More than 20% of OC loan owners owe more on their mortgage than they could obtain from a sale. With declining prices, this percentage is expected to grow. Foreclosure is the only savior.

Irvine Home Address … 31 CASTILLO Irvine, CA 92620

Resale Home Price …… $460,000

Well, if you told me you were drowning

I would not lend a hand

I've seen your face before my friend

But I don't know if you know who I am

Well, I was there and I saw what you did

I saw it with my own two eyes

So you can wipe off the grin,

I know where you've been

It's all been a pack of lies

Phil Collins — In The Air Tonight

Many loan owners in OC have no equity. No equity means no real ownership. They own a loan. They are still on title, and most still feel like homeowners, but they have no more financial interest in the property than a renter does, and if they stop paying the rent on the money they borrowed, they will (eventually) get evicted just like a renter.

Some who are underwater are victims of poor timing. Many of these people qualify for loan modifications, and they have been helped. Many more are victims of their own poor choices. They HELOCed themselves into an underwater situation, and the government is not throwing them a debt preserver.

1-in-6 O.C. borrowers still ‘under water’

September 15th, 2011, 12:04 am — posted by Jeff Collins

Real estate data giant CoreLogic reported that 17.3% of Orange County homeowners with a mortgage still owed more than their property was worth at the end of the second quarter.

In all, 96,747 Orange County homes were “under water” last spring.

Most of these numbers are poor estimates. Zillow for instance only calculates underwater based on the original first mortgage and does not include seconds, refinances or HELOCs. Obviously, that understates the problem. CoreLogic may have better methodology, but the 17.3% seems suspiciously low to me.

While the number of underwater homeowners has dropped steadily over the past 18 months, it’s likely that some of that drop is due to lenders foreclosing on a portion of those properties, taking them out of the mix.

Since properties have declined more than 10% in value over the last year, many more have submerged beneath the waves. Amortization may have helped a few, but foreclosure is how most of the underwater have been relieved of their burdens.

The figures show also that five years after home prices hit their peak and began to fall, large numbers of borrowers still are under water.

The CoreLogic figures show also:

• The number of underwater homeowners fell 5.2% over the past year, a decline of 0.8 of a percentage point. There were 102,000 “negative equity” homes in O.C. at the end of Q2 2010.

0.8%? Less than a 1% drop is not exactly making major progress. At that rate, loan owners will be underwater for about 120 years.

• 4.2% of O.C. homeowners with a mortgage are above water but have debt representing 95% or more of their home’s value.
• More than 23,300 homeowners are just barely above water because they owe 95% or more of their home’s value.

When the dubious 17.3% number who are underwater is added to the 4.2% who couldn't pay a realtor commission to get out, and 21.5% of loan owners are effectively underwater and unable to sell. With 21.5% unable to sell without bank permission, and with no buyers in the last 10 years having any move-up equity, it shouldn't be a big surprise that the move-up market is dead and sales volumes are more than 25% below historic norms.

Orange County has about 120,000 underwater borrowers by CoreLogic's measure, but what about the rest of the country?

Mortgage Delinquencies Drop

By Kevin Chiu — Published September 23, 2011

The number of homeowners behind on their mortgages has dropped as a result of a higher number of mortgage modifications, according to one of the nation’s largest providers of mortgage data. The drop in mortgage delinquencies is a positive sign for the housing market, despite an uphill battle banks and mortgage companies are waging with the foreclosure crisis.

Mortgage delinquencies fell 2.5% in August from July, according to Lender Processing Services, which gathers its data from nearly 40 million mortgages it tracks for the U.S. lending industry. Total delinquencies, which include loans that are 30 days or more past due, dropped to 8.13% last month.

Still, however, the number of single family homes 90 days or more delinquent are near record highs with 1,866,000 late but not in the foreclosure pipeline. Another 4.25-million homes are 30 days or more past due on their mortgages, but not in foreclosure. About 6.4-million homes are 30 days or more delinquent or in the foreclosure process.

6.4 million homes are 30 days or more delinquent or in the foreclosure process. That is an astonishingly high number. And it's expected to get worse as there are 10 million more mortgage delinquencies to come.

The drop in delinquencies, however, is not a clear indication that foreclosures are easing nor are they expected to slow by real estate analysts over the next few years. Aggressive action by government leaders combined with bankers are the only avenues that could aid the housing market as high unemployment and other financial worries trouble the nation’s economy forcing more mortgage holders from their homes, and at risk of foreclosure.

Forcing more mortgage holders from their homes? He means to say that more loan owners will be relieved of their debt burdens on properties they have no ownership in. The language we use to convey information has hidden assumptions and meanings. The people who go through foreclosure are being forcibly removed from properties they no longer own. Many of them had no equity in the property, or they would have sold it prior to the foreclosure. Nobody sheds a tear when a renter gets evicted, but government is supposed to do everything in its power to stop a loan owner from facing the same fate. I think that's bullshit.

Losing HELOC income: when the house in unemployed

During the rally of the housing bubble, houses were like a third wage earner in the family. In fact, for nearly five years in Irvine, the median home price went up by an amount equal to the median income. With access to this windfall through HELOCs, every home owner had another source of income, and best of all, this income was not taxed.

