I have an extremely overpriced Turtle Rock home for you to giggle about this weekend.
Irvine Home Address … 4 SUNPEAK Irvine, CA 92603
Resale Home Price …… $2,745,000
One foot on the brake and one on the gas, hey!
Well, there's too much traffic, I can't pass, no!
So I tried my best illegal move
A big black and white come and crushed my groove again!
Go on and write me up for 125
Post my face, wanted dead or alive
Take my license n' all that jive
'cause I can't drive 55!
Sammy Hagar — I Can't Drive 55
IHB News
The flipping fund closes in 3 weeks. I reported two weeks ago that firm commitments were over $1,000,000. Now that number stands at $1,425,000. I still believe I will reach $2,000,000. There are still 19 Sophisticated investor spots available.
I had been falling behind in my library updates, so Zovall developed an automated system that keeps me up-to-date at all times. For those of you wanting to find a post in the archives, it is now much easier to locate what you are looking for.
Writer's Corner
I cleaned out my office at work this week. I am still doing hourly work and helping with business development, but I no longer go to an office every day. I don't know what my future will be with the land development industry. I enjoy design work, but over the last 3 years, I haven't done very much of it — and neither has anyone else. I am still seeing no green shoots in the homebuilding or development industry.
It's sad really. You spend your adult life gaining experience and increasing the depth and scope of your knowledge in a given profession, and suddenly that skill is no longer in demand. Perhaps if demand picks up, I may go back to that work, or at least do some hourly work on interesting projects. For now, I am focusing my energy on establishing a fund and creating a new professional life. I am not the only one in my industry that has been compelled to find other methods of making a living.
This new venture is very exciting. I am still mourning what may be the passing of my past career, but I am very excited about this new challenge. I feel like a sportscar that has been kept in the garage too long. In fact, last week I had a dream that I was driving a lime-green Lamborghini. I remember taking it out and fumbling with the gears and feeling a bit lost in a sea of gauges. I didn't get it up to top speed, but after a few minutes of driving, I felt like I was in control of the vehicle, and the power was exhilarating.
In my dreams, I have noticed that vehicles I drive are often symbolic of how I view my own life. I don't want to own a lime-green Lamborghini, but as a symbol of refined power with unique style, I can't think of a more appropriate automobile. If my subconscious views my new life this way, it stands in stark contrast to the sense of helplessness I felt at times during the recession. I guess part of me is more excited about the future than consciously I realize. I want to thank all the fund subscribers who have expressed their confidence in my ability to make this venture a success. I am looking forward to hitting top gear.
Housing Bubble News from Patrick.net
Fri Aug 27 2010
Pierce the Housing Bubble! (nytimes.com)
House Prices May Drop Another 25% (theatlantic.com)
Another Record Low for Housing (economix.blogs.nytimes.com)
Burning Down the House; New House Sales Consensus 330K, Actual 276K, Record Low (Mish)
Rosenberg Explains Why Not One New House Priced Over $750,000 Sold In July (zerohedge.com)
Housing market continues to decline (csmonitor.com)
Lack of Jobs, Foreclosures May Keep U.S. Housing Depressed (bloomberg.com)
New Foreclosure Numbers Reverse MBA Survey's "Bright Spots" (cnbc.com)
Experts Say Housing No Longer Builds Wealth (irvinehousingblog.com)
An unsupportable American dream (nationalpost.com)
The Housing Bubble: The Economists Should Have Known (newgeography.com)
After Housing Bubble, the Dark Side of Houseowner Dreams (time.com)
Treasury Admits Program for Struggling Houseowners Just a Ploy to Enrich Big Banks (alternet.org)
The Fed's Monetary Insanity (atimes.com)
