA 92612
| Beds: | 1 |
| Baths: | 1 |
| Sq. Ft.: | 635 |
| $/Sq. Ft.: | $315 |
| Lot Size: | – |
| Property Type: | Condominium |
| Style: | French |
| Stories: | 1 |
| Floor: | 2 |
| View: | City, Park or Green Belt, Treetop, Trees/Woods, Has View |
| Year Built: | 2003 |
| Community: | Airport Area |
| County: | Orange |
| MLS#: | S582681 |
| Source: | SoCalMLS |
| Status: | Active |
| On Redfin: | 3 days |
Stunning Astor Court model located on the second floor with a view ofthe Greenbelt. Home includes granite counters in Kitchen and Bathroom,
crown molding, window treatments throughout. Experience a sophisticated
lifestyle in one of the best condominiums in Orange County! The
Watermarke Community provides you with a bounty of amenities such as a
concierge service, top-of-the-line fitness center, movie viewing room,
pools, spas, and tennis courts.
I’ll stay with my unsophisticated lifestyle.
This property was purchased on 8/26/2005 for $310,000. The owner used $248,000 first mortgage, a $15,500 second mortgage and a $46,500 downpayment. There is a HELOC from 2007 for $68,404. If this guy took out the money, he got is downpayment back. If he didn’t max out the HELOC, he lost $46,500 in addition to having his credit trashed.
The above property is being offered for 35% off its 2005 price.
Asking Price: $319,000
Income Requirement: $79,750
Downpayment Needed: $63,800
Purchase Price: $519,500
Purchase Date: 2/10/2006
Address: 2118 Scholarship Irvine, CA 92612
| Beds: | 2 |
| Baths: | 2 |
| Sq. Ft.: | 1,037 |
| $/Sq. Ft.: | $308 |
| Lot Size: | – |
| Property Type: | Condominium |
| Style: | Other |
| Stories: | 1 |
| Floor: | 1 |
| Year Built: | 2006 |
| Community: | Airport Area |
| County: | Orange |
| MLS#: | P696025 |
| Source: | SoCalMLS |
| Status: | Active |
| On Redfin: | 4 days |
community of AVENUE ONE! This 2 bedroom, 2 bath condo has the finest of
details throughout. Features include: granite kitchen and bathroom
countertops, rich dark wood cabinets, two panel doors, crown molding,
patio, very open and bright. The community ammenities include an
Olympic sized pool, Bar-B-Ques, fitness room, indoor half basketball
court and beautiful club house with full kitchen and flat screen TV.
Only built in 2006, this wonderful home and community are located close
to shopping, dining and entertainment. This is one great home you don’t
want to miss!
Another sophisticated condo!
ammenities?
I have no purchase or mortgage data for the above, but I do know than an NOD was filed in May.
That is individual capitulation. Will this become a mass movement?
The above property is being offered for 39% off its 2005 price.
Asking Price: $879,000
Income Requirement: $219,750
Downpayment Needed: $175,800
Purchase Price: $1,430,000
Purchase Date: 2/7/2006
Address: 3131 Michelson #1504 Irvine, CA 92612
| Beds: | 2 |
| Baths: | 3 |
| Sq. Ft.: | 2,063 |
| $/Sq. Ft.: | $426 |
| Lot Size: | – |
| Property Type: | Condominium |
| Style: | Contemporary/Modern, Hi-Rise/Mid-Rise Condominimum |
| Stories: | 1 |
| Floor: | 1 |
| View: | City Lights |
| Year Built: | 2006 |
| Community: | Airport Area |
| County: | Orange |
| MLS#: | S581994 |
| Source: | SoCalMLS |
| Status: | Active |
| On Redfin: | 9 days |
floor to ceiling views including a view of Catalina Island. 2BR + Den,
2.5 BA offers the finest in modern appointments with stainless steel
appliances, hardwood floors, granite counter tops and more. Pamper
yourself with full time concierge services, social events, gym, media
room, board room with Wi-Fi, billiards lounge, pool and spa. This
gorgeous home is the ultimate in living! And REALLY a great deal – to
be sold as is.
And REALLY a great deal – to
be sold as is. I find the linking of those incompatible ideas disturbing.