The former owners of todays featured property bought back in 1993. By April of 2006, they ran up a $487,000 mortgage. This was easily double what they paid. But the house was not done working for them. They stopped paying in early 2008, and they were allowed to squat for 3 full years.

Foreclosure Record

Recording Date: 03/25/2010

Document Type: Notice of Sale

Foreclosure Record

Recording Date: 12/24/2009

Document Type: Notice of Default

Foreclosure Record

Recording Date: 03/04/2009

Document Type: Notice of Rescission

Foreclosure Record

Recording Date: 12/01/2008

Document Type: Notice of Sale

Foreclosure Record

Recording Date: 08/22/2008

Document Type: Notice of Default

Irvine real estate is wonderful, isn't it?

——————————————————————————————————————————————-

This property is available for sale via the MLS.

Please contact Shevy Akason, #01836707

949.769.1599

sales@idealhomebrokers.com

Irvine House Address … 31 CASTILLO Irvine, CA 92620

Resale House Price …… $460,000

Beds: 3

Baths: 2

Sq. Ft.: 1337

$344/SF

Property Type: Residential, Single Family

Style: One Level, Contemporary

Year Built: 1977

Community: Northwood

County: Orange

MLS#: S674172

Source: SoCalMLS

Status: Active

On Redfin: 3 days

———————————————————————

This REO property is located in the highly desired area of Irvine, Northwood. Close to the 'Blue Ribbon' high school, Northwood High, shopping and hiking trails. No Mello Roos and low HOA which includes a tennis court. Walking distance to shopping and parks. This single story home has an open floor plan with vaulted ceilings in the living/ dining area. A side entry for privacy. A real brick wood burning fireplace for your family to gather around on those cold winter nights. With a little work this could be the home of your dreams.

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Proprietary IHB commentary and analysis

Resale Home Price …… $460,000

House Purchase Price … $200,000

House Purchase Date …. 8/5/1993

Net Gain (Loss) ………. $232,400

Percent Change ………. 116.2%

Annual Appreciation … 4.5%

Cost of Home Ownership

————————————————-

$460,000 ………. Asking Price

$16,100 ………. 3.5% Down FHA Financing

4.10% …………… Mortgage Interest Rate

$443,900 ………. 30-Year Mortgage

$124,254 ………. Income Requirement

$2,145 ………. Monthly Mortgage Payment

$399 ………. Property Tax (@1.04%)

$0 ………. Special Taxes and Levies (Mello Roos)

$96 ………. Homeowners Insurance (@ 0.25%)

$510 ………. Private Mortgage Insurance

$60 ………. Homeowners Association Fees

============================================

$3,210 ………. Monthly Cash Outlays

-$335 ………. Tax Savings (% of Interest and Property Tax)

-$628 ………. Equity Hidden in Payment (Amortization)

$23 ………. Lost Income to Down Payment (net of taxes)

$78 ………. Maintenance and Replacement Reserves

============================================

$2,347 ………. Monthly Cost of Ownership

Cash Acquisition Demands

——————————————————————————

$4,600 ………. Furnishing and Move In @1%

$4,600 ………. Closing Costs @1%

$4,439 ………… Interest Points @1% of Loan

$16,100 ………. Down Payment

============================================

$29,739 ………. Total Cash Costs

$35,900 ………… Emergency Cash Reserves

============================================

$65,639 ………. Total Savings Needed

——————————————————————————————————————————————————-

Far from being the end of the world, the pain of the Great Recession caused by the housing bust will have long term beneficial effects on society — assuming we learn the right lessons.

Irvine Home Address … 34 BROOKSTONE Irvine, CA 92604

Resale Home Price …… $484,900

Always look on the light side of life…

If life seems jolly rotten,

There's something you've forgotten!

And that's to laugh and smile and dance and sing,

When you're feeling in the dumps,

Don't be silly chumps,

Just purse your lips and whistle — that's the thing!

And… always look on the bright side of life…

Monte Python — Always Look On the Bright Side of Life

The fact that prices are falling is not a bad thing, not that loan owners who rely on HELOC income would agree. Financial market implosions purge irresponsible and unsustainable habits from the populace. HELOC dependency serves no one, not even the sheeple who got to enjoy it for a time. The unceremonious fall from entitlement is inevitable, and although the fall is emotionally devastating, getting off the HELOC heroin is better for borrowers in the long term.

Falling prices bring affordability to the prudent who understand valuation and their cost of ownership. Many people have put off their purchases because they understand the power of rental parity. Those people will be rewarded with lower debts, and the ability to move without feeding a black hole on their family balance sheet. The lower debt service payments will benefit the local economy as money that used to go to a lender is now circulating in the local economy to buy goods and services.

The housing bust has a good side

Published 03:15 p.m., Friday, September 23, 2011

Anyone who has seen a friend kick an addiction — be it to alcohol, drugs or cigarettes — knows the extreme discomfort and force of will required. America has long suffered repeated bouts of binging on real estate. The booms inevitably trigger busts, one of which we're now in deep.

