Sky Starts Falling — Doves
Is the sky really falling? I guess it depends on whether or not you associate falling real estate prices with the end of the world. Real estate prices are falling, and they will continue to do so until prices are affordable again. With all of the talk about stabilizing the housing market, people overlook the benefits of affordable housing. If people can live in a property and only spend 28% of their income on it, they have money left over for other uses. The economy will benefit from lower prices as discretionary consumer spending will increase. Of course, if you believe in perpetual Ponzi Scheme financing, we can always fuel our economy on ever-increasing debt loads justified by inflated real estate values. However, we just tried that, and so far the results haven’t been too encouraging. We grossly misappropriated resources to non-productive uses, we overbuilt home improvement shopping centers, and we employed too many people in real estate related professions. The inevitable collapse of the Ponzi Scheme has left us deeply in debt, with an insolvent banking system, and with an economic recession. It will take many years for the California economy to readjust from the housing bubble just as it did in the early and mid 90s. The allocation of resources must change, and it will not be a pleasant process. I hope the California economy that emerges is rooted in something productive rather than another unsustainable Ponzi Scheme.
Today’s featured property is another loser in our real estate game of musical chairs. When the music stopped, today’s owner had taken out all the equity and left the lender is without a chair.
Asking Price: $499,900
Income Requirement: $124,975
Downpayment Needed: $99,980
Monthly Equity Burn: $4,165
Purchase Price: $699,000
Purchase Date: 4/13/2006
Address: 10 Orangetip, Irvine, CA 92604
| Beds: | 3 |
| Baths: | 3 |
| Sq. Ft.: | 1,785 |
| $/Sq. Ft.: | $280 |
| Lot Size: | 2,568
Sq. Ft. |
| Property Type: | Single Family Residence |
| Style: | Contemporary |
| Year Built: | 2006 |
| Stories: | 2 Levels |
| Area: | El Camino Real |
| County: | Orange |
| MLS#: | P654243 |
| Source: | SoCalMLS |
| Status: | Active |
| On Redfin: | 7 days |
home with wood floors, two toned paint, custom banisters, designer
carpet, granite, stone and shutters. Upstairs masters has a retreat and
oversized dressing room, walk-in closet and nicely appointed bath.
Backyard has a great patio perfect for entertaining. Neighborhood has
no mello roos, low tax rate and close to everything. In the much sought
after Irvine High School disrtict. Close to shopping, parks, and
freeways. Association includes pools, spa, and tennis courts.
Do you like the $499,900? Why not $499,999.99 and 9/10. If you are going to price like a used car dealership or a gas station, why not go all the way? 
Highly upgraded? As opposed to lightly upgraded? Or just upgraded? Or perhaps downgraded? Maybe flippers will start tearing out the good stuff and putting in the junk you see in mobile homes…
How do you like the patio “perfect for entertaining?” I thought I was looking at the grounds of Versailles.
This property was purchased on 4/13/2006 fir $699,000. The owner used a $534,171 first mortgage, a $142,445 second, and a $22,304 downpayment. He refinanced on 5/1/2007 with a $588,000 first mortgage and a $110,100 HELOC effectively pulling out all but $900 of his downpayment. He is now offering it for sale at 29% less than his purchase price. Assuming this short sale is approved, a buyer is found at this price, and a 6% commission is paid, the total loss on the property will be $229,094. Taylor Bean & Witaker Mortgage Corporation will lose on the first mortgage, and Citibank will lose their HELOC money.
.
Who am I supposed to be?
I can’t be sure that the next one will see me
And if the sky starts falling on the street outside
The only thing that satisfies
If the sky starts falling on the heads outside
The only thing that keeps me alive
If you see her again, be sure to say hello
Be sure to send my love
Did she seem like before
Could you seem above it all
Be sure to send my love
Wake up, waking up to see
It’s a sign
That what will be will be
And if the sky starts falling on the street outside
The only thing that satisfies
If the sky starts falling on the heads outside
The only thing that keeps me alive
Sky Starts Falling — Dove
It was built in 2006, yet is in El Camino and had NO Mello Roos (which is usually associated with new homes). Where is this development? Or was it a tear-down/rebuild?
I did not realize this neighborhood existed either until I started seeing properties for sale there. It was constructed on a left over piece of land at the intersection of Culver and the 5. It is adjacent to the freeway, a high school, and a large shopping center. I suppose everything is convenient, but it certainly does not have the sense of neighborhood and community you come to expect in Irvine.
Who would pay 1/2 a mill to have the 5 Fwy in their backyard ?!
Apparently there are a few who want to do that as long as kids have a yard to play, and they have different rooms to decorate with the Walmart furniture. The question is how much would they be pre-approved for?
CZ
Not me either. The expressway is pretty close. Is there sound wall in this section?
The sound walls are so high along the 5 fwy through most of Irvine you feel like you are driving in a tunnel. They have very attractive decorative stone built in as well.
This is in contrast to the 5 Fwy in LA County, which has decorative graffti on the sound walls.
Why does anyone buy next to a freeway? Ever heard of eniment domain? Last time I checked, the 5 freeway isn’t getting any clearer.
