Water Runs Dry — Boys II Men
Don’t buy now. Just say no. Don’t let your downpayment wash away with the declining market. As Boys II Men say “We’ll make the biggest mistake of our lives. Don’t do it baby”
Today’s featured property is a major comp killer establishing a new low water mark in the Watermarke development. They developers of this property are geniuses. They started a high-end apartment complex just as the bubble was taking off, and being opportunistic, they decided to convert the properties to condos, and they made a fortune off the frenzied buying of the Great Housing Bubble. The property was purchased on May 18, 2005 for $367,500. It was flipped on July 3, 2006 for $435,000 right at the peak. The 2006 purchaser used 100% financing (big surprise,) with a $348,000 first and a $78,000 second. The property went REO on January 23, 2008 for $324,900. It appears as if the loans were originated by IndyMac. It was purchased by Deutsche Bank National Trust Company, and the Federal National Mortgage Association (Fannie Mae.) This is the first property I have seen where Fannie Mae has been on the hook. Fannie Mae is one of the Government Sponsored Entities (GSEs) that makes its money by insuring mortgages to facilitate transactions in the secondary mortgage market. Although the GSEs are explicitly not backed by the Federal Government, investors behave as if they are, and if they keep seeing huge losses like the one today, the Federal Government may step in to rescue these companies. If there is going to be a federal bailout, it will probably be caused by the collapse of one of the GSEs. Did you realize your tax dollars are implicitly backing the secondary mortgage market? They are…
Asking Price: $263,000
Income Requirement: $65,750
Downpayment Needed: $52,600
Monthly Equity Burn: $2,191
Purchase Price: $435,000
Purchase Date: 7/3/2006
Address: 3415 Watermarke Place, Irvine, CA 92612
| Beds: | 1 |
| Baths: | 1 |
| Sq. Ft.: | 635 |
| $/Sq. Ft.: | $414 |
| Lot Size: | – |
| Type: | Condominium |
| Style: | Contemporary |
| Year Built: | 2004 |
| Stories: | One Level |
| Area: | Airport Area |
| County: | Orange |
| MLS#: | P632107 |
| Status: | Active |
| On Redfin: | 7 days |
Great rear end condo , balcony in living room, hardwood floors, granite
counter tops in kitchen, upgraded cabinetry, stainless steel
appliances, this is a must see!!! HURRY or MISS this great DEAL
Hurry, you don’t want to miss your chance to be trapped in a 635 sqaure foot apartment for the next several years…
.
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This unit is being offered for 40% off its peak purchase price. Let that sink in a moment… 40% off in Irvine… Who would have thought that was possible? Oh yeah, we would have…
I must admit, I did not think we would be seeing such large discounts so quickly, but then again, this property will probably fall further — who wants to own a tiny, one-bedroom apartment? An investor might, but a cashflow investor would want to see a positive cashflow, and considering the $290 a month dues, this property probably needs to fall to $125,000 to be a true cashflow investment.
If this property sells for its asking price (some knife-catcher will think this is a bargain) the total loss will be $187,780. That is the lender loss on a 635 SF condo. When we start seeing losses that large on properties that small, what will the losses on the larger properties look like? I hope Fannie Mae has some significant loss provisions set aside, or we will end up paying for it in the bailout.
.
Wait
Don’t wait for the water
Wait
Don’t wait for the water
We don’t even talk anymore
And we don’t even know what we argue about
Don’t even say I love you no more
’cause saying how we feel is no longer allowed
Some people will work things out
And some just don’t know how to change
Chorus:
Let’s don’t wait till the water runs dry
We might watch our whole lives pass us by
Let’s don’t wait till the water runs dry
We’ll make the biggest mistake of our lives
Don’t do it baby
Now they can see the tears in our eyes
But we deny the pain that lies deep in our hearts
Well maybe that’s a pain we can’t hide
’cause everybody knows that we’re both torn apart
Why do we hurt each other
Why do we push love away
Water Runs Dry — Boys II Men
At 414/sq. ft., I doubt it will be seen as a bargain today. I think they’ll have to cut the price even more. I know it’s a studio condo, but even so, ouch. And maybe it’s the lighting/photography, but the pergraniteel in the (I presume) kitchen is pretty ugly. It looks like a laundry room.
That’s funny, “laundry room” was the first thing I thought as well.
Look, call me cynical but I think the idea that Fannie Mae won’t need a bailout is much more unlikely than the reverse. If nothing else, propping up Fannie Mae will serve as a wedge to sell a lender bailout.
It will happen.
I also find it interesting that in order to qualify for a “conforming” loan in Irvine at the peak, you had to buy a 635SF condo. Maybe Fannie Mae will avoid too many losses here because there were probably very few conforming loans written.
Fannie and Freddie will absolutely be bailed out, because by the time they need it there will be no other way to get mortgages. They’re most of the market already. The feds will have to bail them out or face a total collapse of the housing market.
This is a cell within a prison block and you will be chained to a mortgage.
