We wrap up our week of music from Children’s Christmas shows with this old favorite.
Down to the village,
With a broomstick in his hand,
Running here and there all
Around the square saying,
Catch me if you can.
He led them down the streets of town
Right to the traffic cop.
And he only paused a moment when
He heard him holler “Stop!”
For Frosty the snow man
Had to hurry on his way,
But he waved goodbye saying,
“Don’t you cry,
I’ll be back again some day.”
Thumpetty thump thump,
Thumpety thump thump,
Look at Frosty go.
Thumpetty thump thump,
Thumpety thump thump,
Over the hills of snow.
.
This particular street in Quail Hill is showing signs of stress. We profiled two properties on this street in the post Reunion Rollback. The rollbacks are still coming. This one is from 2004.
Asking Price: $529,950
Income Requirement: $132,487
Downpayment Needed: $105,990
Purchase Price: $567,500
Purchase Date: 12/29/2004
Address: 109 Reunion, Irvine, CA 92603
1st Mortgage $564,000
HELOC $70,500
Total Debt $634,500
Beds: 2
Baths: 2
Sq. Ft.: 1,447
$/Sq. Ft.: $366
Lot Size: –
Type: Condominium
Style: Spanish
Year Built: 2005
Stories: Three or More Levels
View(s): Park or Green Belt
Area: Quail Hill
County: Orange
MLS#: P611008
Status: Active
On Redfin: 7 days
From Redfin, “Numerous amenities adorn this spacious upscale Quail Hill Condo. 2 Bedrooms, 2 full baths. A Great room design with built in desk and romantic fireplace. clean and sleek gourmet kitchen with stainless still appliances, granite countertops and custom design backslash. Ceramic tile floors and upgraded carpet. Assoc Pool, Assoc Barbeque, Assoc Gym/Exercise Room, Assoc Sport Court, and Assoc Tennis. Great Corner Location.”
What is a backslash? Sounds like a karate move in a horror film.
Do the “still” appliances work?
A “clean and sleek gourmet kitchen.” I am impressed. Since it is “clean” does that mean it comes with lifetime maid service? I would like to thank Shhhhh for our fabulous new Gourmet kitchen award. These will be prominently displayed on any listing mentioning a gourmet kitchen from this day forward
Did they really need to write “Assoc” 5 times?
.
.
So how much will the lender lose on this one? Assuming the HELOC is fully tapped, and assuming the owners never made more than the minimum payment on their negative amortization loan with the 1.25% teaser rate, the lender will lose over $137,000.
Anybody want to invest in second mortgages in California?
This has been an eventful week at the Irvine Housing Blog. Monday’s post was linked by several national websites. That post was viewed by more than 4800 people. Our traffic was well above average for the week. Make sure you come by Monday as the post is titled “What is a Bubble?” It should help everyone fully grasp the psychological factors that drove our real estate prices into the stratosphere (and subsequently into the dirt.)
I hope you have enjoyed the past week as much as I have, and come back next week as we will have more Christmas music and we will continue to Chronicle ‘the seventh circle of real estate hell.’
Have a great weekend.
🙂
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is this one of those “Better to have HELOC-ed and lost (*) than to never have HELOC-ed at all” ?
(*) lost tax payer money that is since there is a bailout in the works
—–
It used to be you had to wait until you sold to see your profits, and there was some uncertainty as to how much you would get. HELOCs and second mortgages changed all that.
I love these posts with all the grammar and misspellings because I add the name of the agent (and agent’s office) to my “Do not hire when looking for my house in 2010 backslash 2011” list.
pot, kettle, ‘black.’ “… grammar errors …”
What the heck is a romantic fireplace…………?
I red your post a couple of times and just got the backslash reference. Very funny!
Congratulations on the eventful week. I came here through The Big Picture blog by way of John Mauldin’s newsletter.
But ole Peter (must have been one of his lackeys taking care of the MLS) is a renowned short sale specialist:
http://realestateexpr.com/whyus/
I’m curious about what you all think about this… How much of what they state regarding a Short Sale is true:
http://realestateexpr.com/shortsale/
What are the Benefits of a Short Sale?
The benefits to homeowners:
– Homeowners can avoid foreclosure and the embarrassment of eviction.
– There are no up front costs or out of pocket expenses to close escrow.
