Deadhead — Devin Townsend
Our market is experiencing wave after wave of pain. Will the owners endure, or will they give in and sell? It depends on the circumstances and the constitution of each owner, but those with little to lose are giving up without much of a fight, and they are passing the pain on to the lenders. Today’s featured property is a classic illustration of kool aid intoxication and bubble behavior. The owner bought with 100% financing late in the rally, she managed to pull out a bit of spending money, and now that prices are crashing she is bailing out and leaving the losses to someone else. The losses to the lenders are accelerating along with the decline in prices. This one is gonna hurt…
Asking Price: $574,900
Income Requirement: $143,725
Downpayment Needed: $114,900
Monthly Equity Burn: $4,790
Purchase Price: $764,000
Purchase Date: 4/22/2005
Address: 46 Townsend, Irvine, CA 92620
| Beds: | 3 |
| Baths: | 4 |
| Sq. Ft.: | 1,900 |
| $/Sq. Ft.: | $303 |
| Lot Size: | – |
| Property Type: | Condominium |
| Style: | Spanish |
| Year Built: | 2005 |
| Stories: | 2 Levels |
| Area: | Woodbury |
| County: | Orange |
| MLS#: | S540511 |
| Source: | SoCalMLS |
| Status: | Active |
| On Redfin: | 3 days |
features granite counters and dark maple cabinets, hardwood flooring,
luxurious master bath with dual sinks, built-ins in master closet.
Seller is installing new stove, diswasher and microwave.
I have seen this floorplan, the dual master layout is interesting, but not practical for a conventional family. I could see a roommate situation working out, particularly if one of the roommates has a child. Also, a household with a single child might like it, particularly if the in-laws visit frequently. There is no yard, but you do get a claustrophobic patio surrounded by two-story house elements. It feels like a cave.
Today’s seller used 100% financing, so any money pulled out of the property was the bank’s money. Their rate-of-return would be infinite as they have zero initial investment. On 5/4/2006 almost 1 year after the initial rental purchase, the owner refinanced with a $688,000 first mortgage and a HELOC for $86,000. Apparently, she was not happy with only getting $10,000 spending money out of her little investment (she had owned a whole year, surely she should have made $100,000, right?) On 5/23/2006, she must have found a “better” appraiser because she was able to open a HELOC for $172,000 which enabled her to pull out $96,000. This left a total debt on the property of $860,000. If the lender can get the asking price, and if a 6% commission is paid, the total lender loss will be $319,594. That is almost 30% off the peak valuation for this property.
Here is another property in Woodbury looking to drop below the $300/SF mark. In early 2007, I saw one of these properties asking $3,000 per month in rent which based on similar properties at the time was a reasonable rental rate. Assuming $3,000 per month is a valid rental rate, and assuming this rate will not decline in the face of a deteriorating economy, the value of this property based on its rental cashflow is around $480,000. The asking price of this property is within $100,000 of its cashflow value.
Those homeowners who are holding on and those holding their breath because they are underwater have people like today’s seller to thank for the continuing decline in prices. In a normal market (if there is such a thing in California) this property would not be for sale. It is only being sold because the owner can’t afford it and the values have dropped too much to warrant hanging on. As prices drop further, it creates more owners like this one. In short, it is a downward spiral. After our brief summer leveling period, expect another big drop this fall and winter. We are not at the bottom yet.
.
You are a sun Goddess
Will you save me?
Hooray for you.
Hooray.
Now the rain it comes, the rain it blurs the grey line
…the grey line…the Greyhound home
You are so vicious (Hurt me, I can take it)
Cause it’s all in the heat of the moment,
It’s all in the pain
Sonar, sonar again…
It’s on again, (got no wings…gossamer wings…) …on again…
You are a sun Goddess!!!
Will you save me? …babe…babe…babe…
Cause it’s all in the heat of the moment
It’s all in the pain!!!
So give in to the heat of the moment
Give in to the pain!!!
Deadhead — Devin Townsend
I’m not sure this was an owner who couldn’t “hang on” … it looks more like fraud to me (by the looks of the kitchen). Apparently, this “owner” was not content to stick the lender with her $106K of HELOC spending money over less than 24 months in the house — she also chose to steal the kitchen appliances on the way out.