But there is some bright side here. As they say, with pain comes gain.

The collapse in house prices could help the environment, stabilize family finances and strengthen our economic base over the long term.

True, the housing crash continues to drag down today's economy. Prices have fallen nearly 32 percent from their 2005 high, according to the Standard & Poor's Case-Shiller 20-city index. One in five Americans with a mortgage is “underwater.” That means these owners owe more on their home than the home can sell for. Economists expect house prices to rise only about 1 percent between now and 2015, leading some to call this a “lost decade” for homeowning.

Housing woes are still the primary cause of our weak economy. An entire industry is sitting on the sidelines. Construction related unemployment is over 30%, and new home sales continue to set record lows. Realtors and mortgage brokers are similarly hurting as lower prices and lower transaction volumes have caused sales commissions to plummet. None of these industries is forecast to improve in the near term.

What we really have is a return to certain realities obscured by the housing bubble. Ten years ago, soaring house prices created a “wealth effect.” This was an illusion of newfound prosperity, which prompted homeowners to borrow heavily off their rising equity and spend the money, much of it at the mall.

Apparently, I am not the only one who noticed. You don't read much about rampant HELOC abuse in the mainstream media.

They didn't save much for retirement, figuring that they could live off the proceeds from selling their home.

i am always shocked when I read about the stupid things some people did to destroy their security in retirement.

Shabby lending practices exploded, snaring many Americans who could not afford what they were buying into paycheck-to-paycheck existences or foreclosure.

The only way out for many struggle families is strategic default. Those with the most financial distress have already walked away, but those who are barely getting by are continuing to hold on with hope that rising prices will give them equity again soon. Unfortunately for them, prices will fall, and even with the lower balance of an amortizing mortgage, many households will be years before they have equity again.

When the music stopped, the wealth effect geared into reverse. Families pulled back on spending. They began to “de-leverage” their finances — that is, start paying off their debt. Construction workers, landscapers, salespeople and others living off the bubble lost their jobs.

The resulting unemployment is troublesome, but won't the American economy become stronger when families start carefully investing for their future, rather than relying on the magic-mushroom “high” of ever-rising home prices?

Isn't it better for the environment that prospective homebuyers now value smaller houses that use less energy, take up less space and are often located closer to work, schools and shopping?

And isn't it good for American towns and cities where these smaller and older houses are located? Once rejected by status-conscious house hunters as “starter homes,” bungalows and capes are becoming the permanent and beloved family residences that they were a couple of generations ago. Neighborhoods populated mainly by older folks and unmarried hipsters now draw families with children, bringing new life to formerly struggling commercial centers.

The housing bust in California has enabled many renters to buy properties closer in to employment centers. The commute through the valley on the 91 is no longer a necessary price to pay to have a nice house for many who work in Orange County.

Speaking of which, the so-called lost decade for homeowners has become a “found decade” for homebuyers. Young people can easily find far more affordable housing, although getting a mortgage has become tougher. They don't have start off their working lives drowning in debt.

The mainstream media is so caught up in the distress of loan owners that they completely fail to mention the benefits current buyers are obtaining. For the first time in a decade, people are able to buy houses with a lower cost of ownership than a comparable rental.

One must feel for the homeowners who now owe more on their mortgages than their homes' value. Some borrowed recklessly, but many just got caught up in a frenzy whipped by powerful interests. The real-estate industry peddled homes as no-lose investments. Deregulated lenders became debt pushers (while passing the risks onto others).

The Federal Reserve sustained the market's boil by keeping interest rates very low, with the Fed chairman himself dismissing the manic speculation as “froth.” The boom-bust cycle in real estate has repeated itself so often in our history that it would be foolish to declare the housing addiction “cured.” We are, after all, a land of bounteous acreage and a certain grandiosity when it comes to the material. But since this latest excess had to come to an ugly end, let's at least get something good out of it.

It's natural for people to want free money. When a Ponzi virus is released into the financial system, it spreads because it's human nature to want something for nothing. People wanted house prices to continue to rise in order to fund their spending. People were willing to push prices every higher to obtain the free money that came from ownership. The system worked until the pipers stopped the music and demanded to get paid.

The damage this Ponzi virus did to the US economy is evident in this recession that goes on and on. The government tells us the recession ended two years ago. Does it feel that way to you? It doesn't if you work in real estate.

The Great Recession will finally end, and prosperity will return. When it does, I hope we have learned the lessons of history. So far, I haven't seen any of the causes of this debacle cured through preventative legislation. Our collective memories will only last so long, and when the Siren's song of free money beckons, the next Ponzi weed will find a fertile soil in which to germinate.

Happy Birthday IHB!

The Irvine Housing Blog turned five years old yesterday. Welcome to the Irvine Housing Blog!

Kitchen is ready for your personal touch and upgrades

This house has no kitchen. The previous owner must have ripped it out and sold it before moving on. The bank took this property back at the end of June and has no idea what to do with it. The strategy right now is to find an all-cash buyer who will put in their own kitchen. This all-cash buyer must be willing to pay $337/SF for a property which backs onto the the Culver/Warner intersection.