Great Firewall of China Blocks Posting To Patrick.net (patrick.net)
Commercial Property Owners Choose to Default (online.wsj.com)
Living For Free: No Mortgage Payment In 32 Months And Not Kicked Out Yet (dailybail.com)
Free Trial of Patrick's Property Finder
Thu Aug 26 2010
July new house sales fall to slowest pace on record (sfgate.com)
New-House Sales Declined Sharply Last Month (nytimes.com)
Existing-House Sales Sink to Lowest Level Ever Recorded (irvinehousingblog.com)
Slightly lower prices and rates can't slow fall in house sales (finance.yahoo.com)
Why nobody wants to buy a house (marketwatch.com)
Are slow housing sales always a bad thing? Hell no! (blogs.forbes.com)
It's okay to walk away (finance.yahoo.com)
Inventory Explodes Past the Worst of the Housing Crash (housingstory.net)
House Sales: Distressing Gap between new and used (calculatedriskblog.com)
The Newest Rip-Off in Housing: Builder's resale fee, forever (market-ticker.org)
Fed's Evans Says U.S. Recovery Uncertain as Housing Not Out of the Woods (bloomberg.com)
Federal Reserve Can't Do Much More to Boost Job Growth, Economy (dailyfinance.com)
Hard-nosed Fed sends global markets reeling (telegraph.co.uk)
Why does a tiny Tel Aviv flat cost as much as a house in Florida? (haaretz.com)
Foreclosures on rise in Oregon (spotlightnews.net)
Home is where the hurt is in today's housing market (suntimes.com)
Congress got loans from Countrywide in exchange for corrupt lawmaking (washingtonpost.com)
Fannie Mae Eases Credit To Aid Mortgage Lending (From 1999 – nytimes.com)
Free Trial of Patrick's Property Finder
Wed Aug 25 2010
Overpriced-house Sales Plummet – Which Was The Statistical Blip? (bayarearealestatetrends.com)
Existing overpriced-house Sales Plunge 27%, Worse than Every Economist Forecast (Mish)
Overpriced-house sales plunge 27 pct. to lowest in 15 years (sfgate.com)
Overpriced-house Sales at Lowest Level in More Than a Decade (nytimes.com)
Houses will still sell, but only at LOWER PRICES (poughkeepsiejournal.com)
Frightened Sellers Who Missed the Market Lower Prices in a Panic (irvinehousingblog.com)
Will Growing Rental Trends Undermine US Overpriced-house Sales? (realestatechannel.com)
The Renting Alternative Will Undermine Housing Bubble For Years (businessinsider.com)
Double-dip in housing prices may be around the corner (money.cnn.com)
Mortgage Fraud Is Rising, With a Twist (finance.yahoo.com)
Woman Wall Street Hates Most Is Suited for Job (bloomberg.com)
Economists blew the bubble (bostonherald.com)
Judges Taking Tougher Line on Bank Bailouts (blogs.nytimes.com)
The other trillion dollar bailout (mybudget360.com)
How To Be Homeless In America (patrick.net)
Free Trial of the Landlord's Property Finder
Tue Aug 24 2010
Let the Housing Market Normalize! (paul.house.gov)
How houseownership fetish hurt American dream (washingtonpost.com)
15 Signs US Housing Market Headed For Complete And Total Collapse (businessinsider.com)
Housing Fades as a Means to Build Wealth (nytimes.com)
Housing Is No Longer An Attractive Investment, Now What? (theatlantic.com)
Now they tell us experts say housing is a lousy investment and always will be (finance.yahoo.com)
The Shills Are Still Shilling Housing (market-ticker.org)
The Ones That Gave & Took Away Your Equity (blog.youwalkaway.com)
House sales collapse in the Triangle (newsobserver.com)
Even high-end properties can't escape foreclosure wave in Palm Beach County (palmbeachpost.com)
Happy 5th Birthday Housing Crash! (bayarearealestatetrends.com)
Housing Slide in US Threatens to Drag Economy Into Recession (bloomberg.com)
Housing already in double-dip (cnbc.com)
Housing inflation ramped up starting in the 1990s (doctorhousingbubble.com)
Australia's real estate bubble (ibtimes.com)
Debt's Deadly Grip (nytimes.com)
House resale fees: latest rip-off (money.cnn.com)
Foreclosure process doesn't stop during short sales (rgj.com)
Brokers See a Rise in Clients' Hostility (nytimes.com)
Free Trial of the Landlord's Property Finder
Mon Aug 23 2010
One Couple's New American Dream: Rent, Don't Buy (npr.org)