– Homeowners closing a Short Sale avoid the damaging effects of foreclosure on credit reports.
– You can even stay on the property during the Short Sale process at no cost.
The benefits to lenders:
– A Short Sale is a more cost effective solution than a foreclosure.
– Short Sales allow lenders to limit their percentage of foreclosed loans to meet their investor’s guidelines.
– Lenders don’t have to evict the homeowner, rehab the property, or market the property for resale.
Market prices are falling with incredible velocity right now. Let’s just say this house sells for $500,000 ($345/SF). That would be a 12% decline from a Dec-2004 purchase price. Holy smokes!
And the real pain in the So Cal marketplace won’t start until Jan-2008 and will continue until year end 2008, due to the ARM reset calendar.
I have to zoom in very close on Redfin to filter down below 500 listings. The flood of inventory on the market is shocking…
Inventory in Irvine is down into the low 1100 range, which is 150-200 units less than peak during selling season I believe. I watch Tustin as well, and their inventory is staying very high, close to peak during selling season. Saw a little rash of new listings, a number in Irvine, right on right after Thanksgiving. People must have been holding back so they didn’t have to move before Xmas…
I hope the latent supply and short/distressed sale inventory hits the market in force come Spring. That’ll serve as a nice catalyst to get prices dropping across the board…
Hey Maestro, what kind of spread are you seeing between conventional 30 years and jumbo ones? I used Marketwatch to follow the market and they show rate trends via bankrate.com. Looks like the spread between prime and jumbo is increasing again… On an average basis, bankrate.com is showing it is almost a .9 spread between the two. Had been down in the .7-.75 range recently if I recall.
“Homeowners closing a Short Sale avoid the damaging effects of foreclosure on credit reports.”
I can’t see how that one is true. How could you possibly stiff the bank for $100K and not have it impact your credit?
One that offers long walks on the beach and roses?
Definition of insanity: Paying 567k for a 2 bedroom apt in the middle
of a parking lot. Why didn’t the psychiatric professionals step in and have these purchasers committed?
The ARM reset calendar is now in flux with the current proposal of the US Gov’t working to freeze terms.
IHB discussion
Good point tealeaf. It will be interesting to see how this affects everything. It may end up delaying the inevitable and leading to more of that “soft landing” we all kept hearing about. But I doubt it…
You forgot to add candle light dinners:)
I just read about this proposal and I dont get it. I already know they came to this same kind of agreement in California. What does freezing the rates do but put off the inevitable? Are the banks going to hold rates until everyone forgets what they were doing and lending practices go back to being crazy so that these people who can’t afford their houses can actually sell them at the prices they think they are worth, instead of being forclosed upon? Ugh. Looks like I’ll keep on renting and saving, although I am hardly seeing the purpose to that now.
Note the phrasing : “avoid the damaging effects of foreclosure on credit reports.” – but *not* “avoid damage on credit reports.” So the short sale could hypothetically hit you so hard you couldn’t even rent without a 6 month deposit, but the statement would still be technically true. Ah, clever phrasing.
A little off topic here, but what does “Temp. Freeze in Subprime Rates” mean? Fed is trying to workout a deal with banks to temp. freeze rates that are due to reset in the future. Is this one of the election policies of Bush Administration? How does this affect our projections of housing collapse in OC?
They’re doing what makes good business sense. Locking people in to above market rates that have already demostrated they can make the payment at the above market rate.
They are talking about an ARM that will be set at 7-9% and then adjust 5-7 years out. Granted, they don’t have the best credit, but that’s a pretty good rate for an investor on someone that has already demostrated they can make the payment, won’t have a payment shock in the future, and probably has some nasty terms in it if the borrower goes to default anyway.
This isn’t locking people at their 1.25% minimum payment, it’s locking them on the initial ARM rate, which for an option ARM was typical 7-8%.
If anybody thinks people in California will continue to make payments at 8% on a house that they have no equity in and is losing $50,000 a year, I say baloney.
The death knell for borrowers in California isn’t the loan reseting from 8% to 11%, it’s when the minimum payment runs out and the payment jumps from $2100 to $4400.
The “freeze” is just putting lipstick on a pig. The unintended (or maybe it IS intended) consequence is that lenders will shy away from ARM loans. And we’re not talking about subprime or flakey loans, we’re talking about real stuff here.
