Today we have a property emerging from shadow inventory. Also, I want to invite everyone to our next IHB Block Party from 6:30-10:00 on Monday, November 9, 2009, at JT Schmids at the District.
Irvine Home Address … 13 CHRISTAMON EAST Irvine, CA 92620
Resale Home Price …… $714,800
{book1}
Oh let the sun beat down upon my face
With stars to fill my dream.
I am a traveler of both time and space
To be where I have been.
To sit with elders of a gentle race
This world has seldom seen.
They talk of days for which they sit and wait
When all will be revealed.
Kashmir — Led Zeppelin
All will be revealed in time. It is fun to speculate on where prices will go and when they will get there. I have an educated guess as to where real estate market prices are going, and I stand behind my analysis and predictions.
I have a few guidelines and an understanding of market relationships that has proven successful in the past. I was posting on this blog as either a commenter or a writer since late 2006. I was bearish then, and drawing on the collective wisdom of the bubble blog community, I began expounding a bearish point of view.
It was easy to be bearish in 2006. An analysis based on conventional financing showed the market pricing was ridiculous, and when you connected the dots between ARM resets, the credit crunch, foreclosures and lower prices, it was rational to be bearish. People caught up in the emotional frenzy, and those that counted on the stability of Option ARM financing — which was most people — were bullish. Kool-aid intoxication has an enormous appeal.
It has only been over the last year that signs have been at all ambiguous. The Federal Reserve’s unprecedented manipulation of the mortgage market has certainly created some mixed signals.
Payment affordability in Irvine is actually reasonable. If you look over the hill at Riverside County, payment affordability is very high, but this is accomplished through market manipulation. How do you forecast the impact of this? How long will this go on? This is no longer a market event, it is a political one.
The price drop of the early 90s must have been much more difficult to predict, particularly the 94-97 stage. The market was choppy and signals were mixed during this period much like the next three years will be.
Over time, a fuller picture of the inventory problem will come out. The degree of market overhang will vary by location, and there may be isolated pockets where high pricing at very low volumes is maintained. Will Irvine emerge unscathed? I doubt it.
Irvine Home Address … 13 CHRISTAMON EAST Irvine, CA 92620
Resale Home Price … $714,800
Income Requirement ……. $133,063
Downpayment Needed … $142,960
Home Purchase Price … $603,457
Home Purchase Date …. 7/29/2008
Net Gain (Loss) ………. $68,455
Percent Change ………. 18.5%
Annual Appreciation … 12.8%
Monthly Mortgage Payment … $3,105
Monthly Cash Outlays ………… $4,030
Monthly Cost of Ownership … $3,030
Redfin Property Details for 13 CHRISTAMON EAST Irvine, CA 92620
Beds 4
Baths 2 full 1 part baths
Size 2,474 sq ft
($289 / sq ft)
Lot Size 5,661 sq ft
Year Built 1979
Days on Market 4
Listing Updated 11/4/2009
MLS Number S594917
Property Type Single Family, Residential
Community Northwood
Tract Pp
According to the listing agent, this listing is a bank owned (foreclosed) property.
Open floor plan with new carpet and paint throughout the home gives the home a fresh feel. Spacious and airy kitchen with eating area. Formal dining room adjacent to the living room. Fireplace in the family room. Huge bonus room upstairs great for office or play room. Inside Laudry, Large yard great for entertaining. Cul-de-Sac street. Seller will be replacing the roof in the month of November. Great Value on this REO Home. All Bedroom upstairs. House to be tented and new roof to be installed. Offers will be reviewed after work is done.
The property was purchased back in 2003 for less than $500,000. After some refinances and general HELOC abuse, he managed to pull out over $200,000. Then his Option ARM blew up…
Foreclosure Record
Recording Date: 05/05/2008
Document Type: Notice of Sale (aka Notice of Trustee’s Sale)
Foreclosure Record
Recording Date: 02/19/2008
Document Type: Notice of Sale (aka Notice of Trustee’s Sale)
Foreclosure Record
Recording Date: 02/19/2008
Document Type: Notice of Sale (aka Notice of Trustee’s Sale)
Foreclosure Record
Recording Date: 01/28/2008
Document Type: Notice of Default
Foreclosure Record
Recording Date: 11/09/2007
Document Type: Notice of Default
Foreclosure Record
Recording Date: 11/09/2007
Document Type: Notice of Default
Foreclosure Record
Recording Date: 07/20/2007
Document Type: Notice of Rescission
Foreclosure Record
Recording Date: 07/09/2007
Document Type: Notice of Sale (aka Notice of Trustee’s Sale)
Foreclosure Record
Recording Date: 04/02/2007
Document Type: Notice of Default
This guy defaulted before I started writing for this blog. He dragged out the process and it finally went back to the bank — over a year ago.