Irvine Renter, for this property you should add a new feature – loss per square foot – which on this property would be a whopping loss of $295SF.
This is an excellent example of the insanity of the bubble years.
Apparently S&P;is also worried about Fannie/Freddie needing a bailout.
http://money.cnn.com/2008/04/21/news/economy/fannie_freddie/
So this is what 60 grand buys you there?
I think even a knife catcher would want more bang for their bucks.
And there will be a super big problem with keeping up the building if there are a bunch of foreclosures; banks pay the assessments only when forced; people who are not paying their mtg are not going to be paying their assessments either.
Are there HOA and Mello Roos fees attached to this place?
I agree with Liz…. your HOA might go up if there are a big bunch of vacancies and no one to pay the HOA fees. Or does the bank have to stay current with HOA fees even when it becomes a foreclosure?
Here, anecdotal evidence in the form of a casual conversation with a HOA atty in line at the court house, has it that the banks don’t pay until the HOA files foreclosure against them. Then they have to pay atty fees and costs too!
Shows the servicers can’tservice properly too.
I had heard this before.
She said they just go back to not paying again, after bringing the HOA current.
This is a very upscale complex in a great area of Irvine. I was living in the neighbor apt complex when Watermarke was being built. We checked out the models and were shocked by the initial asking prices, only to see those prices continue to rise for a couple years.
Watermarke is a nicer Avenue One. Their baseline values are established by the Villa Siena apt complex next door. I didn’t know anything about gross rental multipliers back then. I did know that even with the tax adjustment of owning, these units were wildly too expensive compared to the alternatives.
$1300/month…, WTF? Have expectations really fallen that much in Southern California that someone would pay $1300 a month to live in this Cracker Jack box? At what point does one say to one self, “this is not worth it” and move?
I have a friend who lives in San Antonio Texas and works at an amusement park (not kidding). She bought a brand new 3 bed 2 bath house last year for 136k. My wife and I, who combined make 4 times what she does, joke about how we are going to quick our ass kicking jobs in LA and move to Texas, buy a house and work at Sea World.
I must not be alone when I say if we don’t see another 40% correction in Southern California over the next 2 years wife-e-poo and the kid are getting packed into the hybrid for a trip right the hell out of my native state.
I used to rent in Villa Siena, a one bedroom, one bath….I paid $1655/month, and that was almost 3 years ago. This place would rent for $1300/month.
A small 1 bed close to John Wayne with $290 HOA and probably $300-$500 for taxes and MR.
If it rents for $1300/month, 130 GRM makes worth $169k.
Looks like it’s right next to a big open area-could be right under the flightpath as airplanes do their final circuit.
Seems like the units were sold initially for $350k+??
Regardless, last to the party (condos) are first to the slaughtering line 🙂
Still, this is $414 sq ft and $290 HOA lol
Good luck suckers. This thing will fetch $150-200k when all is said and done.
Nice photos:
Toilet seat up YEAH! BTW where are the bathroom faucets?
Stainless Stell Appliances: Where? I see no such thing. I don’t even see the appliances.
What is that weird cutout in the kitchen? I guess this unit was never even lived in a day. I wonder how many more there will be.
At a target of $300 per SF in Irvine, this puppy still has a ways to fall.
I was just thinking, $300 per square foot is about right for this place.
For 635 sq ft, that is about $190K. That’s only because the place is new and spiffy.
However, is a really tiny apt really worth as much per square foot as a larger, more livable place? I mean, 900 sq ft would make a comfortable place for one person, while 635sq ft is a bed-sitter at best, suitable only as temporary housing. There is no way a 635 sq ft apt can be HOME.
Wouldn’t $250 sq foot be more like it, really?
Yup, that’s why I put the $150k level in my estimate…there are still enough bozos to pay $300 sq ft and keep it around $200k.
Yeah, maybe $300 sq/ft now. But, at the end this POS will go for under $200 sq/ft. Once the proud new owner can’t take their neighbors anymore and just wants out.
My daughter lives in Boston. About 10 years ago she bought a house, one you can walk all the way around with small yards in front and back.
It has 450 square feet, just a bit bigger than a garage in my former house. (My current garage is bigger.) She bought it with the intention of putting on a second story (from which you could see the bay), but has never done so. She’s an architect. She paid 70,000 for it. It’s now paid off, and she’s ready to begin building; is going thru an approval process which is taking forever. Maybe a good thing. I asked her does she have enough work to keep her busy, and she said, oh, for the next 3 or 4 months.
The point is, she has lived in the small space for quite a while, and hasn’t gone crazy or anything. And it’s paid off.
Actually, my mom, my daughter and I all own paid off houses. Tho, if she gets her plans approved, it’s back into debt to build.
IR
You show supprise that the lenders will be this aggressive in price cuts this early in the decline. From my reading of other blogs, I saw posts indicating the the Europeans, in this case Germans, Deutsche Bank National Trust Company, are being agressive in pricing, more so than American lenders because 1) the want to clear these off their books and 2) the are reading the tea leaves and anticipate even more losses if they sell later so anything they can move now is better. I wager that if this wasn’t Deutsche Bank the property would be listed higher.