If I’m loaning my money, I will price it at a lower rate because the borrower, not me, is taking the risk of interest rate fluctuations. And that’s exactly what you see in the real market. Now, if I have to assume the risk that the government is going to coerce (read: force) me into holding the teaser longer than the contracted period, I’m going to either (1) price that risk into my interest rate or (2) shy away from ARMs altogether. This will result in higher rates and fewer people who qualify for mortgages.
The net result will be to make the current mortgage crises even worse, futher depressing the granting of credit and accerating the downward spriral in housing prices. Great news for any potential buyer (assuming you have a down payment and good credit). Not so great news for current homedebtors.
Thanks buster. That’s what I thought too. This credit crunch is no easy fix and trash has to clear the system. When Fannie Mae and Freddie Mac lost billions of dollars (there are backed by the Govt.) we can assume what happens to the ones that are not backed by the Govt. Entire OC is in Junbo loan category and will be blown up. I think Fed is manipulating the markets trying to stay afloat
It’s interesting to note that even realtors in Orange County are advising me to postpone purchasing a home until “the end of 2008, or the middle of 2009”. Am I to believe that these people actually have my best interests in mind, or are they trying to mitigate the actual damage from the housing downturn by providing an overly optimistic estimation of its reversal? I’m inclined to believe the latter, and would double their estimates. Thoughts?
-Dan
Freezing the initial ARM rate will not change the fact that when borrowers either purchased or refinanced their home, the value has significantly dropped since then. They borrowered way too much than what the collateral is worth now. If I took out 90% of my equity in 2005 on an option arm and made the minimum payment since and now I am in trouble, freezing the rate will not change anything. I will still have payment shock going from a 1% rate to a 8% rate, and my property isn’t worth what I owe on it. This is not only the case for option arms, it is with anyone who purchased or refinanced above 90% loan to value within the past 3 years. It will get worse as values continue to drop and then it will hit anyone who purchased or refinanced at a high LTV in the past 4 years….and so on.
i completely agree. this is inevitability delayed; however, it softens the blow somewhat as folks will be in less of a hurry to leave “their” homes when rent payments are higher than/equal to the stucco box they’re in now. plus, seven years is a long time to have a teaser rate frozen and i would guess the borrower would take her chances and stay put.
At least they could have made the bed before taking the picture in the bedroom…
Advising someone not to buy now is a no-brainer, but picking an arbitrary date more than a year out and advising that’s the date when you should buy is more than ridiculous. I’d expect as much from a real estate agent…
All this talk of bailing out poor innocent homeowners who were hoodwinked into taking out ARMs irritates the heck out of me. The reason these people took out ARMs and other exotic mortgages was because they didn’t qualify based on a 30 year fixed.
I didn’t buy back in 2003 because I didn’t qualify for the required loan amount based on a 30 year fixed. I didn’t take out an ARM because I knew it would reset and I would get killed. If I knew that the government would bail me out maybe I should have taken one out. Instead of living in my dumpy 1 bedroom apt I could have been living in a nice house all this time. These people need to return to renting.
Hey some of us took ARMs because we wanted a sweet deal and figured we’d either refi or sell before the ARM adusted… I refied into a 5/1 ARM (from a 30-year fixed) in August of 2003, at 3.75%. I have $350K of equity in my home at current prices so I won’t have any trouble refinancing if I am still there when it resets next year. Heck, even if it drops back to 2001 prices, I won’t have an issue refinancing. I did make a mistake in figuring that we’d upgrade/upsize within five years, but as long as your income has been growing and you have been paying down principal, a refi before reset is not problematic even in this environment.
I could have taken a 30-year fixed in August 2003 at 5.75% or so and paid approxmiately $25K more interest expense over the past four years, but I’d have just been pissing away money and making the lender unnecessarily richer. Personally I’d rather be the one getting richer vs. helping to fuel the corporate Countrywide jet. That $25K put into the stock market instead of Countrywide’s coffers has turned into $75-100K now and my house is still worth the same today with my lovely 3.75% ARM then it would have been with a 5.75% 30-year fixed.
If you know you aren’t going to own a particular home for the long-term, why take a 30-year fixed loan?! Maybe in your case you were looking for the long-term place, but for some people, especially those like myself that were certain they would be starting a family and wanting to move in a relatively short amount of time, ARMs make sense. My place was too big for just the wife and I but is feeling pretty small with two kids under 4 years old… We’ll be moving on soon to something larger and if I’d have borrowed with a 30-year, I’d have paid a premium for two-decades of locked in rates I wasn’t going to use.
