The Astoria at Central Park West in Irvine has given up on sales and is converting to rentals until the next housing bubble.

Irvine Home Address … 401 ROCKEFELLER #805 Irvine, CA 92612

Resale Home Price …… $625,000

And when I lost my grip

And I hit the floor

Yeah, I thought I could leave

But couldn't get out the door

Aerosmith — Amazing

The investors who financed the Astoria at Central Park West lost their grip on financial reality. When prices hit the floor, they wanted to leave with their money, but they couldn't find the door. Now, they are stuck with a loser investment, and they have few good options to get out.

High density real estate costs

High density residential construction costs are the biggest variable in determining the type of construction a specific project can support. The income must be sufficient to provide a return relative to those costs for a project to go forward.

The first major cost barrier comes when a project goes from three stories built on grade to four stories over parking (aka podium construction). A typical apartment complex like those built by the Irvine Company are usually three stories of wood-frame construction built on grade. This is the most cost-effective method of producing housing units. Unfortunately, it is difficult to get more than 28 units per acre using this method of construction, so land values are limited.

Podium construction, typically four stories over a two-story underground parking garage, is the next step up the cost and density scale. Villa Siena and the Village at Irvine Spectrum Center are examples of this kind of construction. Densities exceeding 30 units per acre are achievable, but costs jump significantly. Projects must have significantly higher revenue potential to justify this kind of construction.

True high rise construction, defined here as five stories or higher, take another major step up in cost and require a commensurate increase in revenue to justify their existence. These units are generally confined to city centers in major urban hubs — not in low-density Orange County.

When prices rose so high so fast, rather than consider this price action to be a housing bubble — which it was — developers saw an opportunity to build high-rise condos. If prices had held at their 2006 levels, they would have made money. The developers of the North Korea towers did. The developers of the Astoria; well, they weren't quite so lucky.

The Astoria at Central Park West

I last wrote about the Astoria on February 11, 2010 in Free Wine, Food and Gifts Plus a Tour of an Epic Real Estate Disaster. Lennar was gearing up to sell units in this project with a big party. I thought I would give them some additional press coverage. I heard the turnout was good.

Lennar attempted some creative financing, but buyers didn't go for it:

Builders often buy-down the interest rate to artificially lower the payments for early years. Personally, I think the practice is egregious differing in no way from the subprime 2/28 programs that proved so disastrous. Lennar and their partner obviously do not care about the long-term viability of ownership of buyers; any who use their advertised financing will not be living there 7 years from now. The the builder bought down the interest rate on an ARM which is taken out at the bottom of the interest rate cycle; this interest rate is going to rise, and it is going to make future payments unaffordable. I suppose these will appreciate so much over the next 7 years that it won't matter, right? Bubble thinking is not dead.

I first wrote about the Astoria at Central Park West in August of 2009:

When you look back on the towers built along the Jamboree corridor, you see differing groups of winners and losers. The developers of the North Korea Towers (Marquee at Park Place) were winners. They sold the property out at peak prices and made a fortune. The buyers and the lenders who bankrolled the purchases there are the big losers. The other condos that came a little later have a mixed bag of winners and losers with both the developers and the buyers suffering.

Today's featured property, Astoria at Central Park West has a clear loser — the ownership entity that developed this property (Lennar has only a small investment). None of these units sold at the peak, and now that we are nearing a long, flat bottom, these units are hitting the market. The early buyers will be knife catchers, but in a couple of years, some of these units will be good buys — at about $300,000 to $350,000.

As today's featured property attests to, about half a dozen knife catchers did purchase units in Astoria in the 500s. With competition across the street at the North Korea towers selling in the 300s, rather than lower their price to sell more units, Lennar has chosen to convert this community to rentals.

Luxury Irvine condo towers go rental

By MARILYN KALFUS — June 21, 2011

The luxe new high-rise condos at Astoria in Irvine's Central Park West are no longer for sale — they're for rent.

In leasing the units, the upscale project follows the path of the 25-story Skyline at MacArthur Place in Santa Ana’s South Coast Metro district, which turned to apartments last year as the market for buying high-end condos eroded.

Several other less pricey O.C. condo projects also launched before the housing crash have gone the same route.

The apartments at Astoria, once priced to sell from $415,000 to $779,000 — along with homeowner association (HOA) dues ranging from $915 to $965 a month — now rent beginning at $2,590. The most expensive unit is a 14th-floor, 2-story, 3,185-square foot corner penthouse that can be leased for $20,000 a month.

At present, there is no rent-to-buy program, said Alicia Scott, national business development director for Alliance, the company brought in to manage and rent the units by Lennar Corp., the builder.

The 240-unit towers aren't entirely without owners. Six condos were sold as of February, according to a report we did then.

Astoria is alongside the I-405 freeway, but with the windows shut and the air on in one unit, there was no noise. In another unit, with no air on and one window open, some traffic was audible.

Last November, LuxeListHome.com CEO David Doyle told ocregister.com in a podcast interview that luxury apartments are a growing business even as the economy — and other housing markets — slowed. He credited people of means who don’t want to commit to home ownership in unsettling times, an affinity for resort-like living and renters who just aren't interested in owning.

Astoria’s highlights include:

• A concierge
• Free valet parking for guests
• Limestone and marble flooring
• Fisher & Paykel stainless steel appliances
• Electrolux appliances in penthouse
• Units with built-in surround sound and fireplaces
• A swimming pool, spa and fitness center, with access to Central Park West's junior olympic-size pool, and an 8,000-square foot recreation center with an additional gym
• A wine tasting room and 55-degree wine vault with more than 120 cages
• Pets are ok (but not all)

Prospective renters include international and bicoastal business people as well as Los Angeles residents who spend time in Orange County and want to cut down on commuting, Scott says.

Rent pending another housing bubble

I heard through industry sources that Lennar projected sales of these units for about $750,000 back in 2006. With values in the North Korea towers at about half that price, how long do you think it will take for Lennar to hit their numbers? Forever is my guess.

These high rises should never have been built. The economics simply do not support it. The housing bubble sent a false price signal and builders responded. At $750,000 per unit, high-rises justify their construction costs. At $350,000 per unit, they don't. Twenty years from now — or sooner if we inflate another housing bubble — these units might make sense, but today, forget about it.

Renting these units out is admitting failure, but it is probably the wisest course of action in today's markets for real estate and money. The investors whose capital is tied up in this loser project can take a 50% haircut, or they can rent the properties out and get a 3.5% return. Given the options for competing returns, keeping their money tied up in this property is the best use of the money.

Perhaps if competing returns making 10% were widely available, dumping the property and putting the money to work in a better investment might be wiser, but since good investment returns are hard to find, making a small premium over Treasury bills with the potential for future appreciation is a gamble worth taking. Quite honestly, both of their options suck.

Greater fool wanted

Today's featured property makes a nice study in value based on rental parity. We know from the article above that Lennar is going to rent identical units for $2,590 and up. Even with the super-low interest rates and owner-occupant tax deductions, this property costs $3,291 to own. Why would anyone do that?

What would an owner get for the additional $600 per month in their cost of ownership? The potential to lose more value as prices continue to decline?

Sign me up for two….

