This weekend, I have a tiny condo with a huge loss for the bank as well as another brief guest post.
Irvine Home Address … 78 LAMPLIGHTER Irvine, CA 92620
Resale Home Price …… $333,000
You gotta help me out
It's all a blur last night
We need a taxi 'cause you're hung-over and I'm broke
I lost my fake ID but you lost the motel key
Spare me your freakin' dirty looks
Now don't blame me
You want to cash out and get the hell out of town
Don't be a baby
Remember what you told me
Shut up and put your money where your mouth is
That's what you get for waking up in Vegas
Get up and shake the glitter off your clothes now
That's what you get for waking up in Vegas
Katy Perry — Waking Up In Vegas
Writer's Corner
I have been extremely busy lately. The responsibilities of being an entrepreneur are both exhilarating and exhausting. I have many great Las Vegas stories, and when I get a moment to breathe, I will start to write more about them. No drunken debauchery (I don't drink, and I am happily married), but I have been negotiating cash-for-keys, getting into title disputes with Fannie Mae, cleaning out Sanford and Son's property, and generally having a great time.
I have received several emails from investors concerning my progress. I should have the subscribers website up next weekend. I am still setting up the accounting system, and until I have detailed and accurate reports, the website will not be ready. Just so you all know, the fund currently owns 5 properties, and despite the usual headaches associated with this kind of work, I am very pleased with the margins.
Writing for the IHB is a great creative release for me, but I have been so busy, I haven't been able to devote the time to it I should. As I get my systems in place, my job should get a little easier, and I will put more time back into my writing.
Guest Post
THE REAL STORY ABOUT YOUR HOME
Roger Banowetz, Retired City Building Inspector ICBO Certified, cell (714) 401-5980
Second lesson: What about Termites and dry-rot
Here is the truth about termites; it is not like you see on T.V. or what you have been told how it affects your home; termites are in almost every home, and termites don’t just come to your home and stay there until your house is all eaten up. That’s not how it works.
Don’t be afraid. Termites come and go, and they are not monogamist to your home. It takes many years to do significant damage, and most important you do not ever have to use any poison in your home ever. The official code says (paraphrasing) if you have termite or dry-rot in or on the lumber you must remove and replace infected area with new lumber and your home is back to original. Think of it, contractors cover your home and fill the whole home with “harmless” gas, and this gas goes though drywall and beams and kills the bugs but doesn’t leave any poison on your carpet or floors for your children or your animals. Of course, it does, and down the road your animals get sick and you don’t know why.
Some termite inspectors will try to scare you by telling you your home is in danger and that is not true as long as you keep up normal maintaince, this is not magic you can see the same things inspectors can see so if you knock on your door or window frames and termite dust falls out but you don’t see any termites then they were there and are now gone. In that case just replace the infected wood, but if you see termites then there are other ways to take care of the problem. Orange oil is a way, borax is another. The point is don’t be afraid of your home. If you have questions call your local building dept. Let your city be your friend, and if have concerns about your city please call me and I will be your friend.