Market timing is very important. While you are waiting for home prices to come down to a realistic level, it is important to save a larger down payment. For example if you buy a house for 500k and put 20% as a down payment, your down payment will be 100k. So you’ll be borrowing 400k from the bank. Say your interest rate is 7%, and you’ve got a fixed rate 30 year mortgage. Your total interest will be $558,035.59 on this loan. So at the end of the day this 500k house will cost you $558,035.59 interest+400k principal+100K cash down= $1,058,035.59. This is with a 20% down payment! My point is if you save an extra 10K for the down payment you’ll end up saving around the same amount in interest payments. While your waiting for the market to come down, you should same up as much money as you can for a down payment. If you can’t then at the least get a loan that has no prepayment penalties. Here is the url for the payment calculator. http://mortgages.interest.com/content/calculators/monthly-payment.asp
At this point, advising someone to wait to purchase is commendable, and I wouldn’t nit pick about the time frame they propose.
I was thinking it recites poetry to you while you sit by it.
“If you know you aren’t going to own a particular home for the long-term, why take a 30-year fixed loan?!”
If you know you aren’t going to be in a home for the long term, why own?
No reset will happen!!!!!!!!!!!! Paulson is going to order all banks freeae the rates.
“Hey you mean banks! You are not allowed to collect money at the previously agreed rates! You selfish banks!”
It used to be you had to wait until you sold to see your profits
You forgot to add that real estate always goes up.
But when it doesn’t, somebody is stuck making payments on a wreck. Certain banks are going to be completely wiped out, because the first holder is going to reset, and trigger a foreclosure, wiping out the second. There will be blood on the streets, because business is business.
Inflation.
Congratulations on the traffic increase IR et al. You deserve the spotlight- though I get a bit possessive about sharing our beloved IHB.
Could you do a followup on the status of some of the homes profiled in the last few months? It always brings a smile to my face when I recognize them on Redfin’s unsold after 90+days. But I wonder if any have sold…….?
The spread is close to a full point, even more.
This place is right by me and I am almost positive I remember seeing the garage open and there being an E500 and new BMW 5 series inside. I did see those exact vehicles in the garage of a unit that was for sale on Reuinion and I’m pretty sure this was it. There was an open house a few months ago and I walked by and the garage was open.
Why does someone who owns a 500k(realistic value near or below 400k) starter condo have vehicles totalling over 100k???
Inflation.
I don’t think it’s unreasonable for some people to place a premium value on ownership (where they’d knowingly pay
I think allot of people in OC and especially in Irvine, Newport area try to floss (act like they are rich). And there are allot of people who do have money but stay humble. They drive nice cars as well but there homes are well within range. Many of the people that bought off of Shady Canyon did so in 2005. Many of these people are now eating crow on there homes, just like these guys.
The insanity of keeping people underwater in mortgages doesnt make sense in a macro economic environment, especially if they are in a DEPRECIATING ASSET.
It was one thing when they were apreciating and people were using their homes like an extra paycheck and buying goods, but now?
If you keep these poor souls in their homes they will be living on Top Ramen and Hamburger Helper for the next 10 years. Not buying new gadgets, cars and boats with their HELOC money.
Keeping people buried in an inflated mortgage will NOT keep the U.S. form avoiding a recession. WTF is wrong with everyone, isnt a recession just part of a normal business cycle?
“If you know you aren’t going to be in a home for the long term, why own?”
Because sometimes it’s cheaper than renting on a cashflow basis, could provide for a tidy sum of equity in the form of appreciation as well, and provides a host of other tangible and intangible benefits. It’s pretty much not the case any longer that you can buy for less than the cost of renting, but definitely was so back in 2000-2003.
If I had not owned my place over the past six years, I would be many of hundreds of thousands worse off from a net worth perspective right now and spending at least $1000 more per month on housing expenses.
EGO is my answer to your question. With such big egos like the Fed Reserve Chairman and other government executives, they would like to delay even if it just means fighting the symptoms – at least the roof will fall on someone else’s head – seems to be their hope!
“could provide for a tidy sum of equity in the form of appreciation as well”
That part seems to be losing its luster… It is also what drove the bubble.