Do you see where shadow inventory comes from? Is this owner the exception or the rule?
I hope you have enjoyed this week, and thank you for reading the Irvine Housing Blog: astutely observing
the Irvine home market and combating California Kool-Aid since
September 2006.
Have a great weekend,
Irvine Renter
😉
Oh, Vey! So the bank has been sitting on this house for 15 months now, and it has been a dead asset Christmas 2006? Yikes. That’s 36 months from default to listing. I am a believer in the big bath theory of cleaning up financial messes, so it is good to at least see this property on the market, but your question remains — how many more properties like this are going to have to be dumped on the market before we get back to anything resembling “normalcy”?
The govt just released the nations job figures … not good … the US unemployment rate is now 10.2%. That’s a multi-decade high.
If you remember correctly, when the govt completed the stress test on the banks this past spring, the most adverse scenario was an employment rate exceeding 10.3%. Well, it took 6 months to reach that level. I can’t help but believe the (zombie) banks are gonna come begging to DC again.
I think we’re gonna see another crash in the stock market within the next few months. Investors are once again being set up, and told by the talking heads on Wall Street, to ignore the obvious, and concentrate on the forward looking market.
Jobless recovery people! Stop trying to “talk down” all the leaps and bounds that we have made this year on the path back to prosperity and McMansions with granite counters for all!
You mean “Job*loss* recovery”.
I expect to see unemployment number heading higher (and I don’t mean U3 either).
Lee, Looks like with jobless recoveries, the stock market really likes that with increasing prices of goods, increasing profits, and depressing wages. Looking back over the Carter years, the unemployment was lowing with inflation, but people saw that as the worse of times. Reagan year initally had higher unemployment, but higher stock market. Is B.O. trying to repeat Reagan, but needs a little bit of inflation instead of the current deflation in housing? In general, Americans think the stock market is a gauge on the health of Main Street. The stock market is a gauge on Wall Street (reality or delusions) and not Main Street.
IrvnineRenter, Was the 7/07 Notice of Rescission an indication of refinancing or loan modification? If so, the cure only lasted 2 months. Was that 2 months cure, because of a prepayment included in the loan?
Here are the bank stress test scenarios:
Baseline scenario
Economy — Shrinks by 2 percent (adjusted for inflation) in 2009 and grows by 2.1 percent in 2010.
Unemployment — Averages 8.4 percent in 2009 and 8.8 percent in 2010.
Housing prices — Drop 14 percent in 2009 (from where they ended December 2008) and drop 4 percent in 2010 (from December 2009).
More adverse scenario
Economy — Shrinks by 3.3 percent in 2009 and grows by 0.5 percent in 2010.
Unemployment — Averages 8.9 percent in 2009 and 10.3 percent in 2010.
Housing prices — Drop 22 percent in 2009 (from where they ended December 2008) and drop 7 percent in 2010 (from December 2009).
http://www.bankrate.com/finance/savings/what-are-bank-stress-tests-1.aspx
[b]Updated MLS Irvine Closed Sales through [color=red]October 2009[/color][/b] at [b][url=http://irvinerealtorsite.com/]www.irvinerealtorsite.com[/url][/b].
(previous years are at tabs at the bottom)
– I show 206 closings for October, resale (6.65/day).
– Mortgage info has not yet been updated.
– October median price for Irvine is in at $582,500, back up from September’s $539K median.
– 28 were short sales (14% of total sales).
– 17 were REO sales (8% of total sales).
As a refresher:
[b]Yellow[/b] is still unconfirmed (no data reported yet)
[b]Blue[/b] is “suspicious” even though it is recorded.
[b]Green[/b] is confirmed.
Closed lease info has been updated through October, as well. 172 leases, prices edging slightly up again to $1.58/sqft. average.
Floorplans have all been uploaded, including new homes in Woodbury and Woodbury East.
Thank you again, and be sure to drink your Ovaltine!
-IrvineRealtor
So short sales are picking up?
Where is IPO’s CS data? Has he taken a break?
Thanks IR2!
Now, that is an actual example of (now former) shadow inventory. Of course, it’s quite possible there were legal entanglements (former owner fighting the foreclosure, for instance) that prevented the bank from listing the property until now. It also looks like the house needs a new roof, which the bank is now installing. The bank might have been debating whether or not to pay for it, although 15 months is extreme.
