Tight inventory and increased sales still has not stablized low-end pricing. Today’s featured property is a 2003 rollback.
Asking Price: $275,000
Address: 2243 Martin #111 Irvine, CA 92612
{book1}
Somethings wrong, shut the light
Heavy thoughts tonight
And they arent of snow white
Dreams of war, dreams of liars
Dreams of dragons fire
And of things that will bite
Sleep with one eye open
Gripping your pillow tight
Exit light
Enter night
Take my hand
Off to never never land
Enter Sandman — Metallica
When one-bedroom condos start going for over $400,000, doesn’t that just feel wrong? Isn’t there an intuition that says, “this property is just not worth that much?”
One thing I like about Dr. Housing Bubble’s Real Homes of Genius is that you just knew something was wrong. When you look at a decrepit old shack selling for $500,000, something isn’t right.
Even at $275,000, this price for this property makes no sense. Twelve years ago, that was the median home price, and $274,000 would have bought you a nice house (15182 Marne Cir Irvine, CA 92604). Instead we enter the Never Never Land of the Great Housing Bubble, and condos like today’s featured property suddenly sell for more.
So where do we go from here? Many people are getting caught up in our current bear rally and are becoming convinced we are at the bottom. It isn’t very likely that we are at the bottom.
We are entering a strange place in our housing market where many properties trade at or below rental parity — outside of Irvine — and yet prices will likely fall further. Despite the continuing slow decline, there are opportunities to save money buying versus renting. For those who know they are going to stay in a property for ten years or more, they can ride out the remaining decline and still fare well financially because they are saving money each month over renting.
The lack of appreciation in the market distorts the buy versus rent decision just as rapid appreciation does. It creates this unique circumstance where long-term homeowners can still benefit financially even in the face of declining prices. In areas outside of Irvine, we have reached the point where selling and “going short” is probably not going to yield significant savings, particularly for those who will pay more in rent after the sale. In Irvine, our prices are still inflated enough that cashing in that bubble equity lottery ticket may still have value.
Asking Price: $275,000
Income Requirement: $68,750
Downpayment Needed: $55,000
Purchase Price: $280,000
Purchase Date: 6/30/2003
Address: 2243 Martin #111 Irvine, CA 92612
| Beds: | 1 |
| Baths: | 1 |
| Sq. Ft.: | 934 |
| $/Sq. Ft.: | $294 |
| Lot Size: | – |
| Property Type: | Condominium |
| Style: | Contemporary/Modern |
| Stories: | 1 |
| Floor: | 1 |
| View: | Greenbelt |
| Year Built: | 1992 |
| Community: | Airport Area |
| County: | Orange |
| MLS#: | S583303 |
| Source: | SoCalMLS |
| Status: | Active |
| On Redfin: | 4 days |
Resort Luxury Living In A Gorgeous Tropical Setting At TheMetropolitan. This Open And Spacious Condo Is Perfectly Located On The
First Floor With Easy Access To The Pool, Clubhouse, Fitness Center,
And Parking. The Metropolitan Has A Guard Gated Entry For Security And
Privacy. A Spacious One (1) Bedroom Condo With A Large Balcony
Surrounded By A Greenbelt And Lush Trees. You’ll Feel Like You’re On
Vacation At A Tropical Resort. Volume Ceilings, Crown Molding, Inside
Stacked Washer/Dryer, New Carpet, And Designer Paint Make This A
Turn-Key Home. Highlights Include A Living Room, Den/Office/Dining
Room, Master Suite With Dual Sinks, Large Tub, Separate Shower, And A
Walk-In Closet. The Metropolitan Features A Resort Quality Pool, Spa,
Fitness Center, Clubhouse, And On-Site Property Management. Great
Location In The Center Of Irvine’s Financial District, With Easy Access
To John Wayne Airport, Freeways, South Coast Plaza, Fashion Island, And
The Beach.
Why Is Every Word Capitalized?
This is another 2003 rollback as the low end continues to drop.
{book6}
I would like to take this opportunity to thank Daniel Young, President of Community Development for the Irvine Company for taking the time to speak with us on Monday evening. We have a Conference Call Thread on the main blog, the complete Call Transcript in the forums, and there have been other associated threads there. I believe that the consensus is that the call was useful and contained real substantive answers.