Irvine House Address … 401 ROCKEFELLER #805 Irvine, CA 92612

Resale House Price …… $625,000

House Purchase Price … $555,000

House Purchase Date …. 5/21/2010

Net Gain (Loss) ………. $32,500

Percent Change ………. 5.9%

Annual Appreciation … 10.2%

Cost of House Ownership

————————————————-

$625,000 ………. Asking Price

$125,000 ………. 20% Down Conventional

4.49% …………… Mortgage Interest Rate

$500,000 ………. 30-Year Mortgage

$108,448 ………. Income Requirement

$2,530 ………. Monthly Mortgage Payment

$542 ………. Property Tax (@1.04%)

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

$130 ………. Homeowners Insurance (@ 0.25%)

$0 ………. Private Mortgage Insurance

$865 ………. Homeowners Association Fees

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

$4,067 ………. Monthly Cash Outlays

-$422 ………. Tax Savings (% of Interest and Property Tax)

-$660 ………. Equity Hidden in Payment (Amortization)

$208 ………. Lost Income to Down Payment (net of taxes)

$98 ………. Maintenance and Replacement Reserves

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

$3,291 ………. Monthly Cost of Ownership

Cash Acquisition Demands

——————————————————————————

$6,250 ………. Furnishing and Move In @1%

$6,250 ………. Closing Costs @1%

$5,000 ………… Interest Points @1% of Loan

$125,000 ………. Down Payment

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

$142,500 ………. Total Cash Costs

$50,400 ………… Emergency Cash Reserves

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

$192,900 ………. Total Savings Needed

Property Details for 401 ROCKEFELLER #805 Irvine, CA 92612

——————————————————————————

Beds: 2

Baths: 2

Sq. Ft.: 1583

$395/SF

Property Type: Residential, Condominium

Style: One Level, Modern

View: City Lights, City, Hills, Mountain, Panoramic, Yes, Faces North

Year Built: 2009

Community: Airport Area

County: Orange

MLS#: S657365

Source: SoCalMLS

Status: Active

——————————————————————————

Astoria is Irvine's preferred newest High-Rise Luxury Urban Living. This dual master suite is located on the 8th floor with unobstructed 180 degree City and Mountain views, and a terrace for entertaining. The Gourmet kitchen features stainless steel appliances and granite counter tops. Dual full baths include pristine marble throughout, dual-vanity sinks, glass showers and separate soaking tubs. Over $85,000 in private upgrades: fully integrated 12-speaker home entertainment system with component/amplifier tower, 3 wall mounted touch screens, Lutron lighting & remote window shades! Resort-style landscaping featuring an elevated terrace with pool & spa, a private wine tasting room and wine vault, business center, grand fitness center, outdoor entertaining areas, Concierge service & 24hr valet parking. Live in Orange County's newest and most luxurious resort-style master planned community. .. Central Park West

Delinquent mortgage squatters living in shadow inventory are obtaining the benefits of ownership while paying none of the costs.

Home Address … 1 STARLIGHT Isle Ladera Ranch, CA 92694

Resale Home Price …… $1,100,000

Racing faster.

Escape disaster.

Partners in crime will leave their mark.

We make our own way.

No thoughts of yesterday.

Black hearts of chrome and battle scars.

Black Veil Brides — The Legacy

Strategic default is often the wisest course of action for a family to take. Lenders are hoping to escape disaster while borrowers and attorneys partner to leave their mark on lender's balance sheets. In the future, the threat of strategic default should make lenders more reluctant to make stupid loans with payments greatly exceeding comparable rents (more on that soon).

However, after a strategic default, what is the borrower to do? I think they should get out and move on with their lives because once they quit paying, it is only a matter of time before they must leave. This lingering uncertainty takes an emotional toll on families that isn't necessarily offset by the savings.

Most borrowers in default don't move into a rental and move on with their lives. Those borrowers are intent on gaming the system for as long as possible to obtain the financial benefit of no housing costs. These delinquent mortgage squatters are the legacy of stupid lending in The Great Housing Bubble.

Backlog of Cases Gives a Reprieve on Foreclosures

By DAVID STREITFELD

Published: June 19, 2011

Millions of homeowners in distress are getting some unexpected breathing room — lots of it in some places.

In New York State, it would take lenders 62 years at their current pace, the longest time frame in the nation, to repossess the 213,000 houses now in severe default or foreclosure, according to calculations by LPS Applied Analytics, a prominent real estate data firm.

Clearing the pipeline in New Jersey, which like New York handles foreclosures through the courts, would take 49 years. In Florida, Massachusetts and Illinois, it would take a decade.

Ponder those statistics for a moment. At the current rate of resolution, states with judicial foreclosure will have lingering problems for decades.

In the 27 states where the courts play no role in foreclosures, the pace is much more brisk — three years in California, two years in Nevada and Colorado — but the dynamic is the same: the foreclosure system is bogged down by the volume of cases, borrowers are fighting to keep their houses and many lenders seem to be in no hurry to add repossessed houses to their books.

“If you were in foreclosure four years ago, you were biting your nails, asking yourself, ‘When is the sheriff going to show up and put me on the street?’ ” said Herb Blecher, an LPS senior vice president. “Now you’re probably not losing any sleep.”

Borrowers can obtain free housing if they merely stop making their payments. Strategic default is bound to expand under such circumstances. If given the option to obtain shelter for a huge payment or for no payment, many will chose no payment, particularly if they can stay in the property indefinitely.

When major banks acknowledged last fall that they had been illegally processing foreclosures by filing false court documents, they said that any pause in repossessions and evictions would be brief. All of the major servicers agreed to institute reforms in their foreclosure procedures. In April, the Office of the Comptroller of the Currency and other regulators gave the banks 60 days to draw up a plan to do so.

But nothing is happening quickly. When the comptroller’s deadline was reached last week, it was extended another month.

New foreclosure cases and repossessions are down nationally by about a third since last fall, LPS said. In New York, foreclosure filings are down 85 percent since September, according to the New York State Unified Court System.

Mark Stopa, a St. Petersburg, Fla., specialist in foreclosure defense, has 1,275 clients, up from 350 a year ago. About 75 clients have won modifications, dismissals or sold their properties for less than they owed. All the other cases are pending.

“Banks aren’t even trying to win,” said Mr. Stopa, who charges his clients an annual fee of $1,500.

An annual fee? WTF? This guy has stumbled upon a great business plan to take advantage of the amend-extend-pretend policy of lenders. The longer this process drags on, the more money he makes. Right now, he has 1,200 clients paying him $1,500 per year. That's $1,800,000 per year he is making from assisting squatters.

J. Thomas McGrady, the chief judge of Florida’s Sixth Circuit, which includes St. Petersburg, agreed. “We’re here to do what we’re asked to do. But you’ve got to ask. And the banks aren’t asking,” he said.

A spokesman for Bank of America said, “Any suggestion that we have a strategy to delay foreclosures is baseless.”

LOL! I watch the foreclosure market nearly every day. Each day 90% or more of the scheduled auctions are postponed or canceled to prevent too much product from entering the market. Further, the percentage of delinquent mortgage squatters that have not made payments in over two years continues to grow. Lenders are clearly executing a strategy of delaying foreclosures, and assertions to the contrary don't pass the giggle test.

A Wells Fargo spokeswoman blamed changes in state laws governing foreclosure for any slowdown. A GMAC spokeswoman said it was following “regulatory and investor expectations.” JPMorgan Chase declined to comment. Servicers said some of the decline in foreclosures could be traced to an improved economy.

Bullshit by any other name would smell as sweet.

There are many reasons that foreclosure, which has been slowing ever since the housing bubble burst, has been further delayed in many states.

The large number of cases nationally — about two million, plus another two million waiting in the wings — have overwhelmed many lenders and the courts.

Lenders, who service loans they own as well as those owned by investors, tried to circumvent the time-intensive process by using “robo-signers” who mass-produced documents, many of which made inaccurate claims. When the bad practices were discovered last fall, the lenders were forced to revisit hundreds of thousands of cases.