The Other Orange County
What you won’t see on fantasy TV shows: a cratered real estate industry, few jobs, foreclosed homes, and empty office space
http://www.businessweek.com/bwdaily/dnflash/content/apr2008/db20080415_242666.htm?chan=patrick.net
It’s been a long time since my last apartment days. I see this 635 sq ft place very similar to my college flop I rented for $325/month + utilities between 1993-96 with no rent increases.
My living room today is about 600 sq ft. I am beginning to ask myself if Irvine, or any other similar area in OC/LA, is really worth $400+/sq ft plus all the other costs of living in OC; mello, HOA, 7+% state taxes, etc?
Maybe I am becoming numb to seeing these absurd prices. The lessons I gleam from spending time here on IHB and other sites is comparing the home analysis to what I see while I’m actually in Irvine and S. Cal. It has little to do with ability to afford and everything with not finding the “perceived” value.
Is it really worth it waiting a decade watching the bubble grow and then burst likely followed by years of price stagnation? Obviously it is to many who know OC as home, but the doubt of finality is beginning to dawn with me.
another Realtor pointing to recovery:
http://lansner.freedomblogging.com/2008/04/21/demand-for-oc-homes-up-23-in-a-year/#comments
“we’ll see a mathematical end of the county’s home-buying losing slump.”
This one is going to sell fast at this price no matter what everyone says. At 263k its easy to get financing even at full doc.
Maybe, it pretty much depends on how much rent the comparable unit can get.
I have no doubt that there are plenty of people who can afford to buy this place with full documentation in Orange County. The real question is will any of those people want to live there.
What I wonder about is whether or not this type of property does act as a belleweather for the rest of the market. My take on the subject is that these places were purchased by those most desperate to get onto the merry-go-round, hence those who could least afford a downturn as they were the least financially developed.
However, clearly as the “low end” collapses completely the move-up chain engages in reverse, as it were, taking like properties down while collaterally ruining the next step of home type. Needless to say, this is certainly going to get a lot worse before it gets better.
Sorry, after review I just realized I didn’t quite finish my first thought …
I simply wonder if the low end will experience the highest amount of depreciation because they are clearly the least desirable while also being the most highly overpriced in comparison. In other words, larger condos attached and detached and smaller SFR’s had greater competition in the marketplace while also likely being purchased by higher earning families and/or move-up buyers with perhaps more personal cash in the deal. Although they too will see the pain, their homes are more desirable in general and likely to see more knife-catchers step-in than on a sub 1000 sq.ft. pad like this.
Somewhat at odds with my thinking is that I think the largest losses will be borne at both the “low end”, small places like this one and the 3000+ sq.ft. McMansions both of which experienced ridiculous run-ups in price during the bubble. Both segments were the most ridiculously priced from reality. That said, there were plenty of mid-market homes, if you will, that followed the bubble up too but my sense is (I’ve got no data to back-up my suspicions) that there was less silly activity in the middle than on the margins.
Why should anyone be surprised that stuff like this is 40% down? Stuff like this was overpriced from day on. Wildly overpriced.
Perhaps the Irvine Company will buy the whole thing out and turn all of this mess into rentals.
I was interested in buying this unit until I read the phrase “rear end condo” in the advertisement. Unless there is a better way to word that, count me out completely!
I bet the payments would be a pain in the ….
“rear end condo” is realtor speak for “butt ugly” condo…..
Dano
“Great investment opportunity.”
Last investor only lost $52,000! You may lose even less!
http://www.redfin.com/stingray/do/printable-listing?listing-id=1658655
The one thing no one has mentioned yet is the proximity to UCI.
If the rent is $1300/mo for that place, its cheaper than Villa Sienna next door, and a decent deal for a student that would want their own single dorm room.
You could rent this place for $1300 to a student from UCI.
My sister used to rent a 2br/2ba with a roommate at Stanford Court near UCI (1100 sq ft) for $1800 or something like that.
I can’t believe they didn’t take pictures of every room. And the loose cabinet part in the kitchen is pretty sloppy too. But for a single bedroom apartment, it looks pretty nice. The bathroom looks awfully big for such a small apartment, maybe that’s why there is no picture of the bedroom?
Could you please put this picture on the inside on the cover sleeve? Preferably in the “About the Author!”
[img]https://www.irvinehousingblog.com/wp-content/uploads/2007/07/big-mac-attack.jpg[/img]
I have a friend who used to live at Watermarke. The walls are paper thin and you can hear the people above you walking. The neighbors below came up often to complain about hearing walking.
ZOMG… when I lived in OC in 2005/2006 I heard about a property JUST. LIKE. THIS. which a friend of a co-worker bought for his daughter who was going to attend UC-Irvine, a 600 sq ft condo for $360K. So this is what happened to that property… even if this is not that exact same one.