Yes, this has the imprinteur of fraud on it, and it’s my belief she had scamming in mind when she pulled out $96K in HELOC money.
Many people know the end was nigh by 2006, and were equity-stripping their places with every intention of just walking away.
I have no hard data to back me up, but I’m beginning to think, from informal talk in my own area, that there was some element of fraud in about half the mortgages and 75% of HELOCs and cash-out refis over the past few years.
We’re going to not only have to rebuild this country financially, but morally rehabilitate it while were at it. The hit-score-run-and-do-anything-you-can-get-away-with mentality that has ruled this country at all socio-economic levels for the past 40 years, is going to have to be replaced with an ethic of truthfulness and honest effort.
About this house- it has a lot of curb appeal, a very good-looking house until you get inside. The interior is a big letdown. This place could have been really pretty with just a little more attention to details, and a better grade of windows. I get sick of looking at properties that would be beautiful were it not for the really junky grade of windows that shriek CHEAP! from 200′ away.
Cheap is right. The hardwood flooring is nice but it doesn’t go very well with the 99¢ paper window blinds LOL.
Laura, I love your comments, but “forty years” is a little too partisan for me. Fifty years ago remember how a certain group sat in the back of buses? “Forty years” is the kind of reference point that people like Larry Craig or David Vitter use while dry-drunk george and alcoholic dick shred our Constitution. I believe in accountability but the shitty lender, the appraisers, the LIARtors, and the banks all made a share of the bad money here and should stand in the docket beside this scumbag (if it was fraud). Sorry, Laura, seems like accountabilty, assessment, and responsibility only apply to the people who gather the shopping carts from the parking lots of WalMarts while the managers and owners get away with murder (don’t like this analogy–replace it with foreclosures/homeowners and Lehman Bros/Bear Stearns). Things were going wrong before the Sixties and they’ve not been corrected a bit by the accountability president and his honorable ilk.
east coast wonderman, the very people of whom I was thinking of as I wrote that comment were the spoiled white middle class and even lower-middle-class people I lived among as a teen.
It was about that time, the late sixties, during my adolescence, that I noticed that I was one of the only kids around who didn’t feel like the local department stores were sticky-finger-special bazaars. My little peers viewed shoplifting as a game, even though they more than had the money to pay for what they took.
As I proceeded into adulthood, I noticed that the thieving and dishonesty were becoming really rampant among the people I knew in the decaying midwestern city in which I grew up and lived until the age of 35. Why, I thought, did two young men, who both were successful in business enough to own good homes free and clear of mortgages by the age of 30 find it necessary to steal into a construction site in the night and make off with a massive coil of copper electrical cable? I remember there was a lot of insurance fraud- push the car into the river and then file a claim.
When I entered the securities industry in the 80s, I was agog at the dishonesty and complete lack of scruples. It seems to me that the only way we’ve prospered in this country since the 70s is to spin off one financial scam after another. It is all we know how to do anymore.
The idea is whoever dies with the most toys wins & honesty is for schmucks& and be as bad as you can and no better than you have to be.
It’s our leadership class that has supplied the example for it all. You can understand why average morons out here thought it was OK to HELOC themselves to the hilt, pocket the cash, and walk, for our “betters” have pocketed hundreds of millions of dollars each by creating and promoting “product” that is bankrupting the country. And you know what? They will most likely keep their ill-gotten gains and die fat and happy, at our expense.
The only lesson we’ve learned and can pass to our kids is to make sure you get in early and don’t be the last one to leave the party. l
When you write, “It seems to me that the only way we’ve prospered in this country since the 70s is to spin off one financial scam after another. It is all we know how to do anymore,” you are making the point so much more clear than before. Thanks for the clarification in your reply, Laura.
Exactly. This “past 40 years” comment definitely sounds pulled out of your ass.
Come on, EC and Joseph … you’re reading a lot into Laura’s comment. The sad fact of the matter is that many people/companies/governments-at-all-levels in this country no longer believe that entering into debt is a serious matter, and that not paying back that debt is serious, or dare-I-suggest it, “shameful.” Exactly when this shift in attitude happened is beside the point.