Over the last two years, most defaulting homeowners were people who had lost their jobs. Housing analysts say these homeowners are more likely to hire a lawyer and fight repossession than borrowers who had subprime loans that swelled beyond their ability to pay.

The link to unemployment is nonsense. Homeowners are hiring lawyers to game the system because it works. Paying a lawyer $1,500 a year is certainly cheaper than paying $1,500 a month in rent after a foreclosure. If the lawyer gains the squatter even one month of free housing, it was a good investment for the borrower. If it gets them a year of free rent, the payback is twelve fold. With such a good return on the money, it shouldn't be too surprising borrowers and attorneys are teaming up to screw the banks.

Judges these days are also more inclined to scrutinize requests for eviction rather than automatically approve them. The so-called foreclosure mills — law firms that handled many of the suits for the banks — are in retreat under law enforcement pressure. And some analysts suggest that banks are reluctant to take too many houses onto their books at any one moment for fear of flooding a shaky market.

Fear of flooding the market with REO is the primary reason lenders are not foreclosing and processing as fast as they can.

In New York, lenders seeking to repossess face additional hurdles. The legislature has mandated that borrower and bank meet to discuss terms under the auspices of the court, but these conferences have turned out to be anything but brief or simple. Instead of one conference, 10 are often needed, court officials say.

Borrowers are not going to be in a hurry to resolve anything since they are getting free housing. I imagine many borrowers and their attorneys have difficultly fitting these conferences into their busy schedules, and when they make no progress, they reschedule another one for six months from now. A requirement for conferences is guaranteed to add significant time to the process to the benefit of the squatter and the detriment of the bank.

And many foreclosure lawyers seem unable to meet a requirement, made last October by the New York Chief Judge Jonathan Lippman, to affirm the accuracy of their documentation.

“The affirmation has had a pretty chilling effect,” said Ann Pfau, New York’s chief administrative judge. “The attorneys for the banks tell us they can’t get through to the right people at their clients who can verify the information.”

Last September, before the documentation crisis, nearly 1,500 New Yorkers lost their houses as a result of foreclosure, according to LPS. The average over the last six months: 286. That is far lower than at any point since the recession began.

I discussed the problem of foreclosure delays in New York in the recent post: Free housing: the new bankster entitlement in New York City.

Similar foreclosure cases can have different fates. To increase their odds of staying put, the foreclosed who can afford it are hiring lawyers, a move that can drastically slow down a case.

Mr. Stopa, the Florida lawyer, said he divided his clients into three groups. Some are unemployed or disabled and just getting by. Others are able to save money and improve their financial situation as their case drags on. The third group are those who have strategically defaulted. They can afford to pay but are taking advantage of the banks’ plodding pace. Often the members of this group rent out the foreclosed home and keep the proceeds.

For as reprehensible as this behavior is, as long as this behavior is disclosed to the renter, I don't have a problem with it. Lenders created this situation, and they could stop it by foreclosing and taking the property back as REO. If the renter knows what they are getting into, then everyone is making choices based on full knowledge and disclosure. If the renter doesn't know, then I have a real problem with what the owners are doing.

Though delays in foreclosure might seem like a gift to those behind on their mortgage, the foreclosed themselves do not necessarily feel that way.

Margaret Bellevue waited nervously in a Miami courtroom early this month. She and her husband, Roland, an architect, are among 97,000 households facing foreclosure in Dade County, where the average time to foreclose is 738 days and climbing, according to LPS data.

Ms. Bellevue was on her third lawyer in a case that has stretched on as many years. “A friend of mine got her mortgage lowered through a modification,” Ms. Bellevue said. “I’d like to do that too.”

I imagine she would. The woman overpaid for her house, but she wants to keep it by having her debt reduced. When she and millions of others made a foolish and irresponsible purchases, they drove up prices and crowded out more prudent buyers. They should be forced to move out of their properties so there are some consequences for what they have done. Lenders are more culpable than borrowers, but it doesn't mean borrowers should have no consequences at all.

When her case came up, the judge told the lawyers they should try to work out a deal. They huddled outside the courtroom and agreed to meet again.

What is there to work out? The lender needs to foreclose, and the delinquent mortgage squatter needs to get out. It should be any more complicated than that.

Squatting is not just for the little guy

When you read stories about delinquent mortgage squatters, there is an implicit assumption that it involves lower income subprime borrowers. Nothing could be further from the truth. Many posers levered themselves into beautiful high-end mansions, and when the Ponzi borrowing ran out, they simply stopped making payments and squatted.

I can understand why they stay. Who would move out of a multi-million dollar property they can stay in for free and find another where it would cost $5,000 or more in rent? What is shocking is how long lenders have let this go on.

Lenders have made the argument that leaving occupants in a property prevents it from deteriorating. I call bullshit on that one. Properties deteriorate more quickly if they are being used and improperly maintained. What possible incentive does a delinquent mortgage squatter have to invest any money to upkeep a property? When they accidentally knock a hole in the drywall, will they spend money to patch it? At least a renter is going to call the landlord if there is a problem. A delinquent mortgage squatter will let small festering problems grow into large repairs rather than spend their own money fixing up the place.

Today's featured property is not in Irvine. The owner paid $2,265,462 on 8/24/2006 — the peak of the bubble. He used a $1,811,696 first mortgage from Countrywide, a $226,462 HELOC, and a $226,842 down payment. The owner had another property at the time in Aliso Viejo with several hundred thousand dollars of mortgage equity withdrawal.

A reader called this property to my attention. The haircut is enormous and newsworthy on its own, but what's more interesting is that the lender has allowed this owner to live there for over three years now without making any payments, and they don't appear to be in any hurry to foreclose.

Foreclosure Record

Recording Date: 06/23/2010

Document Type: Notice of Sale

Foreclosure Record

Recording Date: 12/03/2008

Document Type: Notice of Sale

Foreclosure Record

Recording Date: 06/24/2008

Document Type: Notice of Default

The first NOD was filed in June of 2008 which means this owner stopped making payments sometime before March of 2008. He has been living there ever since and enjoying his entitlements.

While you were making your onerous house payments or paying your rent, this owner has been living for nothing in what was a $2M+ house. His neighbors must feel like chumps for continuing to pay their mortgages, particularly as his short sale pummels their property values.

Irvine House Address … 1 STARLIGHT Isle Ladera Ranch, CA 92694

Resale House Price …… $1,100,000

House Purchase Price … $2,265,000

House Purchase Date …. 8/24/2006

Net Gain (Loss) ………. ($1,231,000)

Percent Change ………. -54.3%

Annual Appreciation … -14.9%

Cost of House Ownership

————————————————-

$1,100,000 ………. Asking Price

$220,000 ………. 20% Down Conventional

4.49% …………… Mortgage Interest Rate

$880,000 ………. 30-Year Mortgage

$190,869 ………. Income Requirement

$4,454 ………. Monthly Mortgage Payment

$953 ………. Property Tax (@1.04%)

$708 ………. Special Taxes and Levies (Mello Roos)

$229 ………. Homeowners Insurance (@ 0.25%)

$0 ………. Private Mortgage Insurance

$400 ………. Homeowners Association Fees

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

$6,744 ………. Monthly Cash Outlays

-$1062 ………. Tax Savings (% of Interest and Property Tax)

-$1161 ………. Equity Hidden in Payment (Amortization)

$365 ………. Lost Income to Down Payment (net of taxes)

$158 ………. Maintenance and Replacement Reserves

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

$5,045 ………. Monthly Cost of Ownership

Cash Acquisition Demands

——————————————————————————

$11,000 ………. Furnishing and Move In @1%

$11,000 ………. Closing Costs @1%

$8,800 ………… Interest Points @1% of Loan

$220,000 ………. Down Payment

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

$250,800 ………. Total Cash Costs

$77,300 ………… Emergency Cash Reserves

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

$328,100 ………. Total Savings Needed

Property Details for 1 STARLIGHT Isle Ladera Ranch, CA 92694

——————————————————————————

Beds: 5

Baths: 6

Sq. Ft.: 5882

$187/SF

Property Type: Residential, Single Family

Style: 3+ Levels, Colonial

View: Canyon

Year Built: 2006

Community: Ladera Ranch

County: Orange

MLS#: S624677

Source: SoCalMLS

Status: Pending

——————————————————————————

Fantastic 3 stories including very large 13,000 Square foot lot. Gated courtyard has casita with separate entrance. Wolf appliances, Subzero fridge, Wood floors, gourmet kitchen w/ butlers pantry, granite countertops, built-ins, intercom and security system. Property includes high ceilings a large driveway, and plenty of bedrooms. Large basement with great area for a home entertainment.