Housing Crash News
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Fri Oct 22 2010
Bay Area house sales continue slump; San Francisco prices decline (latimesblogs.latimes.com)
Calif. home sales drop 18 percent in Sept. (mercurynews.com)
Drop in Mortgage Applications Reflects Foreclosure Crisis, Rising Rates (dailyfinance.com)
House goes from $3.1M to $1.85M in 3 years (huntingtonhomes.ocregister.com)
Hamptons House Prices Fall as Buyers Seek Lower-Priced Retreats (bloomberg.com)
Calif. Pensions Cost Each Resident $3,000/year (cbs13.com)
If we all smoke a lot of dope, we can close California's budget gap (money.cnn.com)
Credit Card Use Bolsters Self-Worth (miller-mccune.com)
Eviction battle looms over foreclosed Simi house (vcstar.com)
Fannie, Freddie bailout could nearly double in size. No surpise there. (washingtonpost.com)
The Lawyers Who Fight Foreclosures (online.wsj.com)
Mortgage Mess: Shredding the Dream; Major Fight over Enormous Losses Yet to Come (Mish)
Banks' legal troubles mount as everyone seeks payback (miamiherald.com)
China Hides Rampant Inflation in Money Binge (bloomberg.com)
American housing still too expensive (doctorhousingbubble.com)
Patrick's Property Finder Now Includes Fair Value Estimates (patrick.net)
Actually, Obama is a pretty good president (politifact.com)
Christine O'Donnell Witch Ad (youtube.com)
Christine O'Donnell Witch Ad Parody (youtube.com)
"The Rent Is Too Damn High" Party (biggeekdad.com)
Thu Oct 21 2010
Recession Worse in SF Than Dot-Com Bust, Distress Index Shows (baycitizen.org)
SoCal housing market 'on hold' (ocregister.com)
Private islands tough sell in current market (seattletimes.nwsource.com)
Graph of balance of power between buyers and sellers (baltimoresun.com)
Where Is The Housing Recovery? (forbes.com)
Statement On The Kotok Plagiarism Used in Forbes Link Above (gonzalolira.blogspot.com)
Chicago Sheriff Says NO to Enforcing Foreclosures (4closurefraud.org)
Answers to Your Questions on the Foreclosure Crisis (economix.blogs.nytimes.com)
Most shocking discovery yet about how banks hid their toxic mortgages (slate.com)
Largest Financial Swindle in World History (georgewashington2.blogspot.com)
Now THAT Was a Gold Bubble (timiacono.com)
Officials hint Fed on the verge of more easing (finance.yahoo.com)
English mortgage lending drops to 10 year low, despite low interest rates (telegraph.co.uk)
Fed Wants Banks to Buy Back Some Bad Mortgages (nytimes.com)
PIMCO, Blackrock, Fed Seek to Force BofA to Repurchase $47 Billion in Bad Mortgages (Mish)
Bank of America Accused of Racketeering in Foreclosure Lawsuit (bloomberg.com)
US Housing Market Foreclosure-gate Doomsday Revolution Erupts (marketoracle.co.uk)
Intermission, at Best, in Battle Over Foreclosures (nytimes.com)
Foreclosure freeze could put security clearances at risk (washingtonpost.com)
How Can I Profit The Most On The Coming Legalization of Mortgage Fraud? (dvorak.org)
Wed Oct 20 2010
10% Unemployment; Unemployed Don't Buy Houses (Mish)
Subprime Debacle Act II (seekingalpha.com)
From $1.5 million down to $630,000 in Huntington Beach, CA (doctorhousingbubble.com)
'Foreclosure Mill' Employees Got Gifts For Altering Documents (huffingtonpost.com)
Pimco, NY Fed Said to Seek BofA Repurchase of Mortgages (bloomberg.com)
A market with no mortgages (patrick.net)
How Much Will Foreclosures Weigh Down Big Banks? (dailyfinance.com)
Mortgage Buybacks May Cost Lenders $120 Billion (businessweek.com)
Why should we pay taxes if borrowers don't pay mortgages? (globalresearch.ca)
House Stealing (lewrockwell.com)
Fed Ignores Gold, Targets Higher Inflation And Plays With Fire (forbes.com)
U.S. Infrastructure Spending: No Time to Get Cheap (businessweek.com)
Arguments For Restoring Top Tax Rates (businessforsharedprosperity.org)
Thank You Julia G. ($10) for your kind donation.