Seven Reasons Why You Shouldn't Buy a House (dailyfinance.com)
N. Calif house sales drop 23 percent in July (sfgate.com)
SF Bay Area and Calif. continue to lose jobs in July (contracostatimes.com)
Big California Earthquake May Come Sooner Than Expected (aolnews.com)
Texas actually not immune from housing crash (Mish)
Mansion squatters return in a big way (seattletimes.nwsource.com)
Housing Double Dip Is Not Just Tax Credit Hangover (cnbc.com)
Your House Might Be Underwater for Years (bloomberg.com)
Housing affordability through LOWER PRICES not even considered by govt (theautomaticearth)
Ireland to make house sale prices public by law (Irish with subtitles – tg4.ie)
Government Robs Working Renters to Subsidize Unemployed Homedebtors (irvinehousingblog.com)
Banks want federal guarantee of mortgage profits (contracostatimes.com)
How Pimco Is Holding the American Houseowner Hostage (minyanville.com)
Treasury yields fall to 17-month lows amid economic woes (money.cnn.com)
Interest rates 'may hit 8pc' in two years (telegraph.co.uk)
Commercial Real Estate Price Index declines 4% in June (calculatedriskblog.com)
Rising pay, benefits drive growth in military towns (usatoday.com)
"National Security Letter" Makes You Disappear (sott.net)
'John Doe' Who Fought FBI Spying Freed From National Security Letter After 6 Years (wired.com)
Irvine Home Address … 4 SUNPEAK Irvine, CA 92603 
Resale Home Price … $2,745,000
Home Purchase Price … $1,679,000
Home Purchase Date …. 1/2/2008
Net Gain (Loss) ………. $901,300
Percent Change ………. 53.7%
Annual Appreciation … 18.3%
Cost of Ownership
————————————————-
$2,745,000 ………. Asking Price
$549,000 ………. 20% Down Conventional
4.50% …………… Mortgage Interest Rate
$2,196,000 ………. 30-Year Mortgage
$536,471 ………. Income Requirement
$11,127 ………. Monthly Mortgage Payment
$2379 ………. Property Tax
$0 ………. Special Taxes and Levies (Mello Roos)
$229 ………. Homeowners Insurance
$269 ………. Homeowners Association Fees
============================================
$14,004 ………. Monthly Cash Outlays
-$1716 ………. Tax Savings (% of Interest and Property Tax)
-$2892 ………. Equity Hidden in Payment
$915 ………. Lost Income to Down Payment (net of taxes)
$343 ………. Maintenance and Replacement Reserves
============================================
$10,654 ………. Monthly Cost of Ownership
Cash Acquisition Demands
——————————————————————————
$27,450 ………. Furnishing and Move In @1%
$27,450 ………. Closing Costs @1%
$21,960 ………… Interest Points @1% of Loan
$549,000 ………. Down Payment
============================================
$625,860 ………. Total Cash Costs
$163,300 ………… Emergency Cash Reserves
============================================
$789,160 ………. Total Savings Needed
Property Details for 4 SUNPEAK Irvine, CA 92603
——————————————————————————
Beds: 5
Baths: 4 full 1 part baths
Home size: 4,782 sq ft
($574 / sq ft)
Lot Size: 8,000 sq ft
Year Built: 1996
Days on Market: 70
Listing Updated: 40416
MLS Number: S621933
Property Type: Single Family, Residential
Community: Turtle Rock
Tract: Cust
——————————————————————————
HUGE PRICE DROP. Live at the pinnacle in the hills of Turtle Rock. Beautiful custom home, tastefully remodeled in the last 3 years. On a coveted street where homes rarely come of the market, this jewel estate enjoys panoramic views of rolling hills of Shady Canyon by day & twinkling city lights by night. Classic exterior architecture is complemented with elegant interiors. The one of a kind floorplan is ideal for multi-generational living and provides flexibility with 3 potential master suites, including one downstairs! The grand entry foyer greets you w/a sweeping staircase, 2 story high ceilings adjoining to the immpresive formal great room. Entertain in the huge family room which includes an oversized built-in bar w/granite counters and seating for 6, walk in wine closet, built-in entertainment center, even room for a game table! A chef's dream kitchen has it all & includes 2 islands. Dine in the sunny nook or intimate dining room. Ideal dwnstrs home office/den. Even 4 fireplaces!
immpresive?