Never going to happen.

This property might fetch $525,000 if the kitchen were in place, but nobody looking to profit on the flip would touch this place for $484,900, and given its inherent negatives, I don't foresee many all-cash owner occupants willing to buy this place.

Either the bank is going to have to lower its price significantly, or they are going to have to spend the money to put in a kitchen and hope for the best.

——————————————————————————————————————————————-

This property is available for sale via the MLS.

Please contact Shevy Akason, #01836707

949.769.1599

sales@idealhomebrokers.com

Irvine House Address … 34 BROOKSTONE Irvine, CA 92604

Resale House Price …… $484,900

Beds: 3

Baths: 2

Sq. Ft.: 1440

$337/SF

Property Type: Residential, Single Family

Style: One Level

Year Built: 1981

Community: Woodbridge

County: Orange

MLS#: K11124093

Source: CRMLS

Status: Active

On Redfin: 2 days

——————————————————————————

GREAT opportunity to own your piece of Woodbridge. Close to Northlake and many of the other association amenties, including one of their many parks, pools, sports courts etc!! Seller is contemplating repairs, send your CASH offers to get this price. .. 3 bedrooms and 2 baths, kitchen is ready for your personal touches and upgrades. Brick fireplace in family room and sliding glass door to rear patio area.

——————————————————————————————————————————————-

Proprietary IHB commentary and analysis

Resale Home Price …… $484,900

House Purchase Price … $635,000

House Purchase Date …. 8/26/2004

Net Gain (Loss) ………. ($179,194)

Percent Change ………. -28.2%

Annual Appreciation … -3.7%

Cost of Home Ownership

————————————————-

$484,900 ………. Asking Price

$16,972 ………. 3.5% Down FHA Financing

4.10% …………… Mortgage Interest Rate

$467,928 ………. 30-Year Mortgage

$131,822 ………. Income Requirement

$2,261 ………. Monthly Mortgage Payment

$420 ………. Property Tax (@1.04%)

$0 ………. Special Taxes and Levies (Mello Roos)

$101 ………. Homeowners Insurance (@ 0.25%)

$538 ………. Private Mortgage Insurance

$85 ………. Homeowners Association Fees

============================================

$3,405 ………. Monthly Cash Outlays

-$353 ………. Tax Savings (% of Interest and Property Tax)

-$662 ………. Equity Hidden in Payment (Amortization)

$25 ………. Lost Income to Down Payment (net of taxes)

$81 ………. Maintenance and Replacement Reserves

============================================

$2,495 ………. Monthly Cost of Ownership

Cash Acquisition Demands

——————————————————————————

$4,849 ………. Furnishing and Move In @1%

$4,849 ………. Closing Costs @1%

$4,679 ………… Interest Points @1% of Loan

$16,972 ………. Down Payment

============================================

$31,349 ………. Total Cash Costs

$38,200 ………… Emergency Cash Reserves

============================================

$69,549 ………. Total Savings Needed

——————————————————————————————————————————————————-

Two presentations this evening Wednesday, September 28, 2011

We still have seating available for tonight's presentations. I hope to see you at the offices of Intercap Lending (9401 Jeronimo, Suite 200, Irvine, CA 92618).

You may still attend if you have not provided an RSVP; however, if the crowd is too large, you may have to stand in the back.

The Orange County resale home sales market enjoyed its seventh consecutive month of increasing affordability. The lack of a move-up market has depressed sales more than 25% below the long-term average.

Irvine Home Address … 11 VERNAL Spg Irvine, CA 92603

Resale Home Price …… $4,895,000

Are you ready to crawl out?

Are you ready to take my hand and see?

Are you ready to crawl out?

From within the slow bleed?

Thousand Foot Krutch — Slow Bleed

The story of the housing market over the next few years will be a slow bleed. Prices won't likely crash hard as lenders have learned to control the price descent by slowly releasing product. They know if they release too fast, prices will crash, so they slowly bleed the market drop by drop. This slow bleed will go on until the inventory of distressed properties is cleared from the system. At current rates, that will take a very long time.

O.C. home prices at 7-month low

September 25th, 2011, 12:01 am — posted by Jon Lansner

DataQuick’s first glance at September and Orange County homebuying trends shows pricing at a 7-month low — suggesting that a summertime price bump may have lost steam.

For the 22 business days ending Sept. 8 – the latest numbers — Orange County’s real estate market saw …

• Median selling price for all residences of $417,500 – that is off 6.2% vs. a year ago. Last full month that was lower was February 2011 at $410,000.
• Total Orange County sales of 2,683 residences closed in the latest period — that is up 6.8% vs. a year ago.
• Note: 16 of 83 Orange County ZIPs had both rising sales and prices in the period. Is your ZIP one of those neighborhoods? To see, CLICK HERE!