Tue Oct 19 2010
Barney Frank Is Anything But On Housing (investors.com)
Government's mortgage subsidies are screwing families and houseowners (finance.yahoo.com)
The higher the price, the harder to sell the house (lansner.ocregister.com)
Shilling Thinks Housing Will Fall Another 20%, But Owners Will Get Bailed Out (forbes.com)
The Second Leg Down of America's Death Spiral (gonzalolira.blogspot.com)
Why Germany Has It So Good — and Why America Is Going Down the Drain (informationclearinghouse.info)
Our Culture of Financial Fraud and the Anger of the Honest (Charles Hugh Smith)
They're still smoking our old dope in Australia (news.com.au)
India: Manic buying before a likely panic collapse (indiainfoline.com)
Witness: signatures were faked at foreclosure firm (signonsandiego.com)
Victims of robo-signing scandal won't get their houses back (money.cnn.com)
Florida community feels ripple effects as paperwork issues stall foreclosures (washingtonpost.com)
Bank of America starts thaw in foreclosure freeze (news.yahoo.com)
Mortgage Investors Join Outcry Against Banks (propublica.org)
Wells Fargo Prepares For Tsunami Of Loan Repurchase Demands By Defrauded Investors (zerohedge.com)
Forget The Foreclosures, Here's The Simple Thing That Is Crushing The Banks (businessinsider.com)
The New Tax Man: Big Banks And Hedge Funds (huffingtonpost.com)
Mon Oct 18 2010
Even well-off borrowers find lenders reluctant to lend (msnbc.msn.com)
32% of Houseowners Expect Prices Fall Next Year, Highest Short-Term Pessimism Ever (Mish)
House Sellers Fail To Cut Prices Enough (rismedia.com)
From a Maine House, a National Foreclosure Freeze (finance.yahoo.com)
Charting the Foreclosure Crisis's Far-Reaching Consequences (dailyfinance.com)
Winners and losers from a foreclosure holiday (washingtonpost.com)
Title company threatening to sue me! (patrick.net)
Banks Fumble Amid Flood Of Foreclosures (npr.org)
Banks were paid 100% for defaulted loans in HAMP (4closurefraud.org)
New Bank Bailouts Under Dodd-Frank Within 12 Months (dailybail.com)
Angelo Mozilo gets to keep 85% of his $470M in ill-gotten gains. What justice? (reuters.com)
Scrutinizing the Elite, Whether They Like It or Not (nytimes.com)
Dreams of the middle class deferred by the recession (csmonitor.com)
Millions of dollars in welfare goes to pay bank fees (sfgate.com)
For America's Future, See Japan (nytimes.com)
No Social Security Increase Next Year (nytimes.com)
Stocks Track Hyperinflation (businessinsider.com)
Can You Live Without Money For a Year? (motherjones.com)
Bank of America Announces Trivial Technical Problems With Small Number of Mortgages (ritholtz.com)
38% off the peak
The bank is losing a fortune on this tiny condo.
Irvine Home Address … 78 LAMPLIGHTER Irvine, CA 92620 
Resale Home Price … $333,000
Home Purchase Price … $506,000
Home Purchase Date …. 12/29/06
Net Gain (Loss) ………. $(192,980)
Percent Change ………. -38.1%
Annual Appreciation … -10.3%
Cost of Ownership
————————————————-
$333,000 ………. Asking Price
$11,655 ………. 3.5% Down FHA Financing
4.23% …………… Mortgage Interest Rate
$321,345 ………. 30-Year Mortgage
$63,036 ………. Income Requirement
$1,577 ………. Monthly Mortgage Payment
$289 ………. Property Tax
$150 ………. Special Taxes and Levies (Mello Roos)
$28 ………. Homeowners Insurance
$267 ………. Homeowners Association Fees
============================================
$2,310 ………. Monthly Cash Outlays
-$142 ………. Tax Savings (% of Interest and Property Tax)
-$444 ………. Equity Hidden in Payment
$18 ………. Lost Income to Down Payment (net of taxes)
$42 ………. Maintenance and Replacement Reserves
============================================
$1,783 ………. Monthly Cost of Ownership
Cash Acquisition Demands
——————————————————————————
$3,330 ………. Furnishing and Move In @1%
$3,330 ………. Closing Costs @1%
$3,213 ………… Interest Points @1% of Loan
$11,655 ………. Down Payment
============================================
$21,528 ………. Total Cash Costs
$27,300 ………… Emergency Cash Reserves
============================================
$48,828 ………. Total Savings Needed
Property Details for 78 LAMPLIGHTER Irvine, CA 92620
——————————————————————————
Beds: 1
Baths: 1 full 1 part baths
Home size: 1,135 sq ft
($293 / sq ft)
Lot Size: n/a
Year Built: 2005
Days on Market: 15
Listing Updated: 40459
MLS Number: P755572
Property Type: Condominium, Residential
Community: Woodbury
Tract: Laca
——————————————————————————
According to the listing agent, this listing is a bank owned (foreclosed) property.