This is a two-bedroom condo that sold for $1,430,000. WTF?
I do not have the records for this one either, but someone involved is taking a $603,740 loss — assuming they get this asking price and pay 6%.
The above property is also being offered for 39% off its 2005 price.
{book1}
Conference Call Reminder
The IHB Community has been invited to an open conference call with Daniel Young, President of Community Development for the Irvine Company. The time is 7:00 PM. The call-in number is 877 269-7289. Callers will be asked to enter a
PIN, which is 13113. That allows them to listen to the conversation.
If they want to ask a question—and Dan will remind people of this
periodically—they need to hit *3. They can also e-mail questions to
Dan at info@cardinalhq.com.
Personal Note
I am taking a few days off and visiting with family, so I will be less available in the comments this week. Judging by the upsurge in comments lately, you all will carry on without me.
Your astute observations are greatly appreciated here. It is your participation that makes this blog special.
There are cities, Ft. Lauderdale and Miami as examples, that support luxury condos. There are still condo sales > $1M in those markets. The big problem is that those markets will not support an infinitely large number of condos at any luxury level or price point. Say you define a ‘million dollar condo’ and at $1M you have 5,000 buyers & 5,000 units. Now have 25,000 similar units that are equivalent replacements, and those original condos are worth much less.
Like what I’ve read about Irvine, FL has its foreign investors, but they tend to be Canadien snow-birds. If organic, local demand < supply, additional demand will have to come from somewhere, and will be accompanied by massive price reductions. That looks more like a high-end apartment complex to me. Condo developments where sales were so slow often get the housing slump conversion to apartments. It's the reverse of the rush to convert apartments to condos in the bubble inflation time.
Some of those 1M Miami condo sales were originally 2M or more.
I read that a bulk investor recently bought a bunch of (previously selling at) $1000/psf units for $68/psf
Wait until the HOA fees at the NK Towers starts to creep up and they get their first special assessments….all while rents are falling.
I say 80% off…who knows…when the HOA and taxes exceed the rent (a la Miami) it’ll be tough to give the things away.
“Creep up”? They are already $1,100 a month! How much higher can they get?
I believe HOA’s can legally increase dues a maximum of 25% without a vote from the members. $1100 w/ a 25% increase turns into $1375. I know because this happened to me at my HOA here in Irvine and that was the law as it was explained to me.
Of course, $1,100 a month is already ridiculous. But, since it’s so much, I’ll bet they have a rainy day fund of some sort. I doubt it’ll go higher. I could be wrong, though.
Doubtful. The projects are too new so there are likely to be few repairs. They might be putting some into reserves for future expenses.
The HOA dues will definitely skyrocket because, quite simply, EVERYONE there without exception is underwater. If you’re going to walk on your mortgage, why pay the HOA? And if the lender takes 10 months to foreclose, that’s $11,000 PER UNIT that those who do pay must cover. It’s a vicious cycle – the higher the costs the greater the HOA defaults which push the costs even higher for those who do pay.
The HOA could foreclose sooner than the lender. It would be safer to keep paying the HOA but default on the mortgage.
New buildings are most definitely not immune to problems and BIG assessments. The newer the building, the less time to build a “rainy day fund”. Those “rainy day funds” can also be a drop in the bucket compared to a major expense. Just check out Ocean Towers in Santa Monica. Not only are their HOA’s high, but there is also an underlying additional mortgage when they had to repair/retrofit earthquake damage.
I was living for a bit in Seattle in one of those new fangled luxury highrises (2006/7 build) and the HOA’s were raised twice while I was there. I knew of another building (1993 build) that the cost of repairs was more than the initial construction costs of the entire building.
Many of the new condos in Miami are $1-2psf for Homeowners Dues.
Crazy…I know…but High-Rises are extremely expensive. Much better off renting in them IMHO.
Granite in a 615 sq ft apartment? Why??
Can you really live the sophisticated life in under 700 sq ft? Where will my butler sleep?
:question: “Jamboree Road may become a major traffic issue as all the people living in these properties move back and forth between home, work and shopping.”