Chapman University's Esmael Adibi is predicting continued weakness in the Orange County housing market.

Irvine Home Address … 3981 CEDRON St Irvine, CA 92606

Resale Home Price …… $530,000

Slide away, and give it all you've got

My today, fell in from the top

Now that you're mine

We'll find a way

Of chasing the sun

Oasis — Slide Away

For the last couple of months, I have been commenting on the surprising collapse of local demand and the lack of a spring rally. Today, I am going to feature the comments of others noting the ominous signs for the Orange County and Irvine housing markets.

O.C. Home Prices to Continue Slide, Won't Recover Any Time Soon, Chapman Says

Large supply of distressed properties is blamed.

June 17, 2011

Home prices in Orange County will fall about 4 percent next year, Chapman University economists said Thursday, and will not recover any time soon.

The housing market is being buffeted by “countervailing forces'' of supply and demand, said Esmael Adibi, director of the Anderson Center for Economic Research at Chapman.

“We're not building many new homes, which is good news in terms of home prices, but we're still dealing with a large supply of distressed properties,'' Adibi said.

The fact that we are not building many new homes is one of the main drags on the economy. The unemployed and under-employed in homebuilding and real estate related industries are not buying homes, nor are they demanding other goods and services.

Adibi and Chapman President James Doti, who is also the Donald Bren Distinguished Chair of Business and Economics at the school, released their economic forecast to a gathering of business and community leaders in Costa Mesa.

Related: Sales Down Nearly 20% in O.C.

One “big drag'' on the local economy, the economists said, is the scaling down of government spending, which has led to layoffs.

You can't build a dynamic economy on government jobs. Government work does not add value. It is a cost to society paid by those who do add value.

Meanwhile, Orange County's 8.6 percent unemployment rate, which is already considerably better than the state's, will continue to improve, with job creation gaining momentum by year's end, Adibi said.

Job growth nationally could reach 1.4 percent, bringing the unemployment rate down to 7.5 by the end of 2012, Adibi said. Countywide job growth could reach 2.2 percent in 2012, he said.

Orange County should add 20,000 jobs this year and another 30,000 next year, Adibi said. Unemployment in Orange County fell from 9.1 percent in March to 8.6 percent in April, the latest figures available. California's unemployment rate is nearly 12 percent.

With such weak employment numbers, income growth won't be a driver of home prices. The only way prices can be sustained is super low interest rates — which may be around until the economy picks up — and continued withholding of supply by lenders who control most of it either directly as REO or indirectly as short sales requiring approval.

Most of the added jobs expected in Orange County will be white collar positions—attorneys, accountants, and computer programmers, Adibi said. Private education organizations also will do strong hiring “because people are retooling and going back to school,'' he said, and the healthcare industry will also grow as the population ages and demand increases.

If Adibi is right, the addition of high-paying jobs will help local home prices — if enough of these jobs are created to absorb the inventory.

Adibi and Doti forecast better times for the leisure and hospitality industries.

“We believe tourism will improve, and partly because consumer spending will be relatively strong compared to last year,'' Adibi said.

Consumer spending will likely improve over last year's anemic levels, but without HELOC money, the consumer spending of the bubble is nowhere on the horizon.

Manufacturing will experience some recovery, particularly in high-tech as business invest more on equipment, Adibi said.

Among the wild cards will be oil and gas prices, he said. Political instability in the Middle East has driven up oil prices, but that should stabilize in the coming months, Adibi said, although “it's very hard to project gas prices.''

—City News Service

We have very low sales rates, high unemployment, weak job creation, and a huge overhang of housing supply. Prices should continue to slide, and they shouldn't recover any time soon.

Housing rescue still not on horizon

June 13, 2011 — By JEFF COLLINS and JONATHAN LANSNER

Like the castaways of television's “Lost,” the Orange County housing market continues to search for a rescue that has yet to materialize.

DataQuick Information Systems reported that 2,664 home sales closed last month, making it the second slowest May in records dating back to 1988. Sales fell 18.2 percent from May 2010, the 11th straight month in which home sales were down on an annual basis.

Prices fell, too.

That doesn't leave much to be bullish about, does it?

The median price of an Orange County home – or price at the midpoint of all sales – fell 5.6 percent last month to $425,000. In May of 2010, the median price was $450,000, a post-slump pinnacle not repeated for 10 months.

It's called a bear rally. It's what you get when you provide artificial stimulants to demand then remove those stimulants.

DataQuick attributed the lingering malaise to the same bugaboos that have gripped the market since a home-buying tax incentive expired a year ago: High unemployment, tight lending standards and the lack of buyer confidence that both inspire.

“From a non-scientific basis, we can feel that,” observed Westminster agent Dick Lobin of Century 21 Olympic Team. “Usually we get a seasonal pop in May, June, July and August. We don't feel it (this year). In fact, it's down.“

Thank you Mr. Lobin. A realtor told the truth about the housing market. I hope he doesn't get in trouble.

Looking at 2011 as a whole, we've seen 11,596 residences sold – down 7 percent from 2010.

Compared to past years, 2011 had the fourth-lowest start. The only years with fewer sales as of May were 1995, 2008 and 2009.

In fact, sales this year so far were down 31 percent from the five month average of 16,725 since 1988.

“Here we sit in the market doldrums,” said DataQuick President John Walsh. “The government stimulus is long gone, and some of the fundamental drivers of housing demand have yet to strengthen.”

Like many other market watchers, I predicted the bear rally would falter when the stimulants were removed; although, I didn't think the market would be quite this bad. In my observation, the economy usually displays unexpected strength rather than unexpected weakness.

By housing type, DataQuick figures show:

• Resale houses: 1,702 sold last month vs. 2,015 a year ago. That is a -15.5 percent change. The median price was $500,000 vs. $515,000 a year ago, or a 2.9 percent drop.
• Resale condo: 764 sold last month vs. 942 a year ago. That's a 19 percent drop. The median price was $265,000 vs. $305,000 a year ago or a 13.1 percent decline.
• New homes: 198 sold last month vs. 300 a year ago, a 34 percent plunge. The median price was $560,500 vs. $645,000 a year ago or a 13.1 percent decline.

O.C. home prices are down across the board.

Fifty-nine of Orange County's 83 ZIP codes had price drops, according to DataQuick. Sixty-one ZIP codes – 73 percent of the market — had year-over-year sales declines.

That is ugly data. It can be summarized as down, down, down, down, down, and down.

The two-story house at 938 W. Oceanfront was one example of what sold in May. Although the home sits on the sand and features a whirlpool spa and waterfall, it took a year to sell, and the owner ended up taking a haircut of nearly $2 million, or almost a third off what he paid for it four years ago.