OPEN FLOOR PLANE 1 BEDROOM, 1.5 BATH WITH BONUS ROOM, LIVING ROOM, INSIDE LAUNDRY ROOM, RECESSED & UNDER CABINET LIGHTING, UPGRADED FLOORING AND COUNTERS, APPROX. 1135 SQ FT, ASSOC POOL, SPA, COURTYARD, BBQ AREA, TENNIS COURTS, PLAYGROUND, FIRE PT, FITNESS CENTER, HOA DUES $266.98 MO, CLOSE TO FREEWAYS, SHOPPING, PARKS & ENTERTAINMENT
If I ever board a flight that turns out to be on an open floor plane, I will flee back to the gate and cheerfully forfeit my fare.
As for fire points: They just sound ominous.
I have known men with terrible English but a better work ethic than the clown who wrote this. Life is not fair.
Let’s say that you buy this apartment, and live in it for 3 years, but then need to move for a new job (not unlikely for a professional early in their career who might live in a 1bd).
If prices stay even, you have invested ($2310-$142 tax rebate X 36 months = $78k, plus $22k dp/costs, so $100k. And then you sell for $330k -6% = $310k, while your note is for $320k – ($444 x 36mo) = $305k. Yay, you make $5k on your “hidden savings”.
so your total costs on your 3 years there is $95k, or $2700/month.
$2700/month to live in a 1bd that ties you down in the job market.
fail.
Great analysis. And precisely the kind of situation I always worry about. Thanks, FCM.
Moreover, let’s say you decide to rent the place. I’d love to see some more analysis on that. My guess is that you’d be bleeding money…
Where do you get “3” years from? If your only planning on living somewhere for three years you SHOULD NOT BE THINKING OF BUYING. The old rule (before the bubble price appreciation) was if your not planing on staying for at least seven years or buying is not cheaper than renting… Then rent. PEROID.
Please, no one should think of buying if they only plan on staying “three years”.
Who plans on living in a 1-br for 7 or more years, though?
“IF prices stay even”
Not arguing here at all but that indeed is a BIG “if”
Throw in 10% interest rates and see how much of a fail…
I dated a girl who just purchased a 1 bd condo in HB for too much and told her it was a terrible investment. Needless to say, never went on another date with her!
Did the bankers or shareholders lose the money? Or will it be the taxpayers loss in at the end? The TARP money is being paid back, but the TARP money is a temporary stop gap measure so the liability can be transferred to the taxpayers.
The bankers have collected their cut off the top. They don’t make up of any loss. I really feel bad for the bankers when they receive less bonus for lower fees collected, but then again the retention bonus partially made up for the reduced preformance bonus.
The risk in cash flow properties are:
1. No renter
2. Bad renter
3. Higher RE taxes and other expenses
4. Lower future rents.
5. Replacement cost and lower RE price when the interest rate increase (unless you think rates will go to 4%).
The US needs to create global unrest and tension, but not to a fully scale global war. The US needs to be selling high tech weapons to both sides again — WW I and WWII without actually entering into the war to revive the economy.
Uh…. could we find industries other than weaponry and war to revive our manufacturing? We’d better.
How about power generation? We will be needing about 4X as much as we have, and we will need something renewable that minimizes carbon emissions. May I suggest a greatly modernized and revamped nuclear power industry based on the ultra-safe thorium fuel cycle? India and China are going full bore on the development of the LFTR while we are still building gas and COAL plants, and all the nuclear plants we are planning are the ultra-expensive uranium Gen 3 plants.
We will be needing all we can build if we want to ELECTRIFY OUR TRANSPORTATION. We will need to do this if we want to even have motorized transportation in a couple of decades. We could have built a Rapid Rail (100-150MPH) network that could supply service to every city and town in the U.S. with a population of 10,000 or more, with one third the money we have spent on bailouts and other mitigation for this financial debacle.
These two industries would greatly benefit every American of every socio-economic bracket. They would provide tens of thousands of jobs for people with a wide array of skill sets. They would revive our manufacturing and mitigate the “brain drain” of highly specialized engineers and other extremely skilled people to China and India and South America. They would provide the wealthy with investment opportunities in industries that might have a longer life and produce better returns than the real estate and financial pyramid schemes and the disasters they’ve produced.