HUGE PRICE DROP? LOL! This property is at least a $1,000,000 overpriced. It desperately needs a huge price drop.
I wonder the degree to which your skills would be transferable to overseas land development. You’re right that there will be limited development here, but there has been significant development in China and other overseas countries (mid-East). I don’t buy the news that China has its own bubble because it has been becoming less indebted as a nation, not more.
I’m not sophisticated enough to add to the fund, but good luck with it.
IR, you’ve become an excellent financial writer.
The next step is to do your own syndicated show on finance and real estate, a la Suze Orman, and rake in the millions while educating the wider American public and flogging your books. 🙂
Factoid: Suze keeps 90% of her money in tax-free municipal bonds. Idiot-proof investment.
I second SanJoseRenter’s idea. It’s very difficult to find this type of analysis. Have you looked into it?
What happens when the municipalities default, or am I just showing my ignorance?
IR, good luck with finding those 19 investors.
I think I’ll go conservative and make a measly 3% on my long-term CDs.
Where are you getting 3% anymore? We were getting 5% on ours but then we they expired.
You don’t have to go nuts with _all_ of your moneys, but I figure this fund is a heck of a lot better than the stock market.
And I missed the Gold Train, I think.
If you have Vanguard **Brokerage** Account, you can go online and search for long-term secondary CDs to buy (the 3%ers usually expire around 2017 or longer).
You’ll have to pay a commission though for secondary CDs on the market.
To protect yourself and your investors with this endeavor I would use the excess cash reserves to short major market indexes.
Also I would stick to safe havens like Irvine for the flips.
Goof luck. Very frustrating that you put all of your time into that education. There was no way you could have predicted the housing crash.
I recommend using Planet Realty as a contrarian indicator. It’s worked for Irvine house prices so far.
-Darth
Some helpful advice, first educate yourself on what a contrarian indicator is, then look in the mirror to find one.
Are you being sarcastic? In reality, IR predicted the housing crash accurately.
I’m surprised you used the word accurate. Accurate is one of those funny words that mean different things to different levels of people. You have accurate for the layman to accurate for the scientist with many degrees in between. Then there are many convolutions that lay upon accuracy including timing, efficacy, planning, decision, action..
IR has the entrepreneurial drive and spirit to eventually be very successful.
“IR has the entrepreneurial drive and spirit to eventually be very successful.”
Do you realize how arrogant you sound? For some people it’s a blind spot, and if that’s the case for you, then consider this a little light shining on it.
I realize this as an anonymous message board and all, but I hope you aren’t this arrogant-sounding with the people who live and work around you.
That was a compliment, and I believe he will be extremely successful because of that fact.
IR has called the crash, symptoms, effects, etc. with remarkable accuracy. I understand what accurate means and so do the IHB’s readers. My guess, and true it is just a guess, is that your condescending attitude is compensation for your lack of success and subsequent feelings of inadequacy and inferiority. But, like I said, it is just a guess.
Bad guess but thanks for playing. What do they say? Horse shoes and hand grenades? The irony is fantastic.
It’s very gratifying how every single other reader of this blog is laughing and ridiculing you. You are so horribly discredited, and everyone reading this blog shakes their head daily at what a fool you make of yourself.
However, like I’ve said before, it is also an absolute crime that you will be able to walk away from this profile and re-appear with a clean slate and a clear reputation.
No doubt you’ll show up as a seemingly new poster and talk about how great it is to have found a group of likeminded people. You’ll probably spin some story about how you predicted the housing bust long before it began and how you’ve been warning and telling everyone you know.
We can only hope that your extreme arrogance and poor judgment will somehow reveal itself in your new username or your new posts.
Anonymity is the enemy of accountability.