As for why Riverside County is cheap-it’s because the commute on the 91 is a bitch, and there are only so many jobs out here. The smog and the heat don’t help. However, lots of people were priced out of the OC, and so they moved out here. The builders saw all the empty land, and the high (temporary bubble) demand, and overbuilt. But people who rent tend to be people who can’t buy (college students, people with poor credit, unstable income, and/or no down payment), and there tend to be more of those types of people in poorer areas than in richer areas such as Irvine. I think it’s funamentals, that is, not manipulation. If fact, the government is trying to manipulate prices higher, not lower.
There is no Shadow Inventory, Geotpf. Activity is up! Remember?!
There is no Shadow Inventory – Geotpf just said so yesterday and proved it with flawless ‘Just because’ logic.
Your example proves nothing.
Repeat after me: “No Shadow Inventory”. Ist makebelieve a hoot?
Thanks for reminding all of us how stupid we are.
It’s a great example of what I am always reminded of the late George Carlin’s “American Okie Doke” describing “Bullshit” as the “glue” that holds this place together.
Everybody running around bullshitting one another for their own personal gain.
One big stroke job.
Robert Shiller is losing his certainty on what is happening with housing market prices due to government manipulation.
Shiller on Housing: ‘I am Terribly Conflicted’
“This morning Robert Shiller, Yale professor and co-creator of the S&P Case-Shiller Home Price Index, joined me. It was a fascinating interview. I’ve never seen the professor this way. He was incredibly uncertain about the future. Incredibly conflicted about where we are headed. What made today’s interview with Professor Shiller so intriguing is that he’s one of the leading economists who predicted the asset bubble in the stock market and in housing. In fact, he said the housing bubble was inextricably linked to the finance world. He was right!
Today it was clearly visible that the historical data he looks at to predict the future is not working. The current appreciation in housing and other economic indicators are not what the models would suggest. Time and time again he said “this is a time of great uncertainty.” He’s clearly puzzled by the rapid appreciation in home prices while disturbed by the “bail out economy” and the national deficit. He admitted, “Things seem to be working right now but we’re in a GRAND experiment.” I found it incredibly telling.
At one point I said, “You seem so conflicted.” He said, “I am terribly conflicted. This is the most uncertain time that I can remember. Things are violating the laws that I learned. The turn around in real estate is so dramatic. The whole country is experiencing an upsurge but I don’t know what to make of it.”
Take a look at our interview. When the best admit they don’t know, there is reason to believe we are in unchartered territory.”
What the data are showing:
[img]http://irvinerealtorsite.com/Overview11062009.JPG[/img]
[img]http://irvinerealtorsite.com/LAOC11062009.JPG[/img]
-IR2
The data shows that nicer houses are now being let out of the foreclosure corral. You know…the NON subprime toxic loan centers.
Nicer houses sell for more (also measured by $psf) than shitty ones.
Gee…who would have guessed?
Hi E,
Case-Schiller is price-tier insensitive because it looks at resale values of houses. House X sells for $500K in 2002, and then that very same house sells again for $800K in 2009. It’s not just that more expensive houses are selling.
I would humbly suggest viewing the LA/OC chart IrvineRealtor posted above in its entirety (View image from your web browser).
Then look at the range Jan-90 to Sep-91 and compare against Jan-07 to present.
My point, absurd as it may sound, is that we are looking at the bear rally before the actual correction.
It’s a little bit of a bear market rally, a lot of bit of government intervention in the housing market. The Fed spent $300 Billion this summer buying Treasury T-Notes. (The government is buying up its own debt — that doesn’t make much sense to me.) This gives the appearance of high demand for the T notes, and keeps their yield low.
The yield on the T note sets interest rates for tons of other things.
Interest rates are low enough that insanely high asking prices are actually affordable. People can bid on houses and get fixed rate mortgages without breaking the bank. This creates the illusion of a bottom.
The illusion of a bottom pulls in lots of would-be buyers who were sitting on the sideline.
The kool-aid didn’t stop flowing long enough for people to stop looking at housing as an investment. It makes me sad to see people buying houses now. The government protected the US populace from having to learn from its mistakes.
…
The $300 Billion have been spent, and I haven’t heard anything more about an extension to this program. I think the program ended about a week ago.
Accordingly, interest rates should start rising again, right? Is there any sign that they are starting to creep up?
Back in February Berkeley and UCLA had a Symposium on the Mortgage Melt Down with Ben Bernanke, the head’s of the regional federal banks, and other real estate players.
Basically, there plan was to put a floor under prices to keep people from walking away.
You can listen to the symposium by going to the itunes store and then UC Berkeley > Business – UC Berkeley – UCLA symposium.