We are letting the rest of the world trump us in R&D and the development of PRODUCTIVE industries and advanced technologies we will need badly to run our civilization in the future.
I agree with you, but more difficult then building the rail network will be derailing the auto industry lobbyists.
Sure. As long as it is free of govt subsidy I am all for it.
Well, another thing that’s a bit deceiving is the 3.5% Down FHA Financing. How many people would actually qualify for this? I’m guessing that at today’s current rates, it would be more like a 4.4% standard 30-year, no?
Just for fun go to this link: http://www.ars.usda.gov/is/br/fullstop/infestationmaps.htm
Too Bad Clorodane is banned.
Formaosan Termites can eat your house down – quickly
Look at that LA hot spot.
Enjoy
What L.A. hot spot? I see a big red patch on San Diego county and nothing on L.A. or Orange counties.
I found Roger’s mini-article mildly interesting, and with much less painful English mistakes than the last one, but I’d like some sort of reference for the claim that fumigation definitely equals future health problems, as that’s a fairly radical claim I’ve never heard before.
1 bd, 1 1/2 bth priced for 1/2 a mill is probably a fair price…….in Manhattan.
Upper East Side Condo For Sale
For Irvine, that price’s in PR’s territory 🙂
It’s not like that condo is half the size, 15% more expensive, with an HOA 4-5X, no nothing like that,,, great comp LOL.
But, dontcha know, the “joy of ownership” is worth $500 over equivalent rent any old day 🙂
Gonzola Lira writes in the linked article Mulligan Mortgages – The Banks’ Only Way Out: ”A mulligan is a golf term. It’s when your first shot pretty much sucked—so your golf partner lets you take another shot, with no penalty. It’s the gentlemanly thing to do, as it were. A way to keep a lazy Sunday afternoon game interesting.
Both the mortgage laden intermediate mutual bond funds, such as GSUAX, and the mortgage backed bond ETF, MBB, rose stunningly this last week, giving credence to the concept that the Fed is going to not only be buying short therm bonds, SHY, and those in Pimco’s Mint, MINT, but the mortgage backed bonds as well, in its QE II.
I appreciate Gonzola Lira’s thoughts as they tie into what I believe we will see in the future.
The Dodd Frank legislation established a Federal Financial Regulator, that being the Treasury Secretary, and granted him wide discretionary power of the economy.
From the Robert Wenzel, EconomicPolicy Journal article Secret SEC Meeting with Goldman Sachs and JP Morgan, I conclude that in the US, through an October 6, 2010, meeting of bankers, investment bankers and SEC officials, that an elite group of stakeholders has arisen to act as a “banking, lending, credit, and investment Regulatory Council”, supporting the Financial Regulator in overseeing the US economy.
I believe that the Dodd Frank legislation, empowers the Federal Financial Regulator, to intervene in the foreclosure and mortgage securitization issue; and that at some point in the future he will provide a solution that integrates the banks with the Government in state corporate governance over housing, bandking, and mortgage securitization. Perhaps, Annaly Capital Management, NLY, may have a role to play, given that it has done so well in the Government debt field.
Perhaps this solution will involve purchase of mortgage backed securities, debt foregiveness, and leasing of bank owned properties.
And of course, the US Dollar, $USD, will go down in flames. All I can ask is: “Got Gold?” … Yes one should definitely be invested in gold bullion.
yenguy keeps holding strong, and while it seems a bit far fetched, i have this eerie feeling each time i read yenguy that this is actually going to happen. this is less “black swan” than before and looking at our govt/banking situation, perfectly possible.
Interactive global overview of housing prices and rents
http://www.economist.com/blogs/freeexchange/2010/10/global_house_prices
$1500/mo for a 3/2 home in Irvine:
$1500 a month
Granted, it’s not a great looking one but the price….wow. Simply amazing.
Rental parity is going to get whacked in Irvine.
Chris, I don’t think that’s a legit posting. I did a quick search and found the same home for $2,300, which is a bit more of what I’d expect.
http://www.socalmls.com/CA/IRVINE/92604/rentals/address-not-available-from-broker-55070179
My guess is the Craigslist post is from someone claiming to be out of the country and that you send them money via Western Union as a deposit.