EC, to suggest that “accountability” only applies to those of moderate incomes is REALLY over the top — I suggest you attend a shareholder meeting of Wamu, Countrywide, or IndyMac –whoops, too late on those last two — for a lesson on this concept, and how there’s plenty of “accountability” — and the price to be paid for not taking debt seriously — to go around.
“The hit-score-run-and-do-anything-you-can-get-away-with mentality that has ruled this country at all socio-economic levels for the past 40 years, is going to have to be replaced with an ethic of truthfulness and honest effort”.
Do you mean like the “truthfulness and honest effort” we get from our representatives?
If you think this ship of morally bankrupt, predatory borrowers with their corrupt leaders at the helm is turning around anytime soon, you need to open your eyes and look around. See, there are icebergs everywhere, ready to tear a hole in the haul that will bring this long liner right to the bottom. So we will stay the course, on Iraq, low interest rate policy, high trade deficits, a worthless dollar, hyper inflation, skyrocketing personal debt, over taxation, job exportation and in the end, China & Japan will be left holding the bag.
Laura is largely right, though 25 years (the securitization of mortgages on a massive scale and the start of a long trend towards no savings) is a little more accurate, and 35 years (the collapse of bretton woods) is a little more accurate.
The baby boomer generation consists almost entirely of spineless, self-absorbed, amoral leeches. It’s only natural that they would inflict a near-mortal blow on the integrity of the country.
I certianly disagree with your baby boomer comments. I can only wonder about the experiences that have lead you to this conclusion.
Regarding our currect financial trainwreck, the fraudulent purchasers and walkaways in my neighborhood have been much younger than baby boomers.
the lead singer of that band has the best hair styling I’ve seen in awhile. Baldness WITH long hair? Classic…
Thinking the same thing lol. Decent instrumentals bu the vocals leave something to be desired.
Appliances are usually not fixtures, so
you are entitled to take them.
But it isn’t sporting of you.
Perhaps you are “entitled” to the appliances, but it fits with my fraud theory on this house. I doubt the house was sold to this “owner” without appliances, and I doubt where ever she moved post-foreclosure did not already have appliances (most rental property comes with appliances). Ergo, my bet is she stripped the appliances and sold them, pocketing the money and deepening the lenders loss.
The E-Bay strategy. One of the reasons homes generally come with appliances these days (they didn’t used to do so) is that it just isn’t economical to move them to a new place. Cheaper to buy new when you get there, and that also means you can get the latest goodies. Of course this logic assumes the buyer wants to live there, not strip and flip.
Reading IR and other useful sites that he links to has convinced me that the level of fraud in SoCal real estate during the bubble was absolutely massive. This is one reason that the bailouts are so worrisome. The fraud and stupidity of the bubble moved housing there completely out of line with market fundamentals and the craziness spilled over into neighboring states as people dumped their bubble gains into RE speculation in Vegas and Phoenix. Somehow we have to figure out a solution to get housing back to the place where people making decent salaries can afford a decent home, and wash out the nutso half-million dollar 2 bedroom 1200 square foot condos that were so overbuilt because people could finance them fraudulently. It kinda breaks my heart to read about y’all renting on salaries up over 100K a year. I mean, a person ought to be able to have a decent family home at that point!
“Somehow we have to figure out a solution to get housing back to the place where people making decent salaries can afford a decent home…”
The best way to undo all the mess created by the housing bubble is to leave the whole mess alone allowing all the parties involved to reap the sorrows they have sown. That means no bail-outs, no helps, and no sympathies. The investors of these institutions that created these toxic finances have to get burnt to be fair.
Is McCain still pitching for no bail-outs? If so, the amnesty man would still get my vote.
I am studying for the bar right now. I have learned way too much about fixtures :/
A cave it is.
Cool, another property across the street from me.
I moved to Woodbury last November and I walk and bike around the development quite a bit. I’ve noticed something that I consider to be interesting and that is that the north end seems to be getting hit harder than the south end. Mille Fleur has a lot of homes for sale and a couple foreclosures as do the townhomes across the street. I think the north end is the newer section and it gets older as you go south. It will be interesting to watch to see if the turmoil spreads south.