Where I grew up, anyone who lived next to the freeway lived there because it was their only choice because they were poor. For a 500K SFR in Irivne, this is just about your only choice too, only, if you can actually afford a 500K mortgage next to the largest freeway in California you aren’t poor, just stupid…
IR,
Interesting how the idea of neighborhood or community is so relative. I moved away from Irvine in 2006 and feel a MUCH tighter sense of neighborhood where I live now Raleigh, NC. I would say Irvine has a sense of community only compared to Tustin and south OC. I recently visited my parents in Martinez (in the Bay Area) and the sense of community rivaled North Carolina.
To me, Irvine was a few islands connected with huge streets, and beautiful sidewalks few people use. I lived in Turtle Rock and I loved it, but it was the best of Irvine, as far as I was concerned.
Carl
Ditto. Left in 2006 as well and feel way more connected to my neighbors in the Charlotte area than anything I experienced in Irvine. Weather sucks but the wonderful neighbors, huge home, and home price stability more than make up for it.
ackkkk! more rubes who aren’t sophisticated enough to understand how very, very, very special Irvine is!
Orange County is Disneyland. Coastal California in general is one big casino/theme park, and only hardy reptiles survive in a desert.
Sure former, sure Carl, try telling that to Asians.
WTH do you think there are so many Asians there?
NC? Wasn’t Jesse Helm the senator of that *gleat* state?
I meant ‘here’ instead of ‘there’…as in “here in Irvine”.
It could not have been more than a year or so ago when there were many posters saying, “Prices may go down 5% or at worst 10%, but they will never go down 20% like you doom and gloomers are calling for.”
I also remember them saying if prices did drop 10% they, and everyone they knew, would rush in and buy multiple properties.
Sounds like a new topic –
“Where are they now?”
I had that exact conversation with a real estate broker a year ago in North Tustin. He told me quite smuggly that I was crazy and the he had tons of investors lined up if properties dropped 20%…..Well that has come and gone and sales are still way, way off.
Im sure he has forgotten the conversation by now.
I am in the process of getting my RE license, (we own some rentals and it will handy to have). The kool-aid is still being served in the classes. A lot of “if you see something you like, get it now before prices start going up!”
I sit in the corner and do my best not to sip the sweet nectar.
I know a very smart selfmade man who built his business in computer industry and then slowly got into real estate. Now he has few millions worth assets and cash, working as real estate agent. I was shocked when he said to me as recently as last week that I should buy a home in Corona or anywhere and then I can profit $200K after two years as market is going up soon. I no longer think he is smart and I also am now concluding that he must be burried in debt due to his thinking. I hope he didnt go gangbusters on loading up home after home thinking these are killer deals.
I read the news about Warren Buffet worried about bank failures. I can see a huge market crash coming, lots and lots of banks going belly up. It will take only one major bank/broker to go belly up to trigger CDS warrants. Unemployment is about to kick higher, dont be surprised if Fed cuts the rates further.
where is IPOOOOOO???? 😆
Right here MM, still watching the market.
Price will truly go down when unemployment rate shoots up. Come on IR, you of all people should know this. CA went through a 30% RE price cut back in Georgie Bushie Senor era. It was worse in So Cal because of military base closures and defense contractors laying off massive amounts of people.
Right now Irvine and OC already went through that with mortgage related layoffs. It would take more than that to get the price heading further south.
Prime folks with jobs are still going to pay their mortgages even with their shrinking (now kinda stabilizing) home equities. This will not help price erosion.
Fraudulent listing alert, move along, nothing to see here.
There is no way this short sale will be approved by the lender. This will go back to the bank.
This is a reoccuring problem, people offering properties for sale for prices that they don’t actually have permission to sell for. It seems very odd to me. Kind of like me offering to sell my neighbor’s property without their permission.
If you are so far underwater that it’s a definite short sale, how do you set a reasonable price? The bank will have to approve it, but I hear they typically don’t want to state a number unless they have an offer.
I agree, another example is 10 wedgewood, it is listed at 550k (purchased at 750-800k) and currently has 7 knife catchers bidding up the price.
I so wanted to catch that knife at 525. I even felt proud of myself for having the courage of a making a full asking price offer. But my pride was short lived when my realtor told me that there were as many as 20 offers on the property. I did like the place.
CZ
Thanks, I will profile that one.
10 Wedgewood earned its own thread on the IHB disucssion forums. CubicZ is not the only one who was interested in that place.
The more I hear about the odd dynamics of short sales, the more I think they should just be auctioned on ebay, with the banks setting a reserve.
That is a good idea. Someone should try it…
My son is 19 and taking a class at OCC in personal finance. His teacher is somehow involved in the real estate industry……he told the class that it is always a good time to buy real estate, he told the class you could never call the bottom of a RE market…….GEEEEEEEEEEEEEEEEEEEEZ
the Kool-Aid is strong with this one.
I’d say he’s partly true – you’ll always see the bottom in the rearview mirror. its very tough to call it while you’re in it.
I disagree. It’s easy to call a bottom. It’s very tough to be correct about it.
😆
Nice one.