Here’s the breakdown of recent activity by key category; included is how the latest results compare to the average monthly sales pace from 1988 through 2010:

Slice	Price	Price vs. year ago	Sales	Sales vs. year ago	Sales vs. ’88-’10 avg.
Houses	$470,000	-11.3%	1,784	+8.6%	-21.0%
Condos	$269,500	-10.2%	749	+4.5%	-13.0%
New	$583,000	+12.2%	150	-2.0%	-71.5%
All O.C.	$417,500	-6.2%	2,683	+6.8%	-26.4%

Take a careful look at the chart above. Note the price change on resale houses and condos are both down over 10%. Only new home sales — numbers which can be easily gamed by incentive programs — shows any strength at all in the market. And since the actual sales volumes of new homes is declining, the price gains are largely an illusion.

Also note the rate of sales versus the long-term average (1988-2010). Sales of all housing types is down well below their historic norms. It is particularly bad in sales of both new and resale detached houses. This is explained by the lack of a move up market due to the utter collapse of low end pricing. Nobody at the bottom of the housing ladder has any money to purchase a move-up home.

And more analysis ….

• $417,500 median selling price is 35% below June 2007′s peak of $645,000.
• Current price is 7.2% below 2010′s peak (May and July) of $450,000; 2% above end of 2010′s median ($410,000.)
• The most recent median is 13% above the cyclical low hit in January 2009 at $370,000 — so the median has recouped 17% of the $275,000 price drop from the peak.

While it's true that the median does not show the double dip that both the hedonic and the $/SF measures show, the median is more susceptible to changes in the mix than either of those measures.

Basically, when the bottom dropped out of the market, the only thing that was selling was low-priced homes. With the complete seizure of the high end of the market, a radical change in mix caused the median to decline more rapidly than actual home values. Therefore, the increase in the median since then is more reflective of a change in sales mix than an actual increase in sales prices of individual homes.

• Compared to cyclical low, single-family house median is 12% higher ($418,250 in January 2009); condo median is 7% higher ($252,000 in March 2009.) Builder prices for new homes are 38% above June 2009′s $424,000 bottom.

Does anyone believe builders are selling the same houses for 38% more than they were in 2009? Do you see how the change in mix effects the numbers?

• The median selling price of a single-family home is 36% less than their peak pricing (June ’07). Condos sell 43% below their peak in March 2006. Builder prices for new homes are 33% below their February ’05 top.

Those are some sobering numbers. Most of that drop is due to a return to sane lending standards and the commensurate decline in loan balances.

• Single-family homes were 74% more expensive than condos in this period vs. 77% a year ago. From 1988-2010, the average house/condo gap was 57%.

This disparity portends a continuing decline in high-end pricing. Prices at the high end are generally pushed up from below as move-up buyers take their accumulated equity and increase buying power to bid up prices in the next rung of the housing ladder. With the collapse of low end pricing, what is ordinarily a price push is turning into a price pull — to the downside. Without a move up market, high end prices are floating in air with little real demand to support them.

The chart from Global Decision displays how during the price rally, condos rose more rapidly than SFRs, so prices were pushed up from below. Now with the decline at the low end, the price push has reversed and a price pull has taken its place.

As the lack of a move up market squelches demand, the substitution effect will also pull demand away from higher priced properties as each successive rung on the property ladder falls to more affordable levels.

• Builder’s new homes sales were 6% of all residences sold in the period vs. 6% a year ago. From 1988-2010, builders did 14% of the Orange County homeselling.

Despite the fanfare regarding the Irvine Company's new home products, sales continue to be very weak. Given the price points they are wishing for, sales should continue to be very weak indefinitely.

Delusions at the high end

Wealthy home owners seem to live in their own world. For them, the price crash never happened, and no matter how much they paid, they believe a great fool is waiting in the wings to pay them substantially more when they want to sell. For some, this has proven to be true.

The owners of today's featured property paid $3,350,000 on what was a distressed sale back in April. Did they really buy this for 40% under its “real” value back in April? If they pull off a $1,251,300 profit on a Shady Canyon flip in less than six months, I will be very impressed.

Personally, I don't give them much chance. Where was their take-out buyer willing to pay so much more back in April? If so, was this a flop?

What do you think? Will they sell this for a profit in this market environment?

——————————————————————————————————————————————-

This property is available for sale via the MLS.

Please contact Shevy Akason, #01836707

949.769.1599

sales@idealhomebrokers.com

Irvine House Address … 11 VERNAL Spg Irvine, CA 92603

Resale House Price …… $4,895,000

Beds: 5

Baths: 7

Sq. Ft.: 7577

$646/SF

Property Type: Residential, Single Family

Style: Two Level, Spanish

View: Mountain

Year Built: 2004

Community: Turtle Rock

County: Orange

MLS#: U11003897

Source: SoCalMLS

On Redfin: 14 days

——————————————————————————

With a private and expansive corner lot, this beautifully customized estate reflects Hacienda-style Spanish Revival architecture and is located within the exclusive residential golf preserve of Shady Canyon. The home was recently expanded and completely remodeled, opening up the living space and providing a soft contemporary flair to the custom home sized estate with 7,577 square feet. The well-designed additions created a full theater room, family room, and two additional bedrooms. The one of a kind home now features an incredible outdoor kitchen, dining area, and covered logia adjacent to a spectacular new yard complete with a pool, fire pit, custom lighting and water features, and pool bathroom.