I hope it all works out for you. I wouldn’t want to take on the interest rate risk you are comfortable with. What happens at the end of the term if interest rates are higher? Suddenly you could be looking at a situation where your payments now exceed comparable rentals, and values would be depressed making for difficulty in selling and possibly refinancing. The advantage of a fixed-rate amortizing mortgage is you control when and how you refinance, if at all. I think anyone would have been better off refinancing into a 30-year fixed when interest rates were at historic lows.
“The insanity of keeping people underwater in mortgages doesnt make sense in a macro economic environment, especially if they are in a DEPRECIATING ASSET.”
That is exactly why so many will walk away from their properties when the going gets tough. The lenders will hope freezing rates will help, but it won’t.
“It was one thing when they were apreciating and people were using their homes like an extra paycheck and buying goods, but now?”
When the going gets tough, most will just walk away.
“If you keep these poor souls in their homes they will be living on Top Ramen and Hamburger Helper for the next 10 years. Not buying new gadgets, cars and boats with their HELOC money.”
The fantasy is that this fix will prevent that outcome and properties will somehow begin to appreciate in value again and the music will keep playing.
“Keeping people buried in an inflated mortgage will NOT keep the U.S. form avoiding a recession. WTF is wrong with everyone, isnt a recession just part of a normal business cycle?”
It should be. Recessions purge excesses from the system. They have become a natural part of the business cycle because when an expansion goes on too long, Ponzi financing takes over and the gains become unsustainable. The recession, if it is allowed to run its course, brings balance back to the financial markets preventing a misallocation of resources caused by inflated asset values. Think of all the investor money wasted on the internet boom of the late 90s. Without the recession of 2001 and subsequent dramatic decline in internet stock prices, we would still have thousands of internet companies with no sales providing no benefit to society.
I admit it is nice to have control over the timing of the refi. I purchased in 2001 and refied three times between 7/01 and 8/03… Typically makes sense to refi every half point or so drop in rates provided you make sure you avoid prepayment penalties in your mortgage.
I guess my point is that there are good situations/scenarios where ARMs can save you money and still provide a sufficient term to protect you from payment shock. Using an ARM is not the most conservative thing you can do, but it’s not necessarily a psycho crazy bad choice in every situation. Sometimes the proof is in the pudding, and my choice of ARM has saved me a bundle. I have about a zillion friends that refied into 30-years back in 2002-2003 that have since sold their places and lost the benefit of those loans. All they did was sign up to pay more interest in return for security they did not need.
I think our economy is headed into a nice ugly patch, and I expect interest rates to be lower in the short to mid term. If I bought a bigger place today, I’d get a 5/7 year ARM and expect to refi it within the next 1-3 years. Jumbos have a big risk premium on them right now which can’t last forever…
Good work IR, the fruit of your labor is paying off with increased national exposure, and more web hits.
You sound like jedi master obi-wan kenobi.
I can actually defend freezing rates, somewhat.
I don’t think it’s going to have a huge effect on the downturn, but take a look at this from the Bank’s standpoint.
1. They have an avalanche of new foreclosures coming at them.
2. Not only was this a surprise to many of them, but they do not have the systems nor the people to go from a REO portfolio of 100 to 3000 in less than a year. Oh, and then watch that portfolio taper down in a few years to say 300. Just try hiring, training, finding office space, etc. for that many people that fast, and then getting rid of them and the space 3 years later. Of course, you can contract out, but you will also have many competitors for the same services.
3. The banks are unsure if something will save them, like a political reform, a new financial product, or the toothfairy. However, confronted with losses, massive new administrative burdens, and the no-fun task of kicking people out of houses by the thousands, the banks are willing to see if stretching out the timeline can allow something to make the situation less severe.
4. There is a subset of borrowers (mostly outside of CA) who can make the current payments, have a loan to value ratio below 100%, and might still have an LTV below 100% in 2-3 years. It’s not that hard to imagine in TX or NE. If those moderately stretched borrowers in not-so-bubbly markets can avoid an upward reset, they might last long enough to refi at a lower rate, or get out and pay off their entire loan.
In a market like this, cash is king. However, a consistent record of on time payment will at least get you knighted.
If you read Greenspan’s book, he says
1. He himself always gets a 30 year fixed
2. He thinks the days of low inflation are over.
Heck, that’s reason enough not to get one then! 🙂
Jim Jones, you are dead on.