….ummm have you driven on Jamboree lately? I changed jobs last year. I use to drive 6.5 miles down Jamboree. Now I drive 20 miles in the other direction. Guess which commute is faster.
I was thinking about this on saturday driving to Target from Jamboree (the old Target by the defunt Mervyn’s).
I noted a bunch of four story apartments/condos right on Barranca. As you drive on Barranca you start to see the “standard” Irvine, which is defined by a set of villages interconnected by “high speed” large boulevards.
The quintessential well laid out suburban master plan. Within a village you got pretty much what you need for daily life and you can nicely walk in your parks, etc… if you want to go to a different village you can drive or ride you bike and you get there reasonably fast.
To put “urban” apartments/condos on the main boulevards is absolute folly and runs counter to the master plans.
What is the Irvine Co. thinking? Or rather, not thinking?
Larry Agran tried this ten/fifteen years ago and he got shouted down.
Imagine, today to go from TR to the Marketplace takes about 20 minutes on a weekend. If they build all of these “urban” condos they will have to lay out 40 traffic lights. How bad with the traffic get then? Meanwhile, Culver -and to a lesser degree- Harvard remain rather clear.
If they build those frickin’ 40 lights on Jamboree to allow for those dumb “urban townhomes” we will see the current commuter traffic now clogging Jamboree spill over onto Culver and Harvard.
Essentially chocking traffic in Irvine and making it as bad -or worse- than the South Bay in LA.
The quality of life in Irvine then, the reason why we bought in, the reason why property values are higher than in near areas, will simply plummet. I mean, if I got to put with the same traffic crap in Irvine as in Torrance, hell, we’re moving to Torrance. Why put up with the drive if Irvine is a bad as Torrance, huh?
At that point, you might just see the Homeowners Associations rise up and rent a bunch of eartmovers to grade down City Hall, the Irvine Co. and those stupid condos.
Of course, by then they might be worthless and the Irvine Co. might itself grade them down and build more shopping malls.
;-P
Do you want to know how much I already despise driving on Jamboree? If I want to go to the Tustin Market Place from University Park I first get on the 405 south at Jeffrey and then I take the 133 to the 5. If I want to go to the district, I take the 405 to the 55 and exit at dyer. It’s pretty bad when you prefer getting on the freeway than having to sit through all of those lights and dodge the crazy New-Irvine drivers.
We usually take Harvard off Culver and up until Irvine Center, then we get on the “freeway” and exit just before the Santa Ana Fwy.
Sometimes, on the way back, I may stay on Jamboree until Barranca.
Once, just once, I took Jamboree from the 405 to the Tustin Marketplace by Irvine Blvd on a weekday at 5:30PM. It took me half an hour to get there. Most of it was from the 405 to Barranca _and_ from Walnut to Irvine Blvd.
What a mess!
Quick check on a luxury condo dev in Miami built in ’02. Has had 3 sales combined for 08-09, but has 8 units on market, out of 87. How long for all 8 to sell? At the current rate, they’ll be gone by 2013!
How long is the conference call scheduled to last?
It is scheduled to last an hour, but it may be shorter or longer depending on demand.
Will you be able to post a “podcast” afterwards?
Nice…. at this price, maybe I can purchase 2-4 of them at a slightly better price.
We’ll see.
Take it easy
-bix
Whatever happened to the posters stating anyone who did not buy back in January this year will likely be priced out forever.
That statement brings me back to the movie The Sandlot, where Squints (I think that’s him) keeps saying
For EV er
For EV ER
FOR EV ER
It’s the most ridiculous statement.
I just sent an email question to Mr. Young at the info@cardinalhq.com address above in conjunction with tonight’s discussion. It bounced back as “user unknown”. Anyone else tried it yet?
Bloomberg has a short article on the Central Park West condo development in Irvine.
An excerpt: “People are the only thing missing. While construction of the 43-acre real estate project by Lennar Corp., the third- biggest U.S. homebuilder, is almost finished, a message at the information center says some homes in the development are expected to start selling early next year.”