I hope the Irvine Company will continue to communicate with us through the blog, the forums and periodic calls like the one on Monday. A medium like ours is more effective than a press release, and it is a way to speak directly to customers (us). We all benefit from having these lines of communication open.
And so concludes another week at the Irvine Housing Blog, chronicling the Irvine home market since September of 2006.
Have a great weekend.
😉
$275k for a depressing little one bedroom with no ambient light (are there really no windows in that thing) does feel a bit wrong. Under $200k for this starter home maybe makes a bit more sense. That is just an emotional response, though. How close is this one to rental parity?
This is probably near rental parity with today’s low interest rates. IMO (which is shared by Jim Jones below), a property like this should trade at a significant discount to rental parity. The only reason you would want to own a property like this one is to save significant money versus renting. If I were preparing an analysis of this one, I would discount it 20%-25% from rental parity to estimate true cashflow value.
So just exactly where is rental parity these days? I moved into my apartment 2 years ago and paid $1700 a month. The girl across the hallway who just moved in said she was offered the same apartment for $1350 a month. I think rents are declining fast and trying to figure out rental parity is a little tough.
You should ask for a rent reduction. I did and reduced my monthly rent by $200/month. It wasn’t a very hard sell when I pointed out to my landlord that [upstairs] 3BR’s in our complex were now renting for the same as our downstairs 2BR.
I went so far as to fill out an application and get accepted at a lower-rent 2BR in order to strengthen my negotiating position, but I don’t think that was necessary. He replied to my email within half an hour, agreeing to my proposed reduction immediately and without argument, so I think that I could have asked for and gotten even more.
lf: “I think rents are declining fast and trying to figure out rental parity is a little tough.”
This is the fly in the ointment that has been driving me mad for the past 9 months! I’ve been trying to calculate valuations based on rental parity when making offers, but it’s too fluid. I think that we’ll see rental parity on 2BR & 3BR condos in Irvine compared to Q1-2009 rents, but I’m not so sure that we’ll see price parity vs. rents at the bottom of the bust. I’d like to be able to rent out shortly (6-18 months) after I buy, but I’m preparing myself for living in whatever I buy for a few (2-5) years to wait for rents to climb back up to parity.
-Darth
If you are having problems with rental parity, look at long term price to income ratios.
Ah, yes, crown moldling in a 900 sq ft apartment. Of course, its only in one room: the den/office/dining room.
Crown molding is the olive on the top of the pergraniteel turd-sandwich.
This place looks like a nice apartment.
For reference, the first $275k condo I found in the Fort Lauderdale area is a 3/2 2200sqft, built in 2006, sold in 2007 for $550k. Owner’s mailing address listed in NYC. The biggest problem in many parts of FL is that there are just not enough residents – with good jobs – available to be full-time owner occupants for these condo units. Many will fall to a level where people feel comfortable buying them as vacation/seasonal properties. This oversupply type scenario is what TIC has probably avoided by managing supply.
Rental parity would denote a $1600/mo rent. Is that what this would rent for?
My house in Riverside has just under twice as much square footage (1750ish) and I paid just more than half the price ($150k).
But at $294 a square foot, this is “cheap” for Irvine. It will sell for asking or above.
in the words of every realtor out there…
LOCATION Location Location!!!
Of course.
My palace in Afghanistan … oh nevermind.
Winston,
There is a story on CNN today about a family who is the only occupant in a 32-story condo tower.
Judging from the comp listings with a high % of short-sales, I would not expect any short term (5yr) appreciation, and would expect a shorter-term loss (< 2yrs, even excluding transaction costs). Do many parents of UCI students buy condos like this?
There may be some students in this complex, but it wasn’t designed for them. This project was intended to reach a different market.
It is located in the heart of our commercial district adjacent to the airport. It was intended to attract 20-somethings who could own a condo near where they worked. It was our 90s era attempt to integrate medium density housing with heavy commercial use. The 00s version would be the projects along the Jamboree Corridor.
We really need more properties like this to help reduce traffic generation. Integrated housing and commercial is necessary to get people out of cars and on foot. If we can’t get people on foot, our traffic systems will not support higher densities and more people. Driven LA lately?