——————————————————————————————————————————————-

Proprietary IHB commentary and analysis

Resale Home Price …… $4,895,000

House Purchase Price … $3,350,000

House Purchase Date …. 4/21/2011

Net Gain (Loss) ………. $1,251,300

Percent Change ………. 37.4%

Annual Appreciation … 78.3%

Cost of Home Ownership

————————————————-

$4,895,000 ………. Asking Price

$979,000 ………. 20% Down Conventional

4.10% …………… Mortgage Interest Rate

$3,916,000 ………. 30-Year Mortgage

$982,420 ………. Income Requirement

$18,922 ………. Monthly Mortgage Payment

$4242 ………. Property Tax (@1.04%)

$585 ………. Special Taxes and Levies (Mello Roos)

$1020 ………. Homeowners Insurance (@ 0.25%)

$0 ………. Private Mortgage Insurance

$610 ………. Homeowners Association Fees

============================================

$25,379 ………. Monthly Cash Outlays

-$2145 ………. Tax Savings (% of Interest and Property Tax)

-$5542 ………. Equity Hidden in Payment (Amortization)

$1414 ………. Lost Income to Down Payment (net of taxes)

$632 ………. Maintenance and Replacement Reserves

============================================

$19,738 ………. Monthly Cost of Ownership

Cash Acquisition Demands

——————————————————————————

$48,950 ………. Furnishing and Move In @1%

$48,950 ………. Closing Costs @1%

$39,160 ………… Interest Points @1% of Loan

$979,000 ………. Down Payment

============================================

$1,116,060 ………. Total Cash Costs

$302,500 ………… Emergency Cash Reserves

============================================

$1,418,560 ………. Total Savings Needed

——————————————————————————————————————————————————-

Mortgage interest rates continue to drop to record lows with recent rates dipping below 4%.

Irvine Home Address … 92 RINALDI Irvine, CA 92620

Resale Home Price …… $659,900

You think you'll never get it right

But you're wrong. You might.

The sky could fall, could fall on me

Coldplay — Low

The current low interest rates are truly remarkable. We are approaching the all-time recorded low from the early 1950s. The reason for the latest drop in interest rates is more market manipulation by the federal reserve. However, in a broader context, the continually dropping interest rates are a sign of monetary deflation caused by the ongoing write-offs of bank debt.

It can be argued that today's low interest rates are high in real terms. If you accept Mish's definition of inflation as the expansion of money supply and credit, we are currently experiencing deflation caused by all the write downs. When you have deflation, even low interest rates are high relative to inflation.

Another way to look at the situation is from supply and demand. During the housing bubble, lenders created enormous amounts of debt as credit expansion was off the charts. Now we have a huge overhang of debt borrowers cannot support. As we all know, lenders are loathe to write this debt off, so we are left with a large supply of debt. With the return of prudent lending standards based on real incomes, demand for debt is very low. Large supply and low demand makes for lower prices. The price of debt is the interest rate, so lower prices on money mean lower interest rates.

However, you want to conceptualize or explain the low interest rates, it looks as if they will be with us for a while. As long as the economy remains weak, the federal reserve will want to keep interest rates low. Bernanke has publicly committed to keep rates at zero for two years, for whatever his word is worth.

Mortgage rates drop to once unthinkable lows at less than 4%

The Federal Reserve's latest step to prop up the economy means that 30-year fixed-rate loans are available for less than 4%. But many people are in no position to buy or refinance a home.

By E. Scott Reckard, Los Angeles Times — September 23, 2011, 7:40 p.m.

The Federal Reserve's latest effort to prop up the economy has dropped mortgages into once unthinkable territory, with 30-year fixed-rate loans available for less than 4% — a record low.

For people lucky enough to still have their credit ratings, bank accounts and home equity in good shape, the change means the opportunity to refinance at rates that once seemed unimaginable.

Note those exclusions carefully. It isn't lucky people who have good credit and home equity. Mostly, it is savers and buyers from prior to 2002 who didn't HELOC themselves into an underwater condition. The two groups benefiting most from the housing crash are prudent long-term homeowners (other than the loss of illusory equity) who can now refinance, and renters who have waited until prices and interest rates have fallen so low as to make properties affordable.

“I can remember when I thought 7% was a great loan,” said Roger Hornbaum, a retired city of Orange employee who has already refinanced his home on California's Central Coast twice since purchasing it last year. “After the news this morning, maybe I'll be getting another call from [my mortgage broker] and be trying it again sometime soon.”

Hornbaum's broker, Jeff Lazerson of Laguna Niguel, said clients who pay closing costs and a 1% fee to him are refinancing into 30-year fixed-rate loans at 3.75%.

If Mr. Hornbaum has refinanced twice in the last year, it's his mortgage broker who is really happy.

Of course, these days many people are in no position to buy or refinance a home. Many can't meet the stringent lending standards that have prevailed since the housing bust and bank bailout, or they owe so much more than their house is worth that they can't get a new loan at a better rate.