-Darth
“everyone reading this blog shakes their head daily at what a fool you make of yourself.”
yup.
seems every blog or forum i read has one or more of these types.
they’ve identify this characteristic. it’s the
Dunning-Kruger effect.
http://en.wikipedia.org/wiki/Dunning–Kruger_effect
[quote]
The Dunning–Kruger effect is a cognitive bias in which an unskilled person makes poor decisions and reaches erroneous conclusions, but their incompetence denies them the metacognitive ability to realize their mistakes.[1]
The unskilled therefore suffer from illusory superiority, rating their own ability as above average, much higher than it actually is, while the highly skilled underrate their abilities, suffering from illusory inferiority.
This leads to the situation in which less competent people rate their own ability higher than more competent people.
It also explains why actual competence may weaken self-confidence: because competent individuals falsely assume that others have an equivalent understanding. “Thus, the miscalibration of the incompetent stems from an error about the self, whereas the miscalibration of the highly competent stems from an error about others.”[2][/quote]
Wow, what a time to go through in your career. I’m very glad you’re keeping a positive outlook on it and viewing new opportunity that you see as a great way forward. You have many loyal readers here, so glad to see you continuing to maintain this following and hopefully we will help you kick off your new career.
Thank you IR for maintaining the blog, I enjoy it greatly. Wishing you the best in all your future endeavors.
When was this property sold at 1.6MIL? Was that a distressed sale?
The location is very good, but the view is wrong. The good views are on the NW, N, NE and East parts of the top of the hill, this home faces SW. Which means it’s fine if you think that “city lights” is the pastoral look of Bonita Canyon.
Going per square footage, if you allow for 400 per sq foot then this house would run about a MIL less than asked.
What is sale price per sq. foot in TRidge nowadays? Quality and location wise this home should be in the top 15% of TRidge prices. IMHO.
IR,
At least you can find other marketable uses for your skills. I worked in electronics hardware for 38 years, from repair to production & design & a degree to boot yet that industry is now dead & gone, not to return in my lifetime. (laid off 2.5 years ago, no decent job prospects since) Tech work for that matter is dead, what is not outsourced or done by H1B visa holders is done by people much younger than me who work for cheap.
Your best local sources for the best CD rates are your local credit unions.
I am in tech/electronics and I am overwhelmed with work. Full time job and so much consulting work I can not keep up.
Where I work, we struggle to find qualified engineers. Update your skills with the technologies currently in use and you should have no problem getting a job.
The problem with working in tech is the amount of time required to keep one’s skills fresh. Technology moves very fast. At some point I might burn out from all the work AND learning new technologies.
IR, I think you need a new graphic called “huge” or “oversized”. Maybe it could be a pic of sumo wrestler. Or maybe to illustrate the irony of how often “oversized” is overused, you can show one of those huge houses on a postage-stamp-sized lot.
It’s amusing how $400 per sq. foot on a house like this is considered a reasonable price by some. Our entire concept of the proper value of a California home still needs to go through a major paradigm shift.
It is going to be a long 5 years for those who believe we are getting close to fair value.
As for me, I continue to enjoy renting cheaply and putting away 65% of our salary each month as the knife catchers continue to clear out of the market.
I wish you well as you transition to new employment.
Somehow I stumbled across your blog months ago; perhpas it was because of my interest in real estate as an investment, perhaps because you write so well on mortgage equity withdrawl, and perhaps it was because I experienced Irvine in wintertime in the 1970s and 1980s when I vacationed there from Colorado and your blog reminds me of pleasant vacations. I found the view from the air stunning to see the California desert and the green strip with swimming pools and then the ocean. Vacationing there in winter was most pleasant. That was when I worked as an accountant for a mining company that developed the Platoro Project in Platoro Colorado. I wondered how in the world the company got all the money to prospect for gold and silver. It wasn’t until I read Elaine Meinel Supkis, that I reasoned that it came from yen carry trade funding from the Bank of Japan and its proxy banks at 0.5% interest. Over the years, my mental and physical health worsened to the point that I went through spend down of all assets and ended up living in a Mission and now life in an efficiency apartment. I no longer work. I blog on my two favorite subjects of interest those being sovereignty and seigniorage.