If there's any good news in last month's Balboa Peninsula home sale, it's this: The high end of the Orange County housing market is starting to see price drops as big percentage-wise as those seen in years past by the lower sectors of the market, several local agents say.

I guess the high end is not immune after all. Amend-extend-pretend has failed.

It could be the final chapter of the slump that needs to be written before the market can recover.

“The declines are starting to hit the high end, which they didn't for awhile,” observed Brian Johnson, an agent with Hom Real Estate Group in Newport Beach.

Johnson noted that sales in some high-priced areas like the Balboa Peninsula are showing signs of bucking the county's sagging sales trend as wealthy buyers paying cash snatch up properties seen as undervalued.

“They realize that prime beachfront will run up in the long run,” Johnson said.

In a select few neighborhoods this may be true. The rich have gotten much richer over the last decade or more. Unfortunately, this wealth is very concentrated in the hands of a few people. Certain neighborhoods may be spared the high-end crash, but properties that benefited from their proximity to wealth — properties typically purchased with extreme leverage by posers — these less desirable properties will be crushed just like the condos we see here in Irvine.

South Orange County agent Steve Thomas reported that a Google search of the term “housing double dip” turns up 782,000 hits since May 30. Although most indicators show that housing is down from a year ago, Thomas takes issue with the use of the term “double dip,” at least when it comes to home prices.

The 4.6 percent price drop reported nationally is tiny compared to the 18.9 percent drop in the first few months of 2009, he said.

That's some pretty weak realtor spin.

Lobin, the Westminster agent, noted that investors paying cash also are dominating the housing market in central Orange County. Lobin said that about 60 percent of the sales in Little Saigon involve all-cash deals.

But even there, the market is hampered by the same factors that are dragging down housing as a whole: The slow economy, the loss of jobs, difficulty getting loans and a lack of confidence in the market.

Well, which is it? Are foreign all-cash buyers going to save the market or not? Since market prices are set on the margins, it doesn't seem likely than any core group can dictate pricing. They won't save Westminster, and they won't save Irvine either.

“There's no definitive direction that's been determined. Nobody knows what the future is,” Lobin said. ” … It's a little disheartening. But let's see what June, July and August bring.”

Contact the writer: 714-796-7734 or jcollins@ocregister.com

Actually, there is a definitive direction that's been determined. The market is going down. While it's true that nobody knows what the future holds, do you think June, July and August will bring a surprise rally, or will it see more weakness? Weakness seems far more likely.

Has housing slump hit Irvine?

By JON LANSNER — June 13, 2011

Has the bloom come off Irvine's home market?

State for the full month of May from DataQuick — prime homebuying season — show Irvine shopper less active than a year ago …

• Citywide sales totaled 272 – that's down 40 purchases or 12.8% vs. a year ago. Countywide, sales were down 18.2% vs. a year earlier.
• Irvine home sales were 10.2% of the countywide market in the latest period vs. 9.6% in the year-ago period.
• Of Irvine's 8 ZIP codes, 3 had sales gains vs. a year ago while 2 had a gain in their median selling price vs. a year ago.
• Medians within the city's ZIPs ran from $355,000 to $1,120,000 – while the price gap was $408,000 to $1,010,000 a year ago.
• 3 of these 8 ZIP codes beat the -5.6% overall performance of the countywide median for the past year.
• Below is a look at how the latest DataQuick report breaks down Irvine real estate deals by ZIPs; change is vs. a year ago!
• Note: A year ago, there were significant tax breaks for shoppers and the Irvine Co.'s new-home push in North Irvine was just taking off.

Irvine ZIP	Median price	Yr. chg.	Sales	Yr. chg.
92602	$545,000	-13.4%	15	-59.5%
92603	$1,120,000	+10.9%	36	+16.1%
92604	$501,000	-5.5%	27	+8.0%
92606	$495,000	+21.3%	12	-42.9%
92612	$410,000	-10.4%	40	-4.8%
92614	$355,000	-36.3%	17	-29.2%
92618	$563,636	-10.6%	80	+2.6%
92620	$545,000	-31.0%	45	-16.7%
All OC	$425,000	-5.6%	2,664	-18.2%

The belief in serial refinancing

During the housing bubble, many loan owners convinced themselves they could always refinance into a larger mortgage with a lower payment. It was considered safe to use an Option ARM or other toxic form of mortgage refinancing with teaser rates and other terms guaranteed to have increasing future payments. Most people were told by their realtor and mortgage broker that when their payments were set to increase, they would be able to refinance into another mortgage with a teaser rate and low payment. This process was known as serial refinancing. It didn't work.

Serial refinancing didn't work because it is a Ponzi scheme. Every borrower who had a payment that didn't cover the interest on their mortgage was borrowing money to pay interest. Such a plan requires a lender to continually extend credit to make debt-service payments. When the time comes that no lender is willing to extend credit — which it inevitably does — the Ponzi scheme collapses in a painful credit crunch.

What was truly shocking during the housing bubble was how widespread Ponzi borrowing became. As I have shown with the hundreds of HELOC abuse cases in Irvine, ordinary citizens became caught up in the financial mania and borrowed themselves into foreclosure. The owners of today's featured property are an example of a prudent borrower going Ponzi in five short years.

• The property below was purchased on 12/30/1988 for $285,000. I don't have their original loan information, but they likely put 20% down.
• On 1/9/2002 they refinanced their first mortgage for $228,000 — an amount $57,000 below their original purchase price. These were prudent mortgage managers up to this point.
• On 6/4/2003 they refinanced again with a $228,000 first mortgage. They were undoubtedly given the opportunity to borrow more, and they chose not to.
• On 12/16/2003 they went Ponzi with a $472,000 first mortgage.
• On 2/25/2005 they refinanced again with a $544,000 first mortgage.
• On 3/21/2007 they refinanced one last time with a $580,000 first mortgage.
• Total mortgage equity withdrawal was $352,000.
• They stopped paying the mortgage at least a year ago.

Foreclosure Record

Recording Date: 01/03/2011

Document Type: Notice of Sale

Foreclosure Record

Recording Date: 09/02/2010

Document Type: Notice of Default

Twenty-three years after purchasing their house, they are going to be a short sale. Their plan to serial refinance didn't work as planned.

Irvine House Address … 3981 CEDRON St Irvine, CA 92606

Resale House Price …… $530,000

House Purchase Price … $285,000

House Purchase Date …. 12/30/1988

Net Gain (Loss) ………. $213,200

Percent Change ………. 74.8%

Annual Appreciation … 2.7%

Cost of House Ownership

————————————————-

$530,000 ………. Asking Price

$106,000 ………. 20% Down Conventional

4.49% …………… Mortgage Interest Rate

$424,000 ………. 30-Year Mortgage

$91,964 ………. Income Requirement

$2,146 ………. Monthly Mortgage Payment

$459 ………. Property Tax (@1.04%)

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

$110 ………. Homeowners Insurance (@ 0.25%)

$0 ………. Private Mortgage Insurance

$43 ………. Homeowners Association Fees

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

$2,759 ………. Monthly Cash Outlays

-$358 ………. Tax Savings (% of Interest and Property Tax)

-$559 ………. Equity Hidden in Payment (Amortization)

$176 ………. Lost Income to Down Payment (net of taxes)

$86 ………. Maintenance and Replacement Reserves

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

$2,104 ………. Monthly Cost of Ownership

Cash Acquisition Demands

——————————————————————————

$5,300 ………. Furnishing and Move In @1%

$5,300 ………. Closing Costs @1%

$4,240 ………… Interest Points @1% of Loan

$106,000 ………. Down Payment

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

$120,840 ………. Total Cash Costs

$32,200 ………… Emergency Cash Reserves

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

$153,040 ………. Total Savings Needed

Property Details for 3981 CEDRON St Irvine, CA 92606

——————————————————————————

Beds: 4

Baths: 3

Sq. Ft.: 1897

$279/SF

Property Type: Residential, Single Family

Style: Two Level, Traditional

Year Built: 1972

Community: 0

County: Orange

MLS#: S662914

Source: SoCalMLS

Status: Active

——————————————————————————

Great starter home, boasts high vaulted ceilings, a spacious floor plan. The home sits on a large lot at the end of a Cul-de-sac, in a great quiet neighborhood. Recently upgraded windows and sliding back door. Walking distance to community parks. All of the best amenities Irvine has to offer, club house, community pools and spas, award winning schools and shopping. .. Beautifully landscaped front and back yards. This one won't last long.

realtors acting as agents to lenders are profiting from fraud by submitting bogus opinions of value to induce the lender to sell property below fair market value to straw buyers.