“The phone is ringing off the hook with people who want to refinance,” said loan officer Darin Hardin at Premier Mortgage Group in Ladera Ranch. “But the property values just aren't there.”

The GSEs and FHA will allow underwater refinancing, but the terms aren't very good. Again, the only real beneficiaries are long-term homeowners who didn't HELOC themselves into an underwater position.

The record low rates are driven by the Fed's announcement Wednesday that it would load up on purchases of long-term government bonds and mortgage securities. The extra demand was intended to drive down long-term interest rates, including those for home loans — and it worked.

The yield on the 10-year Treasury bond, which serves as a benchmark for fixed mortgages, had closed at 1.94% on Tuesday. By the end of the day Wednesday it had dropped to 1.86%, and it plummeted Thursday to 1.72%, setting a record low before rising again Friday to 1.83%.

For a 30-year fixed-rate mortgage, the typical rate for solid borrowers had been 4.09% last week and early this week, according to mortgage finance giant Freddie Mac. That's within a whisker of the record low of 4.08% set in 1950 and 1951. The Fed's action dropped it well into record territory.

Mortgage professionals said many companies were making loans slightly more expensive Friday because their loan pipelines were full of more refinance requests than they could easily handle.

Provident Funding, a lender that concentrates on borrowers with solid credit, said on its website Thursday that it could refinance a $300,000 loan on a $450,000 home in Los Angeles County at 3.875% and hand back $3,000 to the homeowner to help with closing costs. On Friday, the rebate on the same loan had dropped to $1,875.

But should the 10-year Treasury yield stay low, there appears to be room for mortgage rates to fall further, industry experts said.

Bernanke is buying 10-year Treasuries to have this effect. He wants to drive down mortgage interest rates to make houses more affordable and spark economic growth by reducing the mortgage burdens on those who qualify for refinancing.

Of course, the flipside to his policy is to reduce the profits accruing the member banks of the federal reserve he is trying to support. Banks were borrowing from him at zero percent, buying treasuries and earning a 3% riskless trade. As long rates go down, the profits from this trade are diminished, and banks will take longer to earn their way out of insolvency.

Refinancing mortgages at lower rates should help stimulate the economy by putting more spending money in borrowers' pockets. Lowering the rate on a 30-year $350,000 mortgage to 4% from 5.5% would cut payments by about $3,800 a year.

Despite this fact, most borrowers are better off walking away from their massive debt loads they can never hope to repay.

Mindful of that fact, the Obama administration is trying to encourage greater use of a program that allows borrowers with loans backed by Freddie Mac and Fannie Mae to refinance up to 125% of their home's value. The borrowers must have kept payments current on the underwater loans to qualify.

According to the Mortgage Bankers Assn., more than three-quarters of all home loan applications are now for refinances, although the volume is more of a boomlet than a boom. As rates sank toward 4% recently, borrowers were refinancing their loans at about half the pace seen in early 2009, when rates cracked the 5% barrier for the first time since 1956.

Each drop in rates prompts some refinancing, but the effect diminishes over time. When rates start going back up, all refinance activity will cease. Mortgage brokers and loan officers are hoping purchase activity picks up dramatically for them to make a living.

Jay Brinkmann, chief economist for the mortgage trade group, said the torpid housing market had produced few new purchase loans in recent years that would be good candidates for refinancing. What's more, many people already have refinanced at rates less than 4.5% or simply never intend to replace an old loan.

“We'll have to see what happens this week with the [latest big] rate drop,” Brinkmann said. “Until a few weeks ago, rates were just back to where they were this time last year.”

Meantime, mortgage borrowing to finance home purchases continues to lag despite the record low rates and home prices that in many areas are down more than 30% from their 2006 peaks. Plenty of families are too stressed out financially to buy. Others are leery that housing prices, which rose a bit in the second quarter, could crater again in a double-dip recession.

It's difficult for most industry veterans to understand how low prices and low interest rates aren't creating demand, but the reality is (1) prudent lending standards, (2) the plethora of foreclosures and short sales, and (3) high unemployment due to the weak economy has greatly diminished the buyer pool. Couple this diminished buyer pool with abundant supplies of distressed properties, and you have a recipe for lower prices and anemic sales volumes.

With a 1-year-old daughter, Joseph and Allison Dillard would normally be prime candidates to stop renting and buy a house.

He is a software engineer and she has a master's degree in mathematics that should allow her to find work when their daughter is older. They have saved enough money for a 20% down payment on a single-family home in Mission Viejo or Laguna Hills, or perhaps a town home in Irvine, she said. And they have been pre-approved for a loan through Hardin, the Ladera Ranch mortgage banker.

Having looked at homes off and on since early this year, the Dillards stepped up the search this month after Joseph settled into a better new job at Google Inc.'s offices in Irvine. But they haven't taken the plunge into ownership.

I know several of the software engineers at Google. I have been to their offices many times. The IHB has spread like a virus there. I wonder if his trepidation about buying is related to the IHB?