I live on Jamboree and frequently walk to/from the airport (15-20 minute walk), saves me $10 on cab.
Too bad due to the lack of complete sidewalks, I have to cross the street twice (along Dupont) and cut through the BofA parking lot.
Kind of annoying especially since one of the street crossing points is around a blind corner with a ~45mph speed limit.
It’s only convenient if you work at….Allergan, that’s about it.
Some of the homes in that area don’t feed Irvine schools, correct? Santa Ana, IIRC.
Not that one would have kids in a 1 BR apt, but it should be a drag on value… an Irvine zip code ain’t enough these days, Jack. College Park, anyone?
My mom raised me and my sister in a one bedroom apartment. Not everyone is rich, you know.
My point is this: the target market for 1 BR apartments is not families. Congrats on being the exception. I’ll send a cookie in the mail.
“our traffic systems will not support higher densities and more people”
1. What makes you think there will be more people? Currently people are migrating out of CA.
2. I think the average commute is dropping and will continue to drop. People often moved to the hinterlands to be able to afford a house. If they have a job, they can now afford a place closer to it. If they don’t have a job, they don’t have a commute, or they are moving out of state.
3. Parts of Dallas laid out 40+ years ago still don’t have much of a problem with traffic. This is despite having the highest long term growth rate of any major metro area. Why? I’ll take a few guesses. A. Plenty of off street parking. B. LOW density housing. C. Much less of a tendency to make up all kinds of special rules about HOV lanes, no left turn 3.5 hours per day, no U turn, bus only lanes, etc. D. Few major streets which suddenly dead end at freeways or major buildings. E. Vehicle inspections, fewer pieces of junk on the road. F. Proof of auto insurance laws, fewer uninsured idiots driving and crashing into things.
In the short term, there probably won’t be any more people here, but over time, birth rates and economic expansion will bring populations up again.
It may be that some of our suburbanized areas remain that way forever, but with the shortage of developable land in OC, we will almost certainly see upward redevelopment in the future. It will be difficult to determine where this development should go until we improve our transportation systems.
Great, I get be responsible for: Mortgage payments, property tax,HOA, maintenance, etc, etc for my crappy little one bedroom apt. While knowing if someone noisy moves into the unit next to me I need to hire a realtor and try to sell before I can move out. The only way I would want to own the crappy little one bedroom apt I currently reside in is if I am saving 50% on rent. Even then knowing first hand what a pain in the ass it is to sell a property I would probably still prefer to rent.
I really don’t think that people who paid bubble prices for crappy little apartments really thought through what they were getting themselves into.
They thought it through, but the thought was “I’ll buy this condo for $280k, sell for $560k, and bank the profit or move up to a 2/2 condo!” There was thought, it just wasn’t intelligent or rational.
It’s very close to the airport..
But it’s 900 sqft. About the size of some 2/1 condos.
I’ve seen three bedroom houses in Riverside that are 900 sq ft. Three very tiny bedrooms, but…
At least with a house, you can add a second story and knock out a couple of walls on the bottom.
With this? You’re stuck.
Yup. One of the many reasons that SFRs should, and do, command a premium over condos for the same square footage.
In Atlanta, the Realtors and listings don’t even mention the square footage.
Our rule of thumb is how many bedrooms there are. You can estimate a house in a neighborhood by how many beds/baths. If you add a bedroom, you can add another 100K (in some areas.)
Of course you have to take into account the age of the house – my neighborhood has 70 year-old houses next to brand new ones.
So…a 1 bedroom for 275,000 just doesn’t compute.
IrvineRenter,
Thanks for the link to the Dr. Mortgage blog. His other post yesterday about the 660 billion in outstanding Alt-A’s is frightening. The other 460 billion in Subprime is scary as well. I knew this was really bad, but it is far far worse than I could have imagined. Combined with commerical real estate, which I am already starting to see signs of a collapse in the next 2 months. I am starting to think this mess has no end. I recently did a research job on several large apartment complexes near me.
2 had almost $20,000,000 mortgages for $350-750 units. The mortgage payments are over 100,000 a month. Add insurance and management costs these apartments are bleeding money. Large apartment foreclosures are next.