Irvine Home Address … 41 GOLDEN STAR Irvine, CA 92604

Resale Home Price …… $729,000

I want a house with a white picket fence

Don't look at me like I make no sense

He says I'm dumb

She says I'm scum

Dirty Rotten Imbeciles – You Say I'm Scum

There is a new scam in real estate that can only be accomplished by an agent, most often a realtor because most real estate agents are realtors, but there are likely some independent brokers caught up in this as well. The realtor must shirk their fiduciary responsibility to their client and knowingly tell lies to that client, usually a lender but sometimes a short-seller, to get them to sell property for less than it's really worth in the market in order to get some form of kick-back from the buyer. The following article details how this is done.

Real-estate scam that’s devastating prices

Lew Sichelman — June 10, 2011

WASHINGTON (MarketWatch) — Question: My neighbor in Palm Springs, Calif., who claims to have millions or more in the bank, let his home with a $1 million mortgage go into foreclosure. A real-estate friend of his bought it from the bank and is renting it back to him. After one year, my neighbor plans to buy it back. It affects me as a homeowner because now we have a home in our community that shows a sale price for $600,000, instead of the current market of $725,000. How do I report such activities? —J. McK.

Answer: This type of thing is more prevalent than most people realize. According to CoreLogic, a real-estate and mortgage data firm headquartered in Santa Ana, Calif., lenders will lose more than $375 million this year alone when they sell undervalued houses based on the price opinions funneled to them by unscrupulous real-estate agents.

Aren't you shocked? Isn't there a realtor code of ethics against stuff like this?

Lenders who are foolish enough to take realtors at their word are asking for trouble. Those that fail to verify values through other brokers or automated valuation models are not doing enough to protect themselves.

The scam is called “flopping,” and you are correct, it can have a devastating impact on property values because now, the “sale” becomes a comparable for all future appraisals of matching neighborhood properties.

Like flipping, flopping is the intentional misrepresentation of house prices. But whereas flipping usually takes place when housing prices are rising, flopping occurs when values are depressed.

When a house is flipped illegally, it is “sold” for a greatly inflated value in order to obtain a mortgage that is far greater than the place is really worth. When the seller, who is often in on the scheme, is paid at closing, the difference between the actual selling price and the loan amount is split between the perps, who are usually industry insiders who know how to scam the system.

What? There is another scam realtors engage in to profit from fraud?

Flipping for fraud was rampant during the housing bubble because lenders were giving out 100% financing loans, and it was relatively easy for appraisers and realtors to conspire with straw buyers to defraud lenders of hundreds of thousands of dollars. If loans were capped at 80% of value, it would be much harder to obtain an appraisal inflated enough to make the deal profitable. And now with appraisers being assigned randomly, it makes flipping fraud nearly impossible.

When a house is flopped, it is usually owned by a underwater borrower who has asked the lender to approve a short-sale at a price that’s less what is owed. Unbeknownst to the owner or the lender, the real-estate agent supplies one or more opinions of valuation that show the house to be worth one amount when it is really worth much more on the open market.

When the lender agrees to take the lower price, the agent purchases the property in his name or that of a straw buyer and immediately flips the property to an honest-to-goodness buyer-in-waiting at a higher price than the one negotiated with the lender, with the difference split between the participants.

A classic example of flopping comes from the recent post I did on How lender liquidations lower home prices and bring affordability:

I discovered this neighborhood while looking at another auction property nearby. The property of interest is in a cluster product neighborhood in a nice part of Henderson, Nevada. All the properties were built in 2005 and sold new in the mid 200s.

We all know prices are falling throughout Las Vegas, but when I saw the comps for this property, I couldn't believe my eyes.

The list of comparables below are all in the cluster neighborhood, and they are arranged in descending order of closing dates. Take a careful look at the sales price in the column second from the right.

If I had looked at these comps last November, I would have estimated the resale value at between $105,000 and $110,000. Further, I would have likely set an initial asking prices of about $114,000 without much fear of a low appraisal forcing me to lower my price to an FHA buyer.

What would possess an asset manager at a bank to let properties go in the mid 60s? There are limited possibilities:

Capitulation may be motivating asset managers to take any deal presented to them. If they have a caseload of thousands, they care less about maximizing recovery and more about processing files. The asset manager could also be incompetent.

Fannie Mae has the Homepath program where they allow owner occupants to bid on properties and sell them at a reduced price. I understand their desire to put owner-occupants back into homes, but when they let them go for 40% under comps, they merely take down the values throughout the neighborhood and dramatically increase the pain for other owners and sellers in the area.

Another possibility is fraud. The listing agent could have submitted comps from properties in another neighborhood to the lender to justify a $65,000 selling price. The lender may have approved this sale without realizing there were model-match properties in the same neighborhood selling for much, much more.

The property at 556 Albacate was immediately put on the market. It was withdrawn a short time later. Lenders are wise to the flopping problem, and to combat this issue, most lenders will not underwrite a loan on any property sold twice in the last year. When the lender buys the property at auction is considered sale number one, and the fraudulent sale to the flopper is sale number two. By preventing sale number three from occurring within a year of sale number one, lenders can at least force the floppers to wait a while to get their ill-gotten gains.

Back to the article:

Appraisal and valuation misrepresentation continue to be a big bugaboo in the mortgage sector, even in a weak housing market. And flopping is one of the biggest issues because lenders tend to take agents at their word. But when they do check, they are shocked at what they find.

Should they be shocked? They trusted a realtor, and they were deceived? Lenders need to file a couple of lawsuits against a few realtors to frighten the others. If you don't go after a few of the offenders, they will multiply like a virus.

Some real-estate agents are “clever, even more so than criminals,” says Michael Richardson of BrokerPriceOpinion.com, a firm which assists lenders in obtaining accurate valuations. “I’ve seen them change [comparables] to fit the scenarios they are trying to get away with. I’ve seen it where they enter fictitious listings and then remove them later. And I’ve seen it where they’ve recruited other agents” to participate in their schemes.

There must be a provision in the realtor code of ethics to address criminality, right? Will OCAr go after Mr. Richardson for his observations?

Flopping costs lenders tens or sometimes hundreds of thousands of dollars per transaction because the house could have been sold for more than they accepted. But it costs sellers big money, too. How? Because if you are a seller and your state allows your lender to pursue a deficiency judgment against you, you could end up owing more than had the realty agent not taken advantage of the lender’s ignorance — or trust — of your home’s actual value on the open market.

Think about that one. Borrowers are still liable for the shortfall on the mortgage after a short sale or foreclosure under most circumstances. So far lenders haven't come after them, but they will in time. If the seller gets flopped by the listing realtor, the lender will come back after the seller for an even larger shortfall. It may look like banks are eating the losses, but they will seek to push those losses back onto the borrowers if they can.