If that is the policy, then I would say that they succeeded somewhat in the coastal areas of California (with not so jumbo loans reqirement) but failed big time in other places like most of the Inland Empire, not to mention Stockton, Vegas, Florida, Detroit…etc.
That article gave me shivers.
Only confirms my belief, that something is terribly wrong with our economy.
When this ends, the way I know it will, there are gonna be a lot of pissed off people. The idiots in our govt will be more concerned with public stability than the banks.
36 months from default to listing, what took so long?
It’s an outrage!
You should be outraged about your math.
The “owner” of this property apparently made his or her last payment before November 2006. Adds up to about 36 months to me. You are perhaps using some sort of ‘new math’ system?
Irvine Realtor: Please clarify a point: you’re saying that there has been an essentially long term (say at least 5 years) reset in the historical ratio of price/income of 3-3.5/1 to a revised 6/1 (or more)?
(based on estimated median family income in Irvine of $99K and median home price (single and multi) of $575k)
Assuming a “yes” answer, what are your assumptions about bank lending parameters for a 30 yr fixed interest loan regarding:
1. interest rate
2. minimum down payment
3. FICO credit score
4. DTI ratio of applicant
to the purchaser?
Irvine Realtor: Are you saying that there now exists a long term reset of 6/1 price/income ratio (from the time tested 3-3.5/1) –
Assuming Irvine median income $99k and median home price (sfd and condo) of $575k?
If so, what are your assumptions for a bank loan with 30 yr fixed interest rate regarding the following parameters:
1. interest rate?
2. down payment?
3. FICO score
4. DTI ratio
How unfair. You can’t ask a realtor a question where one must apply logic and intelligence.
Thrifty and E –
I’m sorry if I wasn’t clear… those histograms are graphical representations of the data that Robert Schiller’s group publishes, as referenced by Larry’s “I am terribly conflicted” link from Mr. Schiller.
I don’t make assumptions about where the reset will be, when it will be, or how long it will last. I’m providing the data in hopes of clarifying what the issue is, and let people decide for themselves.
My ego is not too big to admit that I don’t know.
…but a point of clarification – the data are tied to same house selling now vs when it sold in the past, and [b]not[/b] median pricing. So the increase in index value is real, and compares apples-to-apples as best as I’ve seen measured for a macro view. Their [b][url=http://www2.standardandpoors.com/spf/pdf/index/SP_CS_Home_Price_Indices_Methodology_Web.pdf]methodology[/url][/b]
and [b][url=http://www2.standardandpoors.com/spf/pdf/index/SP_Case_Shiller_Home_Price_Indices_FAQ.pdf]FAQ[/url][/b] can be found here.
Thank you, -IR2
IR2
Do I understand you to simply be saying, essentially, that today we’re here; I have no idea where we’ll be in the future?
No, IR knows exactly what is going to happen in the future. He has a crystal ball and only writes this blog to torment mortals like you while he secretly trades on his supernatural prescience.
Question for Irvine Realtor:
Assuming median income of $99k and median home price (condo and sfh) of $575k in Irvine, are you saying that there is now a reset of price/income ratio of about 6/1 in Irvine – vs time tested
3-3.5/1 ?
If so, what are your figures for the below parameters for a 30 yr fixed interest loan on an Irvine property:
1. interest rate?
2. down payment?
3. FICO score
4. DTI ratio
I apologize for the triple post – got messages that they might be spam on the first 2 tries.
Forgive me Irvine Renter, I have sinned: I bought a townhome (okay, legally a condo) in Irvine.
I was renting. I was prepared to rent for a while. I wasn’t even looking, but I stopped by a “realtor open house” one day while driving around, and WOW. I thought, eh, can’t afford it anyway. Looked down and WOW. Plugged through the rental parity worksheet and it is close, close. I even went around the next day and looked at a few housing rentals, and the fact was this house was loved and maintained and move-in ready. Rental housing is run by a lot of people who just slap on paint when the old guys move.
So maybe I am contributing to the froth – while the house was “a good deal” by Irvine standards, it is still insane in 99% of the rest of the country. But I couldn’t help it. And I had 20% to put down….
Congratulations on your purchase.
Wow, you made the leap! Now the important thing for you is to ignore house prices, live happily in your townhome for as long as you can, and enjoy the free space in your head opened up by NOT being in the market.
Congratulations!
Congratulations whatever!
Thanks everyone! I am a little freaked out but I think it is a good decision. I just need to focus on the quality of life and not on the $$
🙂
Congrats!
It sounds like it was a smooth transaction. Did you have to go into a bidding “war”?