The shack that sold for 375,000 was hillarious. 711 sq ft shack for almost half a million. As a landscape photographer and SCAD student, I really love to see MS Paint used in professional work. I wish they had just given the whole house a MS paint job as well.
Thanks again for the blog and the lessons for understanding mortgages and financing. It is already starting to be a summer job for me.
I have seen the CRE bust in my part of NC for at least 2 years. I work in a light-industrial office park. Oakwood homes (or whoever fc’d the prop) has a near empty 200k sqft building and many others are either < 50% occupied. No new businesses are moving to the area. So what pops up 2 miles south of my office - more office space. If you build it, they will come. The small gym next to office just closed because the leaseholder got evicted. Equipment still there, but it makes more sense to have it unused.
Winstongator,
One of my research projects was on a group of owners of commercial property. One owner had about 5 different corps and llcs. Almost every property it owned was around a year late on its property taxes. One of its dues check bounced(which is why I was asked to do a search) and I was able to deduce from their records they had close to over 50,000,000 in outstanding deeds of trust.
Another owner had 8,000,000 outstanding in deeds of trust. He is a lawyer with a very modest law practice. There is no way he and his wife can afford those payments.
Both are raising rent and losing tenents. The banks that loaned them the money are a who’s who of financial messes. This commercial real estate bust will be a nasty surprise for our real estate bulls. On the commercial real estate end, there is no one coming to save them.
I forgot to mention the people researched had properties in Charlotte,NC.
Is anyone still a RE bull? Any CRE bulls?
Charlotte will suffer from Wachovia becoming a subsidiary and BoA’s problems. There may be some forced movement of Merrill folks from NYC to CLT, but BoA will be a net shedder of jobs there.
I guess you haven’t been watching the news. They say the recession is over. “We have finally hit bottom. Home prices have slowed in their rate of decrease. We are soon going to be out!”
I think there are still a number of plucky RE bulls out there waiting to sell, sell, sell at “good” prices.
Your last comment reminds me of the laundromat next door to my post office. The washers and dryers are still inside but the place is locked up tight with a sheriff department eviction notice on the door.
Just as a thought. I went through portions of the transcript with Mr. Young. I have to at least point out that he’s being disingenuous to your question about withholding inventory. Quantity and prices are inextricably connected. To say that they’re not holding prices up, yet they had weeks and weeks without sales points that we’ve either got someone without a basic understanding of economics, or someone who doesn’t want to answer the question.
If TIC wants to withhold inventory so that it keeps prices high, that’s fine with me, just why would someone need to lie about it in a public forum like this? Does he think we don’t understand basic supply and demand? He has collectively insulted our intelligence.
More importantly, we do not control the market, we are the market. IHB cannot influence the clearing prices of an efficient market any more than they can. However, it’s crystal clear that if no transactions are happening, prices are not low enough for them to happen. TIC is killing the goose that lays the golden egg. In 30 years, we could be another Detroit (albeit with good weather).
Chuck Ponzi
From “”As Prices Plummet, Condo Sales in Miami Perk Up” in the NYT, an interesting article in itself, but I think it also relates quite well to one of the discussions here yesterday:
“In newer buildings with many unsold condos, developers are negotiating uncontested, or “friendly,” foreclosures with their lenders, sparing them the expense of a protracted battle. Last month, the Related Group surrendered its 420-unit CityPlace South development in West Palm Beach, Fla., where only 39 sales had been completed, to a group of lenders led by the Bank of Nova Scotia. Related paid an undisclosed sum to cancel its $119 million construction loan and other liabilities and won the right to continue to manage and maintain the project and run the sales operation — all for lucrative fees.
According to recent news reports, Related hopes to work out a similar arrangement within the next couple of months to retire about $1.5 billion in outstanding debt on other South Florida condo projects, including the company’s showpiece, Icon Brickell, where only 31 of 1,646 units have sold.”
There’s no hint of disapproval about the immoral and dishonorable way that this company has broken a Contract, is giving back properties and leaving behind debts. In fact, they do not appear to be shamed, rejected, and worryong about lenders who will not do business with them again for 7 years and until their balance sheet and credit history are repaired.
A private person also has the chance to abide by the contract provisions for non-payment, if they choose to do that. The morality and honor aspects are to me just ways for the lenders to keep the maximum cash stream coming in as long as possible, and to hide from their own falures in collateral and borrower assessment.