To avoid becoming a flopping victim, sellers would do well to pay $95 to $100 for a separate broker price opinion from a disinterested party to make sure the value set by their agent is at least in the ballpark. Richardson says he’d do this before even hiring an agent to put together a short sale.

Sellers should also perform the usual due diligence — with your local realty association, better business bureau, consumer affairs agency and the state real-estate commission — to make sure their agent hasn’t been caught pulling a fast one on others.

Does anyone really think the local association of realtors is going to tell you if one of their agents did anything wrong? First, they probably wouldn't care, and second, the association would be sued by the member realtor for loss of income. The state Department of Real Estate would be the best resource.

If they try it once and are successful, chances are they’ll try it again — and again.

You think?

In your case, reporting these miscreants is easier said than done because what has taken place is not yet a crime, only an immoral act, and a pending one at that.

The realtors engaged in flopping aren't much concerned with the morality of what they do. The don't see immorality in manipulating their buyer clients through bogus claims of boundless appreciation, and they embrace bullshit as a standard sales technique. If that behavior is okay, why would they have any compunction about manipulating sellers with questionable comparables?

I don’t even think the lender can do any more than make sure it never deals again with the real-estate agent — or your neighbor, for that matter.

Nevertheless, you should report the agent to your local realty association as well as his broker.

Reporting to the realtor association will generally be wasted effort. If the broker has ethics, perhaps he or she will do something about it. One can only hope.

And you should also report what has transpired to the lender which originally foreclosed on the property. It is the one which is out big bucks here.

Perhaps the lender might be able to seek a deficiency judgment against your neighbor to recover its loss once the place is resold at a much higher price. California is one of those states where deficiency judgments are not permitted. But perhaps the lender can persuade a judge to rule otherwise in this obvious case of fraud.

A difficult to prosecute case at a time when there are thousands of questionable transactions isn't going to get much traction at the District Attorney's office.

Realistically, there isn't much anyone can do. That's why realtors feel emboldened to do it.

It didn't go up in value, and they couldn't afford it

Today's featured property was purchased just as the housing bust began in earnest. The buyers probably thought they were getting a good deal at the time, but it didn't work out that way.

They paid $815,000 on 9/4/2007 using a $417,000 first mortgage, a $316,500 HELOC, and an $81,500 down payment. This is listed as a short sale, so the HELOC was used to buy the property. The debt load must be difficult for them as evidenced by their default.

Foreclosure Record

Recording Date: 09/07/2010

Document Type: Notice of Rescission

Foreclosure Record

Recording Date: 07/21/2010

Document Type: Notice of Default

Perhaps these owners have unemployment problems or some other reason they are selling now, walking away from their down payment, and dealing with trashed credit. Many in these circumstances simply paid too much for the house because they expected the value to go up and provide them an endless fountain of HELOC money from which they could make their payments. It didn't work out that way.

Irvine House Address … 41 GOLDEN STAR Irvine, CA 92604

Resale House Price …… $729,000

House Purchase Price … $815,000

House Purchase Date …. 9/4/2007

Net Gain (Loss) ………. ($129,740)

Percent Change ………. -15.9%

Annual Appreciation … -2.9%

Cost of House Ownership

————————————————-

$729,000 ………. Asking Price

$145,800 ………. 20% Down Conventional

4.49% …………… Mortgage Interest Rate

$583,200 ………. 30-Year Mortgage

$126,494 ………. Income Requirement

$2,952 ………. Monthly Mortgage Payment

$632 ………. Property Tax (@1.04%)

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

$152 ………. Homeowners Insurance (@ 0.25%)

$0 ………. Private Mortgage Insurance

$50 ………. Homeowners Association Fees

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

$3,785 ………. Monthly Cash Outlays

-$492 ………. Tax Savings (% of Interest and Property Tax)

-$769 ………. Equity Hidden in Payment (Amortization)

$242 ………. Lost Income to Down Payment (net of taxes)

$202 ………. Maintenance and Replacement Reserves

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

$2,877 ………. Monthly Cost of Ownership

Cash Acquisition Demands

——————————————————————————

$7,290 ………. Furnishing and Move In @1%

$7,290 ………. Closing Costs @1%

$5,832 ………… Interest Points @1% of Loan

$145,800 ………. Down Payment

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

$166,212 ………. Total Cash Costs

$44,700 ………… Emergency Cash Reserves

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

$210,912 ………. Total Savings Needed

Property Details for 41 GOLDEN STAR Irvine, CA 92604

——————————————————————————

Beds: 4

Baths: 2

Sq. Ft.: 2580

$283/SF

Property Type: Residential, Single Family

Style: Two Level, Cape Cod

Year Built: 1976

Community: 0

County: Orange

MLS#: S661938

Source: SoCalMLS

Status: Active

——————————————————————————

A Must See Perfect Family Home in the Heart of Irvine. Excellent opportunity on this Short Sale. This four bedroom home is located on a very quiet loop street next to Deerfield Community Park, Just half a block walk to the community pool and spa, park, playground and Tennis Courts. Walk to the award winning Deerfield Elementary and Venado Middle School- both without crossing a single street. Home has recently been completely upgraded with tile floors throughout the main level, ceiling fans everywhere, new kitchen with granite countertop, new bathrooms, 3 fire places all tiled in the living room family room and the master bedroom. Large specious back yard beautifully landscaped, with retractable motorized awnings. Energy efficient with 3 zones A/C, Whole house fan/blower and individual laundry room. It s perfect interior location, LOW Association Dues, and NO MELLO ROOS makes this one a Must See Turn Key Home!

Another realtor demands silence!

Since the topic of the day is the bad behavior of realtors, I thought I would conclude on Friday with the amusing story from the OC Register.

The name has been deleted because I don't want to further humiliate this lady, but if you want to know who she is, you can find out on your own.

Police: Realtor fired gun to scare away people being loud

By KRISTY CHU — THE ORANGE COUNTY REGISTER

June 16, 2011

MISSION VIEJO – A 65-year-old realtor has been arrested on suspicion of discharging a firearm in a negligent manner after police say she fired a gunshot to scare people talking loudly near her home.

A group of eight people in their early 20s were hanging out at Lake Mission Viejo near the 22000 block of Formentor around 11:45 p.m. on Tuesday, police said. A woman who lives near the lake went out onto her balcony and yelled at them to be quiet.

I don't know why she yelled at them. She should have lodged a complaint with the ethics board at OCAr, and they could have demanded the rowdy 20-somethings appear in front of OCAr's kangaroo court to be found guilty of exercising their right of free speech. Since it doesn't matter to OCAr whether or not the people they accuse are in their organization, this woman could have lodged her complaint and made these young people shut up without resorting to shooting a gun.

Police said the group saw the woman return to her balcony a short time later with an object. They then heard what sounded like a gunshot and saw a flash from the gun's muzzle as it was discharged from the balcony. According to police, an individual in the group shouted up to the woman's balcony to ask if she had a gun, to which the woman responded that she did.

The group left the lake and called police to report the incident. The woman also had called police to report people being loud near the lake.

Deputies were sent to the woman's home to respond to the noise complaint and discovered she was intoxicated. The woman first told deputies she had only fired a flare gun, but later admitted to firing a gun up into the air. Deputies located a 38-caliber pistol with one spent round.

So a drunk realtor shoots a gun to stop people from talking, and then she lies to the police about it. Wow! BTW, what is it about realtors that makes them think they can force people to be silent?

I hope she isn't the one behind the complaint against me. Will she show up to the hearing with a firearm? Is OCAr going to install metal detectors at its doors to keep guns out of the proceedings?