I wrote an article that may be of interest to you and your readers entitled “Bonds Fall And Stocks Rise As Fed Chairman Says Central Bank Might Purchase Debt If Economy Falters”; the theme of which is that August 27, 2010, was a pivotal day in investment history as the US Government Bonds sold off, as investors called interest rates higher on Ben Bernanke’s remarks in a conference from the state of Wyoming
The world transitioned from “the age of neoliberal credit liquidity” and into ”the age of the end of credit”.
Higher interest rates means less money, higher food prices, stock and bond deflation, economic contraction, political devolution and global austerity. The czars of credit liquidity such as Alan Greenspan, will be replaced by financial regulators and credit seigniors who ration credit.
Kondratieff Winter started August 10, 2010 when the currency traders sold the EUR/JPY.
So my life has seen quite a change: Once fresh out of college, I got a job that came when currency traders buying the EUR/JPY and money flowed like water.
So more and more I look to the Sovereign and amazed by the changes I see about me.
Best wishes to you in the changes in your life.
The ‘high end’ – asking prices above $1M are going to get crushed! The higher the price the greater the fall… Consider that the houses bought 10 years ago were purchased for 35-50% of the current ask!
Most of these people that have owned since 1999 / 2000 couuldn’t buy their own house from themselves at the current ask….
This part of the leg down will be interesting because as it falls it will put even more downward pressures on the middle and low end…
my .02
BD
You are right BD, the upper end of the market is being held up by a very vulnerable set of factors outside of fundamentals that IR has eloquently talked about.
There is just not the salary base to support the number of homes above $1 million in Irvine or in many other cities in Orange County.
It’s actually a mathematical equation, when you are looking at monthly payments of $6,000 or more, if you assumed it was 28% of your take home salary per month, your after tax take home would need to be $20,000+ per month.
Granted, I am conservative in the model, but I would not buy a house any other way and in this age of frugality this viewpoint will become the norm.
So how many households in Irvine are taking home $240,000 after taxes each year? And how many houses in Irvine require this income?
That consideration will give us an idea of the slaughter that is yet to occur in the high end of the market.
I agree… simple math and the law of large numbers. A trippling of prices on low end houses is tough on people but a trippling of prices that started at $700K in in 1999 is unbelievable. You have just priced out nearly everyone.
As you said Nick, there just isn’t the kind of incomes needed to support all of the houses in this price range. Either incomes are going to go up 30% a year for 3-5 years or prices are coming down. And, for the people on the blog that don’t believe that rising rates will impact prices… you are silly. It seems everyone only cares about what they can afford monthly. People are maxed on a monthly basis. Any change in rates hits price immediately.
Ask yourself, when was the last time you saw any new benz advertised in anyway but, so many dollars a month??
My .02
BD
The law of large numbers refers to the expected outcome after a large number of observations made during a statistical sequence.
Not meaningful in the context of your post, except metaphorically for bubble flipping and gambling. 🙂
Foreclosures of million-dollar-plus homes on the rise
http://www.latimes.com/business/realestate/la-fi-luxury-foreclosures-20100829,0,7308058.story
Irvine Renter:
If you are serious about wanting to stay in the real estate development/land use planning game contact me at my email address. I know someone who is ramping up an online analytical product and needs people who have an understanding of macroeconomics and land use. I can’t promise anything, but I have a feeling you two may hit it off.
How do I find information on the IHB “flipping fund?” How does one join? How much, etc.?
Wow…are we looking at 900+ on the Irvine Home Inventory chart this week?
This house may be overpriced, but take a look at 19021 Edington, 92603. Both are priced at $574/sq ft, both are “inside the loop” in Turtle Rock… which would you buy if money permitted?
Also, check out the serious photoshopping and overall poor quality of the Edington property pictures. And I must say this is the worst description I’ve ever read for a property. To be sure, the featured property is overpriced, but the other property is downright ludicrous. I walked through this property once and am blown away by how much work it needs… who in their right mind would buy this sort of a fixer at this price? It doesn’t even have a decent view.
Condolences on the loss of your full-time position. Here’s hoping that your entrepeneurial endeavors will bear fruit.
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