You have expressed the rage all we Bitter Renters feel at the break being offered to the greedy, delusional borrowers whose pretentiousness, greed, and incredible sense of entitlement has gotten us into this mess, and are now driving our legislators to continue it.
You can now still get a 30-year fixed loan for 10% down if you have a FICO of 680 or higher. However, the proposed bailout legislation will cause lenders to tighten up considerably more and make things that much harder for first-time buyers. Count on it- you will soon have to come up with 20% and have a FICO of 720 for a loan 2.5X your income if this legislation passes.
However, you might have to meet those terms in the near future no matter what, and maybe it’s better.
“Just try hiring, training, finding office space, etc. for that many people that fast, and then getting rid of them and the space 3 years later. ”
Enter the ex-mortgage/RE agent workforce.
Anyone get the feeling that the REAL losers are the ones who bought a house within the last 2 years with 30 yr fixed/20% down loans?
Most of their equity has proabably been whiped out by now…
Those with no doc/nothing down loans have no skin in the game so they say, and they can just walk away…
I believe your thinking is flawed. If low inflation period is over, it makes all the more sense to get a fix 30 year product as your fiat money will be depreciated by inflation or with the fed printing more money while a hard asset will hold its store of value. I believe a home is a hard asset, however, today’s prices are way out of whack, but since you purchased before the bubble I have a funny feeling you are playing with fire with your mortgage. Now, I understand that you can’t actually carry this type of hard asset with you in times of extreme stress and what we are hoping for is that our government will have enough economic and military might to protect this type of asset in the future. Surely, no one doubts our capability now and in the near time frame.
It seems that you are fairly confident in your ability to get a high return on your investments in the stock market. Have you ever heard of people jumping out of the building due to stock market losses? Or, have you ever read Warren Buffet’s biography? Even he is not as self-assured as you seemed to be. Maybe we should recognize you as our infamous investment guru of our time. Just me, I will not invest any money that I cannot live without. Then again, if you had sold your home around 2005 or 2006, I certainly believe you would have made a lot more than the “75-100K” that you made in the stock market. Like you said, you still have the “imaginary” $350K equity in this market. So, were you making the bank more richer or you more poorer?
Now, you think ARM is a good deal? Every single payment you make is money you will never see again. Not only that, it adds the interest rate risk for the future. At least with a 30-year fix you make some payment towards principal, and if you own the home for 30 years, you can think of the principal payment earning astronomical interest rate and the bank will view it as loosing money on your payments towards the end of the the mortagage life – why else will they keep pushing you to refinance. The beauty is that you are locked in to the rate where the banks can not play the crooked role anymore. As years goes by, the payment will become easier and easier due to inflation and the rise in wages in general. Just ask the home owners who purchased in the 80’s or 90’s.
Your counter argument is that you don’t expect to be in this place for that long. Don’t forget this, if your circumstances change, you may just have to squat in this primary residence you purchased for a long time. Also, you hit a period where it is difficult to trade up or get out when you want to. Sure, you say to yourself that you can sell it at 2001 prices. But, how will you feel about the money you made in the stock market then compared to if you had sold it or the imaginary money you could of have?
Playing with your mortgage is just not a smart thing to do no matter how smart one thinks he is. As IrvineRenter puts it, “I hope it all works out for you.”
The drops continue…
http://redfin.com/stingray/do/printable-listing?listing-id=1400889
Price: $489,900
Redfin Savings: $9,798*
322 Quail RDG
Irvine, CA 92603
Beds: 2
Baths: 2
Sq. Ft.: 1,441
$/Sq. Ft.: $340
Lot Size: –
Type: Condominium
Style: Contemporary
Year Built: 2005
Stories: Three or More Levels
Area: Quail Hill
County: Orange
MLS#: S517997
Status: Active
On Redfin: 1 day
New Listing (24 hours)
Quail Ridge at its Best. Gorgeous unit with granite counters in kitchen, ceramic tile and breakfast bar. Cozy fireplace in living room with built in media niche. Ample storage. Great location and close to shops and toll road.
Sales History
Date Price Appreciation
10/25/2007 $563,790 -11.1%/yr
09/28/2006 $640,000 21.3%/yr
10/31/2005 $537,000 —