Deputies arrested Dirty Harriet, 65, on suspicion of discharging a firearm in a negligent manner. Dirty Harriet, whose occupation is listed as a realtor on arrest records, is being held in lieu of $25,000 bail.

State Department of Real Estate records show a Dirty Harriet realtor employed by Rainbow Realty Corp. Century 21 Rainbow Realty's website lists a Dirty Harriet realtor as a realtor with the company, which specializes in “working with seniors in listing and selling homes.“

Contact the writer: 949-454-7343 or kchu@ocregister.com

realtors are complaining that I am making them look bad. I don't make this stuff up people. Based on recent news events, I think it's fair to say realtors are doing that all on their own.

The UCLA Anderson Forecast predicts housing demand will be weak until at least 2013, and as a result, the economy will continue to languish.

Irvine Home Address … 39 SMOKESTONE #36 Irvine, CA 92614

Resale Home Price …… $280,000

Today you're laughing, pretty baby,

tomorrow you could be crying

They say every dog has its day

The good dogs win and the bad fade away

Peter Green — It Takes Time

When I first started writing about the housing bust back in 2006 and 2007, I believed that prices would bottom in 2011. When the government embarked on its campaign of market intervention, they managed to engineer a two-year bear rally which has finally run it's course. What they managed to accomplish — other than shifting much of the losses from lenders to the US taxpayer — is to delay the bottom by two years. I wish my crystal ball were accurate enough to say exactly when, but now others are starting to accept the idea that we won't see a sustained recovery until 2013.

California to suffer housing shift, UCLA forecasters say

Demand will grow for urban rental units by the coast and shrink for single-family homes inland, resulting in fewer construction jobs and no boom for some areas hit hard by the housing bust.

By Alana Semuels, Los Angeles Times — June 15, 2011

UCLA forecasters have seen the future of California's housing market, and it looks like this: more apartments near the coast, fewer McMansions in the desert.

Since housing is still grossly overpriced near the coast, and since people with jobs need a place to sleep, rental demand will pick up. Further, since people can no longer afford the extra square footage of a McMansion, builders are being forced to make houses smaller to achieve lower price points. Those are the real reasons why UCLA's predictions will be correct. The reasons that follow are somewhere between weak and bogus.

That prediction is based on several factors, including expectations that rising fuel prices will encourage people to live closer to jobs along the Southland coast and in the San Francisco Bay Area.

The state's population is also skewing younger, meaning there will be more demand for urban rental units and less demand for suburban cul-de-sacs, according to the quarterly economic forecast released Wednesday by UCLA's Anderson School of Business.

People don't base housing decisions on gas prices. They may choose to buy a car that guzzles less gas while prices are high, but the moment gas prices go back down, demand for SUVs goes right back up. Gas prices may influence how much of a discount is required to get someone to move inland, but even that is less of an issue than how much traffic they will have to deal with and how long the commute time will be.

The idea that a “skewing younger” population will shift demand doesn't seem likely either. Demographic shifts doesn't determine buyer behavior. People will want what they want, and they will substitute as necessary. Academics have written papers predicting housing crashes from the changing housing needs of baby boomers, and those predictions have consistently proven wrong.

“The incremental demand for housing is moving more into multifamily housing,” said Jerry Nickelsburg, senior economist with the forecast. “Many of the younger generation have been buffeted by the boom and bust in the housing market, and see value in living closer to work.”

Younger workers have been frightened by the housing bust, but home ownership hasn't lost its luster. People will demand what housing they can afford, and as long as housing is over priced, people will demand rentals as a substitute.

That's bad news for the state economy, however, for two reasons. One is that construction of multifamily homes requires less labor than construction of single-family homes. Second, areas such as the Inland Empire and Central Valley that were hit hardest by the housing bust won't get a construction boom to help pull them out of the economic doldrums.

This means “there is an even larger structural unemployment problem in California than we originally thought,” Nickelsburg wrote in the forecast. “Not only do we have excess construction, real estate and support skills, but some of those that will be demanded will be in the wrong geography.”

UCLA has been wrong in its previous estimates of the impact of the housing bubble. I'm glad they are finally correcting their mistakes. Many of the construction jobs of the bubble will not come back — it was an unsustainable bubble, and when demand finally reaches an equilibrium, it will be at a lower level of real estate related employment.

California won't start adding a significant number of building permits until 2013, forecasters say, which is one of the reasons the state's unemployment rate will stay above 10% until the middle of that year. Nonfarm employment in the state won't return to pre-recession levels until 2014, and construction employment won't reach those levels until at least 2021.

Construction starts and sales have been near their all-time lows for nearly three years now, and they will continue to drag along the bottom for another two years. As someone who works in the industry, that is not a comforting truth, but it is an accurate assessment of where we are and what we are facing.

“In a typical recovery, you get a bounce-back in housing and hiring of a lot of construction workers,” (see chart above) Nickelsburg said in an interview. “We're not seeing that this time, which definitely slows the recovery, and slows economic growth.”

Changes in the state's demographics are driving some of these shifts, forecasters say. Household formation has slowed in California as the unemployed have moved in with their family members to save money, leading to less demand for new homes.

In addition, California is one of the youngest states in the nation, according to census data, with a median age of 35.2, compared with 38.0 in New York. Although there are many Gen Xers of home-buying age in the state, many “bore the brunt of sub-prime mortgage and housing bubble crash,” Nickelsburg said, and now do not think a home is a safe investment.

The surveys on this issue simply don't back up this contention. Despite the housing bust, people still want to own homes. That's not to say buyers are not wising up to the fact that housing is not a safe investment. People shouldn't perceive housing as a safe investment. Real estate prices do not always go up. The fact that people did believe it was a safe investment contributed to the financial mania that made prices crash.

The market is already responding to this trend, according to UCLA. Building permits for single-family homes have continued to decline while permits for multifamily complexes are starting to regain strength. Permits for multifamily homes are now at 40% of the peak number, comparatively stronger than permits for single-family homes, which are at 20% of their previous peak.

Those are dismal numbers. Real estate related unemployment is also correspondingly high.

These housing issues, coupled with the financial pain experienced by state and local governments, will keep California's unemployment rate at an average of 11.7% this year and 10.9% next year.

The picture is slightly rosier on the national level. Gross domestic product will grow at an annual rate of 3% through 2013, and the unemployment rate will decline slowly, reaching 7.8% by the end of that year. This year, the U.S. unemployment rate will average 8.9%.

There has never been a robust housing recovery in the face of persistent unemployment. It takes people with jobs to buy homes.

The recovery will remain tepid because many jobs are gone for good, said Ed Leamer, director of the UCLA Anderson Forecast. Outsourcing and robots have replaced about 2.5 million manufacturing workers. About 2 million construction jobs are gone permanently because they had been created by artificial demand. Retail technology and Internet shopping, coupled with consumers' spending fatigue, have led to the displacement of 1 million retail jobs.

Those 5.5 million workers are one reason the economy won't grow as robustly as it has in past recoveries, Leamer said.

“We have been vigilant for signs of a real recovery,” Leamer wrote. “These have been hard to find.“

As reported here back in 2009, our HELOC-based economy will not recover quickly because so much of the demand was artificial. With the housing ATM shut off for the foreseeable future, and with consumer debt at very high levels, we will not be able to borrow our way to prosperity.

Minus 10% annual appreciation

Today's featured property is not for sale. It recently closed for a whopping 41% loss which represents negative 10% appreciation for the four and one half years the owner had the place — and prices are still falling.

Remember when everyone bought in 2006 because they believed prices would rise 10% a year? