For our weekend open thread, I have another Northwood II property passing through the foreclosure meat grinder.
Irvine Home Address … 65 BAMBOO Irvine, CA 92620
Resale Home Price …… $850,000
I see trees of green, red roses too
I see them bloom, for me and you
And I think to myself, what a wonderful world
I see skies of blue, and clouds of white
The bright blessed day, the dark sacred night
And I think to myself, what a wonderful world
Louis Armstrong — What a Wonderful World
IHB News
In Friday's comments, I was challenged by a reader who feels that I have lost my objectivity because we now sell real estate. Another reader seconded that concern so I want to address it directly in this space.
I think prices are too high. I also think prices will soften, particularly this fall and winter as the inventory continues to mount and buyer demand wanes. I don’t think buyers should purchase at prices above rental parity which most properties in Irvine still trade at.
Shevy is out working with buyers every day. Both he and I tell them they should not buy a property today unless they are prepared for continued weakness in pricing and they are in for the long haul. There are many properties that are trading for less than rental parity (mostly outside of Irvine), and for some buyers who plan to live there for a long time, they can save money versus renting if they buy today. If they need to sell in three years, they will have problems, and unlike many realtors working Orange County, we are telling clients this truth. There is no real urgency to buy property right now. Prices will likely go down and affordability will likely improve. That is the message we tell buyers because that is what we believe is true. If anyone reading this has heard anything else from me or Shevy, please post it here or email me.
If I am selling anything, it is the truth about profits to be made in the trustee sale market. I will continue to bring this fact to readers attention as I am trying to generate interest for that part of our business because I believe in the opportunity. I am not exaggerating or relaying anything other than factual observations. People who are active in the trustee sale market are making money, and anyone who wants to participate in this market can do so with our assistance.
Some of you may not believe this, but it is possible to be both an objective blogger and a salesman. If the sales opportunity is real and backed by observation of verifiable facts, I can objectively report on it. Sales doesn’t have to be sleazy manipulation and lies. Sales can be exposing a truth and detailing exactly how people can take advantage of it. I feel very comfortable with what I am doing.
Expect to see more trustee sale flips as property profiles in the coming weeks.
Writer's Corner
I have enjoyed a wonderful emotional state and clear frame of mind since coming back from my vacation. When I went, I spent the first few days alone walking in the woods and doing those things that calm and ground me, but that isn't what really cleared my mind. Playing golf did that.
I played several rounds of golf on my trip, and given how little I had played leading up to the trip, I expected very little from my performance. Once I got there and teed off on the course where I learned the game, many of the old thoughts and habits began to return. I shot 78 on my first 18 holes, and I was pleasantly surprised with how well I struck the ball. But more important than that, I was keenly aware of how my own self-confidence had a direct bearing on the level of my performance. The link between golf and life was direct.
As I pondered the link between confidence in my golf game, my performance on the course, and the rest of my life, the purpose of my trip became clear: the spiritual center I was looking for was not going to be found in the woods or climbing the mound, it was going to emerge on the golf course through confident play and solid performance.
On my second round, I accomplished something I have been frustrated with for 25 years: I broke par on my home course. The nine-hole course I grew up playing in Wisconsin is not particularly challenging, and shooting par or better there is within reach of any single-digit handicap player. However, I had not managed to do it since I first began playing there at age 9. I knew the course was in my head when I was 18 years old. In one round I was 1 under par after 8 holes and managed to double bogey the ninth to shoot a 1 over par 37. I have tried off and on for the last 25 years to get past this psychological barrier to no avail.
During that second round, I holed my wedge approach shot on the par 4 third hole for an eagle, and I birdied the par 5 fifth hole to put myself in a solid position. When I holed out my putt on the ninth hole, I had gone around in 35 strokes and bettered par by a shot. In my own mind, I had accomplished far more than that; I had broken through a mental barrier I had for many years. And in doing so, I rediscovered a fundamental truth about confidence in myself and the direct link to my own performance.
Since I have returned from my trip, I have found my heart has been more peaceful, my mind has been clearer, my stress level has been lower, and I have been happier. I am excited about the future, and I am feeling as confident in my own abilities as I ever have. And I am looking forward to my next round of golf, and I am looking forward to the next challenges in my life.
Housing Bubble News from Patrick.net
Fri Jul 16 2010
The $4 Trillion Dollar Question (ritholtz.com)
Corruption in US: Campaign contributions from mortgage industry shaped government policies (voxeu.org)
Housing Basics: Massive Supply, Faltering Demand (Charles Hugh Smith)
SF Bay Area's Contra Costa prices still heading south (sfgate.com)
Rate fears, mortgage rules take bite out of Canadian property sales (torontosun.com)
China Has Been Covertly Funding A Housing Bubble 5 Times Larger Than US's (zerohedge.com)
Foreclosures hit record: U.S. foreclosures jump in second quarter to record high (latimes.com)
Houses lost to foreclosure on track for 1M in 2010 (google.com)
Foreclosures could hit 1 million (omaha.com)
U.S. House Seizures Rise 38% to Record as Banks Process Backlog (bloomberg.com)
Growth Slowing, Deflation Is Emerging Risk (blogs.wsj.com)
Fed Leaders Show Division Over Deflation (nytimes.com)
Treasury Bull Market Still Alive (Mish)
Jitters have investment fund for U Texas buying gold (chron.com)
Montana Man Forgets to Sign Documents Before Stealing Bank-Owned Property (irvinehousingblog.com)
Free Trial of the Landlord's Property Finder
Thu Jul 15 2010
House Sellers Slashing Prices, While Banks Mow the Lawn (finance.yahoo.com)
U.S. Housing Market Sees Price Cuts, Rising Inventory (time.com)
In South Florida, pace of repossession jumps 83 percent (miamiherald.com)
N. Carolina foreclosure rate has nearly doubled in past year (starnewsonline.com)
Foreclosure crisis phase 2: the negative equity dilemma (walb.com)
Over-Leveraged Pretenders Quit Paying; Lenders Allow Them to Squat (irvinehousingblog.com)
Housebuyers Need Patience, Patience, Patience (npr.org)
House Buying Applications Sink to 13 Year Low (nytimes.com)
House Ownership To Drastically Decrease In America (youtube.com)
Has Mortgage Electronic Registration System (MERS) Ripped You Off? (blog.hsh.com)
CA court says MERS cannot transfer note for lack of ownership (foreclosuredefensenationwide.com)
FICO Credit Scores Collapse – 25% of Americans Sink Below 600 (Mish)
Is it time to storm the Bastille again? (theautomaticearth.blogspot.com)
Bank Tax, We Hardly Knew Ye (miller-mccune.com)
Secret gold swap has spooked the market (telegraph.co.uk)
Federal Budget Simulator – Play along! (crfb.org)
Life in corporate America – Smile or Die (youtube.com)
Jury convicts man who says 'Yahweh' sold him foreclosed house (nydailynews.com)
Make money while destroying the economy (dilbert.com)
Free Trial of the Landlord's Property Finder
Wed Jul 14 2010
Foreclosed houses providing big price breaks in Wisconsin (host.madison.com)
Mortgage aid calls crash Michigan system; 17,000 to qualify (freep.com)
California foreclosure filings increase (centralvalleybusinesstimes.com)
History Says Foreclosure Numbers Will Remain Elevated (nuwireinvestor.com)
House sales for 1/4 of zestimate on zillow? (patrick.net)
Miami's Downtown Comes Alive as Condos Fill With Young Renters (businessweek.com)
Florida property insurance rate hikes coming (orlandosentinel.com)
Are we "Trending Towards Deflation" or in It? (Mish)
The Rising Probability of Deflation (aei.org)
Is the U.S. Following in Japan's Deflationary Footsteps? (buygoldandsilversafely.com)
Shorting Gold (themarketfinancial.com)
FDIC sues former executives at IndyMac's housebuilding loan division (latimesblogs.latimes.com)
HUD May Deny More Filed FHA Claims (housingwire.com)
Troubled Relationships: House-Loan Buyers and Houseowners (online.wsj.com)
Housing Gets Sick on Keynesian Roller Coaster (bloomberg.com)
Free Trial of the Landlord's Property Finder
Tue Jul 13 2010
Property values continue to fall across Contra Costa County (contracostatimes.com)
How to Lose $1,100,000 in Irvine Real Estate (irvinehousingblog.com)
Beverly Hills down 31% from year ago (doctorhousingbubble.com)
Politicians became addicted to real estate market (newgeography.com)
House Sale Boost Fizzled Out in June (voiceofsandiego.org)
Distributions of prices and rents (patrick.net)
My short sale success story (therealdeal.com)
The Role of Appraisal Inflation in Loan Securitization (rismedia.com)
China Land Prices Drop 9% (capitalvue.com)
Chinese Government Expects Price Correction In Real Estate Market (nuwireinvestor.com)
America Builds an Aristocracy (nytimes.com)
Investment Fund Suing Banks Over Subprime Losses (nytimes.com)
The Real Black Helicopter Gang: The IMF Coming for Your Social Security (opednews.com)
Learn to love our massive deficit (finance.yahoo.com)
Inside the Dire Financial State of the States (time.com)
National Assn of Realtors Corrupts Our Laws With Lobbyists (opensecrets.org)
Why the coasts are blue (clearonmoney.com)
Mon Jul 12 2010
Democracy dead, killed by corporate lobbyists (contracostatimes.com)
Sacramento new-house sales post lowest quarter yet (blogs.sacbee.com)
Seattle island mansion finally sells at $28 million markdown (seattletimes.nwsource.com)
South Florida borrower delinquency still increasing (blogs.trb.com)
Residential prices in NY area still CLOSER TO TOP than bottom (itsjustatrade.blogspot.com)
Jobs better fix than gimmicks to prop up house prices above market values (mortgagecalculator.org)
The U.S. Mall-Vacancy Nightmare (bullionbullscanada.com)
Wells Fargo to Lay Off 3,800, End Non-Prime Lending (housingwire.com)
Depressing Unemployment Numbers Forecast Long, Slow "Recovery" (newsweek.com)
Foreclosure double standard: Why the rich get away with defaulting (csmonitor.com)
Defaulting and squatting benefits debtors (msnbc.msn.com)
Thinking About Accelerated Default? Average Squatting Time Up to 449 Days (irvinehousingblog.com)
Credit card debt its worse than it looks (finance.yahoo.com)
Debt collectors sock it to consumers (money.cnn.com)
Crisis Awaits World's Banks as Trillions Come Due (nytimes.com)
Trending Toward Deflation (krugman.blogs.nytimes.com)
The Con of the Decade: Bailing out the rich with taxpayer money (Charles Hugh Smith)
CNBC Guest Asserts Gov't Stock Market Manipulation (zerohedge.com)
The Ecology of Foreclosures (blogs.nytimes.com)
California Weeds – They are all over the place (patrick.net)
Another Northwood II bust
The Northwood II neighborhood was developed near the peak, and there have been a large number of distressed properties in this neighborhood. The previous owners paid $964,000 on 4/13/2005. They used a $770,950 first mortgage and a $193,050 down payment. They obtained a $250,000 HELOC on 8/8/2005, but there is no evidence that they withdrew their down payment with this HELOC. There are two other loans recorded later, but they appear to be in error. He did manage to squat for about 18 months.
Foreclosure Record
Recording Date: 09/10/2009
Document Type: Notice of Sale
Foreclosure Record
Recording Date: 08/21/2009
Document Type: Notice of Sale
Foreclosure Record
Recording Date: 04/27/2009
Document Type: Notice of Default
Foreclosure Record
Recording Date: 03/16/2009
Document Type: Notice of Default
When this property went to auction, the opening bid was $629,516, and the current owner-flipper paid $750,000. The profit margin does not look very enticing, and if they end up discounting this property to sell it, the flipper may not make any money at all.
Irvine Home Address … 65 BAMBOO Irvine, CA 92620 
Resale Home Price … $850,000
Home Purchase Price … $750,000
Home Purchase Date …. 5/24/2010
Net Gain (Loss) ………. $49,000
Percent Change ………. 6.5%
Annual Appreciation … 77.5%
Cost of Ownership
————————————————-
$850,000 ………. Asking Price
$170,000 ………. 20% Down Conventional
4.59% …………… Mortgage Interest Rate
$680,000 ………. 30-Year Mortgage
$167,878 ………. Income Requirement
$3,482 ………. Monthly Mortgage Payment
$737 ………. Property Tax
$250 ………. Special Taxes and Levies (Mello Roos)
$71 ………. Homeowners Insurance
$120 ………. Homeowners Association Fees
============================================
$4,659 ………. Monthly Cash Outlays
-$834 ………. Tax Savings (% of Interest and Property Tax)
-$881 ………. Equity Hidden in Payment
$292 ………. Lost Income to Down Payment (net of taxes)
$106 ………. Maintenance and Replacement Reserves
============================================
$3,342 ………. Monthly Cost of Ownership
Cash Acquisition Demands
——————————————————————————
$8,500 ………. Furnishing and Move In @1%
$8,500 ………. Closing Costs @1%
$6,800 ………… Interest Points @1% of Loan
$170,000 ………. Down Payment
============================================
$193,800 ………. Total Cash Costs
$51,200 ………… Emergency Cash Reserves
============================================
$245,000 ………. Total Savings Needed
Property Details for 65 BAMBOO Irvine, CA 92620
——————————————————————————
Beds: 3
Baths: 2 full 1 part baths
Home size: 2,460 sq ft
($346 / sq ft)
Lot Size: 3,932 sq ft
Year Built: 2005
Days on Market: 35
Listing Updated: 40347
MLS Number: S620792
Property Type: Single Family, Residential
Community: Northwood
Tract: Came
——————————————————————————
This property is in backup or contingent offer status.
EQUITY SELLER. BRING YOUR PREAPPROVED BUYERS AND CLOSE FAST! BEAUTIFUL, TURNKEY, CAMELIA PLAN 3 LOADED WITH UPGRADES. 3 BEDROOMS PLUS LARGE LOFT AND ALSO AN OFFICE ALCOVE WITH HUGE BUILT-IN DESK. DARK HARDWOOD FLOORING AND PLUSH CARPETING, CUSTOM BASEBOARDS, CROWN MOULDING, PLANTATION SHUTTERS AND RECESSED LIGHTING. GOURMET KITCHEN WITH GRANITE COUNTERS, STAINLESS STEEL KITCHENAIDE APPLIANCES INCLUDING A BUILT-IN REFRIGERATOR, LARGE CENTER ISLAND AND HUGE BUTLER'S PANTRY. SPACIOUS LIVING AREA WITH FIREPLACE AND BUILT-IN ENTERTAINMENT CENTER. LARGE LOFT WITH ENTERTAINMENT CENTER AND A TECH CENTER OFFICE ALCOVE WITH BUILT-IN DESK. CUL DE SAC LOCATION.
A $100k price increase and the flipper may not make much of a profit. No wonder the poor fool who just wants a house to live in is priced out of the market.
When you factor in sales commissions and renovation expenses, $100,000 on a $850,000 property is not much of a cushion. The flipper overpaid at auction.
It isn’t the trustee sale flippers who are driving up prices for ordinary buyers, it is the flippers who purchase at full retail price that take inventory off the market and squeeze families for a few pennies of profit. Without rising prices, that group doesn’t have much to work with, and you don’t see much activity among them today.
Hey IR…
How about setting up a trustee sale fund.
Can you sell shares on eBay?
Take Paypal.
Share A: 10K. Voting rights.
Share B: 500 bucks.
I would be interested…
Problem i see is IR’s high bid may always get outbid.
Yes, it seems to me all this flippin’ flipping is still a symptom that the housing bubble mentality has not ended. Before anyone could flip as banks would give anyone a loan; now only the “rich” can flip. I wonder when it will all flippin’ end . . .
I don’t doubt that you can blog objectively and sell houses at the same time, and I don’t see a conflict in your writing.
I would like to see two things in your business:
1. A way that you can make that financed trustee sale work, because there are tons of people, me included, who would love to take advantage of the trustee sales, or
2. An IHB investment pool, where we could all profit from the trustee sales.
That having been said, though, I do think that buyers are holding out lately, so I would proceed with caution on the flipping.
Oh, and how about a Case Shiller index for Irvine alone? Is that possible? I don’t think even a CS index for LA or OC really reflects Irvine.
If you don’t have enough cash to play the game yourself, but you do have over 20% cash down payment here is what you do:
Find 3 other people like yourself. Pool your money together to buy at auction. After you successfully flip around a dozen houses you each would have enough to buy a house with 100% cash at a trustee sale. If done correctly this would only take maybe 3 years and you would own outright at a 20% market discount.
Planet, I would love to do that, but I work full time and I just don’t have the time or resources to find three other people who I know and whose judgement I trust, research the market, attend endless auctions and then flip a house, all the while going to work from 8 to 5 M-F and manage a personal life.
That’s why I suggested it on this blog. Obviously, everyone here is passionate about real estate and conservative with their cash. It simplifies things.
As always you’d have to pay for that simplification and your trust of the blog would have to be more genuine than simply saying it. Bottom line is you either have the cash or you pay retail pricing. Nothing will change that.
🙂 What are you suggesting, PR? That I throw bills at my computer screen?
PR is right on this one. The discount at the auctions exist because of the difficulty of buying at auction.
The premium of retail exists because it is an easier process available to more buyers.
This is true in many markets. I buy many electronic components. I buy from industry distributors (difficult for the average consumer) at 50% – 80% off of what you pay at Frys or Radio Shack (retail).
Suprise expenses can crush those trustee sale buyers without deep pockets. One sour deal will change your tune real quick.
There was a Case-Shiller for Irvine being produced by IPO on the old IHB forums, for about 2008-9, but he stopped last year. it dropped to the ~180 level, then rose back up to ~190-200.
I still produce a monthly CS for costa mesa, and put it up at the ocreader site.
“2. An IHB investment pool, where we could all profit from the trustee sales.”
Nefron,
Email me, and I can provide you the information you are looking for.
Hi IR,
I too would like to know more about this investment opportunity…
but can’t figure out how to email you.
could you email me with a “ping”?
gene@adept-ic.com
thanks,
IR
I asked you to email me earlier… you know my email address. I guess it fell through the cracks.
If you set up an investment pool, I’d like to know about it.
tonye,
Email me again. When my email was hacked recently, I lost many of my contacts.
I’m interested also…
“When she starts turning tricks, then we will know she is serious about keeping the property.”
Sorry to piggyback on today’s post, but I had to give you kudos for the above sentence, IR. That is the first time I have actually laughed out loud in my years of reading the IHB.
I absolutely, completely HATE that style of bathroom with the tub between the vanities.
Builders went nuts with that style, which, IMO, is STUPID. Imagine hunting down the supplies under the sink… oh no… it’s on the other side.
Nevermind that big hunk of tub blocking your path.. always having to walk around it.
I seldom used the word HATE…. but I really, REALLY hate such bathrooms and would never buy a house with one such design unless I got a 50K discount to tear it out and rebuilt it with the but off to the side. Where it belongs.
Investment pool…I’m in.
Let’s do it IR.
Email me, and I will send you the information.
Fantastic article.
http://www.ritholtz.com/blog/2010/07/the-4-trillion-dollar-question-2/
[quote]Ultra low rates to stay
A recent study by the Federal Reserve (The Depth of Negative Equity and Mortgage Default Decisions by Bhutta, Dokko and Shan) investigated the question: at what point do underwater homeowners “strategically default” on their mortgages? Surprisingly, it found that the average borrower doesn’t walk away from his home until negative equity reaches a very high level, -62%. But the fascinating thing was that there was something that could trigger underwater borrowers to default much, much earlier – and that something was an interest rate rise.
With a quarter of US mortgages underwater, and likely to stay that way for some time, the Fed must follow its own research if it wants to prevent a cascade of defaults. Hence, expect US interest rates to stay ultra low for an ultra long time.[/quote]
We own a home in this neighborhood. Unlike many of our neighbors we put 20% down and bought one of the least expensive homes in 2004. Not that it matters now. We are completely underwater due to the number of shortsales and foreclosures. There are 3 houses surrounding ours that have been vacant for over 1 yr. Homes 2x the size of ours are listed at far below our purchase price.
It’s wrecking us to keep the house and it will wreck us to walk away. The house itslef is terrific – but not in this environment. It’s so discouraging when you do the right thing but are killed by the greed of others.