Even if rental values start to dip under ownership costs again, that still doesn’t mean that we won’t see a loooong term deflation/unemployment cycle that drags both variables lower.
The baby boomers and their entitlements are going to be a massive drag at every level for the next couple of decades.
Buffett said the same thing and people tend to trust him 🙂
Is this property in irvine? @ $162 psf
3 Mandrake Way, Irvine, CA
This must be bottom.
Wow, those are some of the worst decisons ever made when it came to pictures. 4 bedrooms supposedly and yet I get a couple of pool table shots, one with the dog and a wall of computers. I guess there are fraternity houses in Irvine.
I’m not sure it’s the pictures that make this place look bad 😆
The place looks hideous. You have to remodel extensively. Getting it to the perigraniteel level will take at least 150k. Your time with the contractor in getting everything done will of course be priceless.
CZ
fancy staircase ?????
fugly-ugly
I will profile that one, too.
You know what’s wrong with Irvine? 3,448 square foot homes on 3,200 square foot lots . . . 😉
IR-
didn’t you profile one accross sandburg earlier this year that was halfway renovated? or was that IR2?
It was this one:
https://www.irvinehousingblog.com/blog/comments/186-per-square-foot-in-irvine/
What’s with all those weird brick red carpets every where ? LoL
It is possible that we are assessing home value all wrong, that basing the value on what most recent sales are, allows absurd valuations on homes with long lead time production and gross dependency on financing rates.
From the standpoint of the lender, it would seem to make sense to disregard whatever prices might be derived from current buyer hysteria or fraud, and rely on some alternative measures. With the massive losses the lenders are seeing, it might be possible that this would happen.
An alternative is the rental value, which certainly would seem to work for condos, but has significant limitations for the range of homes that are seldom rented.
Perhaps if a big portion of the assessment were the cost of construction and raw land, it would have damped the rise considerably? On the downside, would it allow loans where values drop
too far, well below replacement costs?
Does evaluation of basic costs give us a clue where the long term value is? Maybe not the bottom, but a region where the price will settle?
The cornerstone of my proposal for ending bubbles in house prices is to change the appraisal system to rely on the income approach considering market rents. The current system using the comparative sales approach simply enables irrational buyers to bid prices higher with someone else’s money. If people were limited in their borrowing ability to stabilized cashflow, they could still bid up prices with their own money, but it is much harder to inflate a real estate bubble with savings without an expansion of credit.
Exactly.
If the Pollyannas want to dump all of their investments into real-estate, at the very least force them to pony up their own cash and stop flooding the market with IOU’s and forcing financially responsible people to compete on an un-leveled playing field.
The current system is a complete scam where a buyer with 100K cash loses to the buyer with a few hundred dollars because the other buyer is willing leverage himself more. It’s a pissing contest between the bidders to see who is willing to borrow more. It all then gets bundled into a monthly payment.
When you bid with IOU’s instead of your own money, you are less inclined to restrict yourself because all you see is a monthly payment on a sum of money that you did not have to work you ass off to earn. The question is “Do I borrow and bid an extra 100K? What does that do yo the monthly payment? Can I afford that? Will a greater fool come along later and bail me out?”
The notion of the cost of the house relevant to income is lost amid all the monthly payment background noise.
Of course we all know that your solution, IrvineRenter, will never come to fruition because the Real Estate machine is hungry for big juicy commissions and your system will throw them off the gravy train.
It’s much better for them if the bank just keeps making up money out of thin air and handing it out to the masses so it can all flow right back in. $ $ $
“With all of the talk about stabilizing the housing market…”
I cringe when I hear Obama say that he wants to stabilize home prices.
I didn’t hear too many clamoring for stabilization when prices were skyrocketing!
“We grossly misappropriated resources to non-productive uses…”
Exactly. I’m afraid we will be revisiting the sentiments of the early 90’s when the Aerospace industry vanished and questions about what other industries are in southern California will be the topic of the moment.
Two intervening bubbles helped us forget that a solid economy involves an educated workforce that supplies goods/services to outside that economy.
Yes, you actually gotta “do work” to make a living and not just trade inflated assets back and forth with each other. An ugly, sobering fact which our bozo leaders are now (or should be) slowly realizing.
<<< Yes, you actually gotta “do work” to make a living and not just trade inflated assets back and forth with each other. An ugly, sobering fact which our bozo leaders are now (or should be) slowly realizing.>>>
I guess it depends on which side of the glass you are standing on. Most “elites” have never really done any work. IOW, they have never really had to design, build, market, sell, and collect money from a tangible product.
Most rich people have been doing just what you are saying for a lifetime, why would they think that their business “model” could not be expanded to include the everyman?
Why do you think they all agree it was a good thing for the Fed’s to bail out Fanny and Freddie? Surely you couldnt just flush all that worthless paper down the toilet, how would Warren Buffet pay his dividend? (only the commoners own the common stock, which is now worthless)
Today’s commentary was especially good. The long term economic consequences of the bubble years are worth rehashing and it provides a good “macro” viewpoint of the situation.
Another chance to pay half a million for alley living. If I wanted to live in an alley, I could do it for free. Even a “freeway close” alleys like this one — there are plenty in downtown LA.