The financial devastation will spread like untreated cancer throughout Woodbury. Because of the timing, virtually EVERYONE who bought in Woodbury has lost substantial amounts of money, and most are underwater. As the neighbors bail out, the frenzy feeds upon itself. The more people exercise their put option, the more their neighbors reason, “hey everybody else is doing it, why should I pay a $900,000 mortgage on a condo worth only $520,000?”
Remember 33 Triple Leaf? Profiled here several months ago. Bought for $1,850,000 just about at the peak. Flopper put $525,000 of their own money in and chased the market down. Well, not sure what happened to it, but it’s off the market and the 2007 property taxes are listed as delinquent, so it’s safe to say it didn’t get sold. The flopper lost $525,000 of their OWN money, and who knows how much the lender lost. When a lender isn’t safe with 28% down, the entire neighborhood is financially radioactive.
Best to keep far, far away from this entire development, because the financial devastation of this neighborhood will surely spread even to those who can afford to stay. It’s like financial Bird Flu — even the healthy can get slaughtered if they get too close to the epidemic.
I starting feel Wall St actually is another Detroit (GM, Ford etc).
They are greed but lazy and stupid.
God bless America!
Where is the rental market really for this home?
$2200? More?
want know too
we renewed our lease on a similar place in Woodbury for $2850 but our place is just a bit smaller and not detached. We are not on a major artery road in Woodbury like Townsend though. So $3000 in rent is a little high but I think they could get it at this point.
with 20% down and 3000 monthly on a 30 yr fix. what should be the house value? can some1 point to a calculator site? thx
It would be about $600,000. Which means you’ve parked a $120,000 in as down payment, plus another $7000-$8000in closing costs.
It’s also a very bad way to look at it because you now have Taxes $6265/yr. Mello-Roos/special assessments to the tune of $3800/yr. An Association at $3288/yr.
All total, at a purchase price of $600,000, taxes, association and mello-roos run $13,375/year. That’s $1114/month for those keeping track at home.
Of course, some would think the lost interest on $120,000 is real money, too.
You can then add maintenance (minimal), insurance (minimal) and some sundry other owner costs. Oh, and put a reserve up for when the HOA reserve runs short and you get an HOA special assessment. To which you have a double exposure has you have two HOAs.
Backing out the taxes and assessments and assuming a 6.5% loan for the mortgage, you get a value of $400,000. Which will leave principal, interest,taxes and assessments at $3069. It leaves out insurance, maintenance and the lost interest on your $80,000 downpayment.
Quite the difference when you look at the real cost of owning this place, you start to get a swing of nearly $200,000.
Well said, I was going to mention the double Woodbury HOA fee as the reason that I am waiting for the 3BR/3BA 2000 sq ft Woodbury homes to drop below $450,000 to be interested in buying the one. Just a few months ago a real estate professional laughed in my face when I said that I was waiting for the home I rent for $3k to drop below $450k. “It can never happen here”.
We can have even more fun.
As ourselves what it’s worth to someone that takes a 97% LTV FHA loan and carries PMI?
Answer: $325,000 assuming 6.5% loan and the $3000 equivalent baseline payments.
At a lower rent value, it’s even lower. Hypothetically, at $2500, it drops to $250,000.
That sounds brutally low at a 100X multiple, but those HOA and Mello-roos are killers. They don’t go down and are going to eat 20-25% of your rent every month.
Now one last nugget of information for this one.
Let’s look at the FHA loan guidelines: 29%/41% front/back DTI.
What’s that mean? Well, at the $325,000 purchase price, you need $125,000 of income to qualify. Provided you have less than $1200/month in recurring debt, car payments, credit cards, etc.
At $250,000, you need $102K income and about $900 of other monthly debt. Frankly, I think more people will have problems with the backend debt number than the front end.)
Now look at the two numbers. $102K low-end, $125K high end on rent equivalence. Irvine’s median family income is about $102K.
To me, this is a median home. It’s detach, no yard, basically a dense townhome, 1900sf making it a little bit larger. The median family income is quite a bit higher than the median household income.
That’s probably the next big question you need to ask. Is this a median property for Irvine? I’m not sure. I think families making $125,000 a year will yearn for something more. Is this what they settle for?
My bad, this is attached.
Not just attached, but middle sandwich apparently with two common walls.
I may correct myself, this is median at best.
Well, HB starter homes are already @450k, and this one is a starter home. The two large OC cities are usually in synch, and Irvine is way out of whack right now.
“Now look at the two numbers. $102K low-end, $125K high end on rent equivalence. Irvine’s median family income is about $102K.”
You know, everytime I see someone mentioning these numbers, I can never seem to connect them to reality. It just doesn’t compute. 102k is 50k per person with both persons working. That is NOT rich. Heck, it’s not even upper middle class. Then why am I surrounded by BMWs and Mercedez and million-dollar homes?
I know we’ve talking about using debt and keeping up appearance, but geez, it just doesn’t compute for me.
“with 20% down and 3000 monthly on a 30 yr fix. what should be the house value? can some1 point to a calculator site? thx ”
Check out the following post:
https://www.irvinehousingblog.com/blog/comments/rent-versus-own/
The impact of a moderate Mello Roos fee is included in the 160 GRM. When these payments exceed $100 per month, the GRM declines.
I think we need to take into consideration the usefulness of the 160 multiplier when assessing certain Irvine communities, especially those that include homes with $273/mo in HOA dues and Mello-roos.
I wonder, does that $273 include Mello-roos? I doubt it. When I visited Woodbury late last year (2007) I toured the Cortile residences, among others, which are the *low-end* homes starting at 400K with a kitchen the size of my apartment’s .75 bathroom.
The combined HOA and Mello-Roos payment came out to be $600 per month. Yes, that is correct: $600 per month, or two car payments, for nothing.
Of course, the livable residences with a kitchen and living room/dining area large enough to accommodate a college student started in the 500-600K range. I feel fairly certain that Model #1 in Cortile was for hobbits only.
Seriously though, once Woodbury’s prices fall back down from the ionosphere to the troposphere I’ll go back for a second visit, but until then I’ll put my own $600 per month towards a more enjoyable lifestyle.
Priced_out makes a fantastic point. The HOA and mello-roos should be entered into your calculation IHB.
So if this place rents for $3000 as you mentioned above, subtract the $600 for HOA & mello-roos. Then use your multiplier of 160 times base rent of 2400 to get the value of this place and you have = $384,000.
Seems a little more realistic, no?
I believe the builders used to pay the fees that are now being foisted upon buyers as the Mello Roos tax. Why pay when you have a bunch of saps that will do it for you?
$600 is a lot of money for improvements that you’ll likely never see. And don’t get me started on some of Irvine’s HOA fees!
3k rent for this place? That’s insane. By all means tho don’t let me stop anybody from paying that extortion rate.
For those that havent seen it yet…
“Here’s the latest Mr. Mortgage video ! Gawd, after watching this, you know that Irvine housing prices are going MUCH MUCH LOWER, and so will RENTS !!!!
https://www.youtube.com/watch?v=QjY8xVewrPg
“
I know it is too early to buy, but what is the best value-priced neighborhood in Irvine to keep an eye on in the next 18 months or so for townhomes and condos?
You will get the best pricing in Columbus Grove and the other new neighborhoods north of Harvard. They were started at the peak, and the builder has been lowering prices to find the market. Because of all the must-sell builder inventory, prices fell faster there than in the neighborhoods without a builder present. IMO, prices there will be on par with Westpark once prices stabilize. Westpark has a long way to fall.
As I read through the post and the comments thread I was struck by the feeling that if this example is at all representative of Irvine real estate then I cannot imagine how sustainable that system is.
No matter what you make (ok, assuming you’re not a sociopathic billionaire) how do you feel about blowing $600 in HOA fees and MRs? No really, how do you feel about it? And what do those fees and taxes do to making a dwelling in this neighborhood able to cash flow?
I know one person, who I mean no disrespect to at all, said they were paying $3k in rent. $3k a month in rent? Seriously? This isn’t a case of the country bumpkin being amazed at the cost of living in Manhattan but seriously, $3k a month in rent? That seems to me as though it would qualify for one of the most asinine wastes of money I’ve ever heard of.
I guess if you’re rolling in the dough and you have a one of a kind of job AND Irvine appeals to you in a deeply emotional manner then $3k a month for rent a condo is no big deal. I guess. But I honestly cannot wrap my mind around that.
$3k a month in a world class city, sure, why not. In Irvine? No matter what you’re making, seems like an awful bit of self-delusion. Irvine is not, in any way, shape or form, a world class city. It may be nice. It may have advantages over many other places but it’s still Irvine. Irvine is not, and I predict, never will be San Francisco, Chicago or Manhattan. And if that’s the opening you (any Irvine defender) were looking for then please, have at it. But whatever you think about those examples or living in what I’m describing as a “world class city” doesn’t change the objective fact that Irvine is relatively new suburb.
And once again, my apologies to the poster above, I don’t mean you, I’m sure you have great reasons to rent what and where you do and I’m not asking supportive details. I frankly don’t care what the details are, it makes no sense to me and that’s my problem. This isn’t about insulting people specifically just questioning the mindset that created an environment where this kind of spending flourished.
This can’t be the same ice_weasel who’s looking to buy in Irvine?
The advantages of Irvine:
1. Great schools – say thanks to Misters Mello and Roos
2. Convenient location – heart of OC employment, home of UCI, crossed by 405 and 5, close to NB and LB
3. Safe family-oriented neighborhoods
Disadvantages: Except for Quail Hill and Turtle Ridge, flat and antiseptically boring, even the newer developments. No civic center to speak of – because it’s not a real city. The Donald Brent Neverland Ranch, better known as the Spectrum may break up the monotony a bit – but not by much.
Overall many, many, many people think the advantages way outweigh the disadvantages. I would agree that paying $3,000 in rent for what is essentially a large apartment seems pretty incredible. But that both reflects the people’s tastes in a large segment of the OC (for better or worst, it is what it is) and how much all those wealthy Irvinites make in their incredible jobs.
$3000/mo is $36,000 per year. You could send your kid to Harvard for that much.
Actually, as I recall Harvard went to zero tution so $36k/yr is a lot more than Harvard.
Correct, Irvine is not San Francisco. My legs were in much better shape during my 3 years working/living on Market St. due to dodging foul-smelling panhandlers and stepping over drug addicts defecating on the streets (no lie, at least 10 times). Reflexes and patience were honed trying to snag a parking spot after 30 minutes of searching about 1/2 mile from my destination. The ubiquitous mold from the fog/lack of sun bolstered my immune system. SF doesn’t waste valuable space like Irvine does with tennis courts, pools, bike paths, lakes, grass… My kids don’t get to see public fellatio at the Folsom Street Fair(again, not kidding).
Irvine may not be a “World Class City” but it is a safe, sunny, clean, open-spaced oasis that IMHO is the best place in SoCal to raise a family. ;-P
Amen to that…try having kids in SF.
Better yet, if $3k is too expensive for you, there’s always Bayview Hunter district and the Western Addition 🙂
OK, I’ll post in reply to ice weasel’s main point (not the old “Irvine isn’t all that” discussion).
$3K rent a month does seem insane. Me and the wife pull down around $120 a year, and the only reason we pay $1900 is so we could rent a house with a yard for the dog. Otherwise, we’d be paying $1600 for a nice (and bigger!) apartment.
While $3K a month seems insane to me, so does $600 a month for a car. Yet, people who make less than we do pay that routinely.
So, who IS paying exhorbitant rents? The same types of folks profiled on here. Simply put, they’re greedy. And they inflate their income with easy credit. However, as this recession deepens, I strongly suspect that personal credit will start to dry up. When that happens, watch for rents to drop. Until then, however, Americans are just running up the tab. Those of us who AREN’T will end up paying for some of this through tax increases and inflation. But, as it gets nastier for the financials, I expect that they’ll start squeezing these folks more. Hopefully, they’ll get their just desserts.
1900$ for a house with a backyard in Irvine? Where? Where??
Amateurs.
I looked at a $900,000 condo in Old Town Alexandria, across the river from DC. OK place, but small, and in basically a glorified apartment building.
The sales girl wasn’t even embarrassed to tell me that the condo fees worked out to almost $2000 a month.
Wait…I pay you a million dollars for the privilege of renting an apartment for $2000 a month? I still don’t get why the Alexandria cops didn’t raid that place. They must have smoked crack by the truckload to come up with that business plan.
The condos never sold, and I think they’re switching the buildings over to apartments, now.
Some Condo Guy…
What ameninities in an Alexandria condo could possibly justify a HOA fee of $2000 a month? 24/7 Doorman? Valet parking? In-house masseusse (not sure of the spelling there)? In Pasadena some “loft” style condos were built which had HOA dues of appx. $800 per month and that proved too steep, so the builder had to step in and pay down the HOA dues for two years from the date of purchase. I guess after two years all buyers will be stuck with higher HOA dues.
Irvine Renter, I have a question for you. I’m following your excellent blog in part because I’m waiting for the Silicon Valley prices to show the correction that you’re seeing in a premier community such as Irvine. Our equivalent higher-end cities such as Palo Alto and Cupertino haven’t had huge corrections yet, but the lower and middle end cities have indeed started their descent.
What I’d like to know is how I can find out what percentage of the mortgages taken here were those insane ninja loans, such as Option-ARM or Interest Only or Piggybacking (1st & 2nd paying essentially nothing down). How could get I such stats by zip code? Is it really true that the higher end places don’t have them, because I know a lot of the loans written after 2003 were Alt-A rather than Prime (thanks to NY Fed maps).
And a comment on NCal vs SCal: the big difference I see between Irvine and our higher end cities is the lack of Mello-Roos. I really think this is killing you guys in OC. Since we have so little available land, few developers would have a big tract they could build up and smack Mello-Roos payments onto. I haven’t seen Mello-Roos fees up here at all, I think it might have been used in exurbs outside Sacramento or far inland such as new communities in places like Patterson. It just doesn’t happen (that I know of) in Silicon Valley and I don’t think people would stand for it if builders tried it. Maybe I’m wrong. I can’t believe buyers bought knowing they were on the hook for those fees every month for 40 years, meaning they are passed along when they sell and depreciate their property values.
madhaus,
I don’t know where to find a detailed breakdown of mortgage terms by zip code or any other fine-grained distinction. The FED has some great maps and statistics that might help.
I really doubt it is true that the high-end zip codes don’t have toxic financing. They got to be so expensive because of the toxic financing. It is the only way people could buy the properties. People really don’t make the money to afford those prices even in better wage areas like where you are. House prices were run up and supported by affordability products. These loan programs are now disappearing, and the high prices they created will disappear as well.
The Mello Roos fees here are pretty high. Some of the older neighborhoods do not have them, but anything new has an additional (almost) 1% added on. When lenders add up all the costs and apply their DTI ratios to them, prices will fall that much farther due to the Mello Roos.
Mello-Roos is not what is causing OC to sink faster than Silicon Valley. The OC economy just does not have the entrenched wealth that is all too common along the peninsula. Our economy down here was heavily reliant on mortgage and other real estate-related jobs. Irvine was at or near the epicenter of the entire credit crunch (New Century, Option One, etc.). Contrast this with Cupertino/Palo Alto/Mountain View which have Google/Apple next door with lots of employees making bank on ISOs and the like. The two just are not comparable markets.
The Irvine Spectrum has a lot of vacancies. Of note, is the absence of the Fox Sports Grill which has moved to Anaheim.
When did that happen? That place was always packed out when there was a big game. Watched lot’s of SC games there…fight on
Actually, it’s not that Fox is moving to Anaheim, but rather Fox Sports Grill is bankrupt as an entire company around the country.
There’s also the fact that greater Irvine has thousands of acres of space (especially former bases) ready to be developed as soon as market condidtions are better.
The penninsula – not so much. It’s hard to think of much at all developed at all in the past few decades since redwood shores and foster city. Bair Island is about it, and that stuff is hard to access from existing infrastructure.
Hi,
I always see that you mention how the owners have financed it. Is this information available publicly (find out the financing details of any property?). if yes, or if already answered before, can someone please point in right direction? thanks
The information is all public record, but the data services that provide this information in an easy-to-use format require a subscription. Sitex and FastWeb are to such data sources.
Number 5 realtor in the nation:
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NoWow, why did you link this guy?