The link is: http://www.bloomberg.com/apps/news?pid=email_en&sid=aOAsVYtdZzpg&ref=patrick.net
OC Register mentioned something about Google Maps with RE info. Just in case anyone missed it.
http://maps.google.com/maps?f=q&source=s_q&hl=en&geocode;=&q=&mrt=realestate&vps=6&sll=33.61805,-118.182678&sspn=0.474592,0.87204&ie=UTF8&rq=1&mpnum=10&radius=25.08
When I first looked at it I was amazed. The map shows houses that are on the road to foreclosure.
Is 0 bedrooms, 0 baths some kind of secret code for foreclosures? The only one that I know about directly was listed that way.
How did you identify foreclosures?
I agree it’s a bit rough on the details. I saw some crazy listings too. Click the details tab after opening up a house. There are details that state a notice of default was issued if it’s pre foreclosure.
Just FYI I’m a RE noob. Not sure how good this info is or if it’s even worth noting.
We were living in Villa Siena (very close apt complex) when Watermarke was being built as apartments. This was in 2003/2004, and one weekend we saw the “Luxury Apartment Homes” sign out front changed to “Luxury Condominiums.”
We checked out the sales office, but even then, when the mania was really heating up, and I had just a fraction of the knowledge about real estate value that I now have, prices were just crazy!
Didn’t they change the name too?
I thought it was “Watermark luxury apts” before they changed it to “Watermarke luxury condos”…
The old “add an ‘e’ and raise the price” schema.
It’s OK, though, I live in Turtle Rocke
On the 2118 Scholarship Irvine, CA 92612 property (Avenue One):
Rent for a 2BR at Avenue One currently runs around $1800 per month. Not sure what the HOA is (probably $400-500), but buying this unit for ~$300k could be a reasonable investment (only if a $1800 rent level is sustainable, which I doubt). Risk: UCI students ruining your apartment…
Per RedFin, HOA: $390.00 /mo.
Dropping $310000 into the calculator and changing the interest rate to 5.5% yields TCO of $1,792.07/mo, so yes, $1800 in rent should cover it BUT let’s say the rent goes down a little bit or that the HOA goes up because a ton of folks are gone? Seems that this should go down some more shouldn’t it?
From the RedFin page: “This home is flagged as a short sale. We’re sorry, we don’t tour or write offers on short sales because of the slim chance that you’ll get the home.” — I wonder how true this is given the recent discussions here.
This is my neighbor’s condo! Yes, $390 HOA and these are just nice apartments. You can hear people walking above you and outside and the building materials are mediocre except for the granite.
I do like renting here, however. The residents are generally attractive yuppies. In fact, rents are going down and it’s still cheaper to rent than buy!
Have you ever lived in a high rise?
I have.
Yes, they can go higher.
Highrises can also have problems leading to HUGE assessments because they aren’t cheap to work on.
I speak from personal experience.
If you really want to see how bad things are in south O.C. click on this link below. This is not a spam.
http://www.redfin.com/search#lat=33.53538520510529&long;=-117.77395248413086&market=socal®ion_id=9948®ion_type=6&status=1&v=5&zoomLevel=13
This makes Irvine look like a boom town.
and this is bad because…
Yes Look at this link and wonder why the avg $/sqft cost is >1k… WTF?!
416 homes on the market in Laguna Beach area?
Just how many homes are there to begin with? It looks like the whole city is up for sale.
Whats’ with the “red” house markers in Redfin? REOs?
Damn, maybe the Chinese can come in and buy the whole place in one package deal.
There are 344 homes for sale in Laguna Beach vs. 264 in all of Irvine.
Hmmm…. Laguna Beach is a lot smaller than Irvine.
I think I get your point. The price is ready to crash down there, and since getting in and out of Laguna is a royal pain in the ass it’s not a commuter’s paradise.
I remember watching all these multi-story condos going up all over Jamboree, right before the crash and thinking what a disaster waiting to happen….whether they were successful or not.
If they sold like hotcakes, our infrastructure couldn’t handle the Jamboree traffic *before* those went up…disaster.
If they crashed and burned, what a ton of money wasted and visible sky lost forever…disaster.
Any way you slice it, those were terrible terrible ideas.
P.S. Who the hell wants to pay almost a million bucks to live in a tiny condo overlooking JAMBOREE?!?!?