31/1646 ?!?! That makes my condo oversupply in SoFla argument for me.
http://www.nytimes.com/2009/07/29/business/29miami.html
Since 2003, nearly 23,000 new condo units have been added to the downtown skyline, from Brickell Avenue up through the more modest Biscayne Corridor — far more than this city of 400,000 people could absorb. About 9,400 remained unsold at the end of June, according to Peter Zalewski, the owner of Condo Vultures Realty, a local brokerage
“For those who know they are going to stay in a property for ten years or more, they can ride out the remaining decline and still fare well financially because they are saving money each month over renting.”
This is to assume that rent won’t fall and the cost associated with owning will stay below rental parity even as housing price continues to slowly decline. Has there ever been a time in OC when rent actually fell for an extended period of time? I konw rent tracks inflation more closely than house prices so it’s unlikely this ever happened.
Rents very closely track jobs. As long as jobs continue to decline, rents will continue to decline. Once job growth starts up again, rents will go up again. Since rents are probably down 15% to 20% on apartments, I would suspect that the first year or two of meaningful job growth will result in some pretty substantial rent growth. Who knows when that will come, probably not until 2011 or more likely 2012.
Yeah, we’ve reached that point with the low-end where I live (greater DC metro area). And we’ve put in an offer on a short. It’s still going to be painful to watch other people buy in the complex for less than we paid (assuming the short actually happens), but it’s at the point where it’s almost cheaper than renting on a 15year loan. (well, actually at the 4.75% rates, it’s even-steven).
So if you’re going to own it outright within 15 years, for a monthly cash-flow payment that including condo fees is less than renting? I guess you can stand to watch your neighbors pay even less.
But with rental parity reached (at current rates and rents) things are flying off the shelves here to collect the $8k. Anything priced to recent comps and under $350k, and quite a bit that’s above that level too.
Who cares about the $8k? I never got that part. That’s $2,400 after tax with a 30% tax rate. Less that one percent of a $350k pruchase. It is like a car dealer offering free floormats if you buy the new 500SL Mercedes for $80k! What a great incentive!
It’s going to be tough to sell this place if potential buyers drive down Dupont from Jamboree right past the 75% completed condo building next door that’s got at least 6 months of dust on it.
My honey and I would be happy to live in a place like this. Good size for a 1br and we don’t need a second because we don’t have kids or space-using hobbies. Ok, I’d prefer a regular sized washer dryer and a second parking spot, but its not bad.
We’d probably be willing to pay 180 for it. Maybe. That second parking space might kill the deal. Right now we have an apartment with 2br, 2ba, 2 parking spots, and a full sized washer dryer and its 1474. Sure it isn’t in irvine, but this isn’t really either and who cares about school districts when you don’t have kids. So this is a little LESS nice than my apartment, and it costs a heck of a lot more per month. This is like 2000 dollars a month (400 dollar hoa, yikes) and its really not even taht well suited for a couple unless they only have one car. Is anyone really going to buy this at this price when they could save 500/month and rent? 500 a month is pretty hefty relative to the monthly cost (25%).
I love this website. This part resonated w/ my situation:
[i]The lack of appreciation in the market distorts the buy versus rent decision just as rapid appreciation does. It creates this unique circumstance where long-term homeowners can still benefit financially even in the face of declining prices. In areas outside of Irvine, we have reached the point where selling and “going short” is probably not going to yield significant savings.[/i]
I live up in West L.A. and considering buying a place in the $400-600k range. Do you have suggestions within a 25 mile radius of UCLA that might make rational sense to buy despite declining prices for the reasons you gave?
“…within a 25 mile radius of UCLA…”
25 miles? I dunno, I think the 2 hour commute might get old after a while…
East LA and Compton are probably at rock bottom. Santa Monica and the South Bay got a ways to go, huh? The Valley… well, even if the Valley were as cheap as Moreno Vly you still have Sepulveda Pass the San Diego and Santa Monica Parking Lots (Caltrans thinks they’re freeways)…
So, nope man, as someone who used to commute to Santa Monica and Westwood the trick is live there or commute from the OC. And get used to liking your car pool buddies.