“The mortgage rates are so low but we're worried, because we don't know much further housing prices will fall,” said Allison, 30. “We're trying to gauge the potential risks and benefits.”

In any case, the Dillards figure, the economy's precarious state means they'll have at least another year before interest rates rise significantly.

“It doesn't seem like they'll be jumping up any time soon,” she said. “So that's not motivating us to do anything right away.”

scott.reckard@latimes.com

He is right. There is no urgency to jump into home ownership. Prices will be flat or down, interest rates will likely remain low, and supply will remain abundant. There are fewer reasons not to buy, but there are few compelling reasons to buy now — not that realtors will admit that.

Buying in a low interest rate environment

realtors generally tell people to buy when interest rates are low. As with most things realtors say, this isn't usually a good idea. The reason is simple, when interest rates rise, money gets more expensive, and future buyers cannot borrow as much to bid up properties. Unless incomes are rising dramatically (or DTIs get out of control), rising interest rates make for tepid appreciation at best.

Ideally, buyers should wait for interest rates to rise so they can refinance into a lower rate and smaller payment in the future. I have endorsed this strategy on several occasions. However, in today's market environment, this advice just doesn't work. It may be seven to ten years before we see the peak of the next interest rate cycle. How long do you want to wait?

The days of making huge gains from appreciation are over. Real estate is going to struggle for years as the supply is absorbed and interest rates slowly rise of the bottom. Both of those factors are going to put pressure on prices for the foreseeable future.

In a low interest rate environment, the primary reason to buy is to save money over renting. This should be the focus of buying decisions for the next several years.

There are many reasons to buy real estate, and it won't be a loser for those buying over the next several years, but buyers need to have realistic expectations. Buy because you want to provide a stable home for the family, but forget the nonsense about appreciation. It isn't going to happen.

Sale-leaseback foreclosure

When a builder puts in a model center, they don't want to leave their capital tied up in the houses they built, so they usually sell these to investors and lease it back until they wind down their sales operation. Today's featured property was purchased by one of these investors who walked away and let the bank take the property back in foreclosure.

Note on interest rates for posts

When I prepare posts for the IHB, I get the current mortgage interest rate from Bankrate.com. They reported mortgage interest rates average 4.1% rather than the 4.0% mentioned in today's post. The rate I show represents the average in the marketplace not the lowest interest rate attainable. I believe this is more accurate to what the eventual buyer of the featured property will actually pay.

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This property is available for sale via the MLS.

Please contact Shevy Akason, #01836707

949.769.1599

sales@idealhomebrokers.com

Irvine House Address … 92 RINALDI Irvine, CA 92620

Resale House Price …… $659,900

Beds: 3

Baths: 3

Sq. Ft.: 1964

$336/SF

Property Type: Residential, Condominium

Style: Two Level, Mediterranean

Year Built: 2006

Community: Woodbury

County: Orange

MLS#: S673564

Source: SoCalMLS

Status: Active

On Redfin: 9 days

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REO BANK OWNED PROPERTY!! Stunning 2 story condo with excellent curb appeal. Inside this gorgeous home there are tiled floors throughout the living room and kitchen. The living room has a cozy fireplace and recessed lighting. The kitchen would be perfect for any cook, with the built in refrigerator and the KitchenAide stainless steel appliances. There is a bedroom and a full bathroom located down stairs. There is a laundry room upstairs. This condo is a former model home and the 2 car garage was remodeled into 2 sales offices. Therefore there is no actual garage. The buyer may convert it back at the buyer's expense. This home is turn key ready and is a must see!

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Proprietary IHB commentary and analysis

Resale Home Price …… $659,900

House Purchase Price … $956,000

House Purchase Date …. 8/24/2006

Net Gain (Loss) ………. ($335,694)

Percent Change ………. -35.1%

Annual Appreciation … -7.0%

Cost of Home Ownership

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$659,900 ………. Asking Price

$131,980 ………. 20% Down Conventional

4.10% …………… Mortgage Interest Rate

$527,920 ………. 30-Year Mortgage

$150,708 ………. Income Requirement

$2,551 ………. Monthly Mortgage Payment

$572 ………. Property Tax (@1.04%)

$400 ………. Special Taxes and Levies (Mello Roos)

$137 ………. Homeowners Insurance (@ 0.25%)

$0 ………. Private Mortgage Insurance

$233 ………. Homeowners Association Fees

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$3,893 ………. Monthly Cash Outlays

-$594 ………. Tax Savings (% of Interest and Property Tax)

-$747 ………. Equity Hidden in Payment (Amortization)

$191 ………. Lost Income to Down Payment (net of taxes)

$102 ………. Maintenance and Replacement Reserves

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$2,845 ………. Monthly Cost of Ownership

Cash Acquisition Demands

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$6,599 ………. Furnishing and Move In @1%

$6,599 ………. Closing Costs @1%

$5,279 ………… Interest Points @1% of Loan

$131,980 ………. Down Payment

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$150,457 ………. Total Cash Costs

$43,600 ………… Emergency Cash Reserves

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$194,057 ………. Total Savings Needed

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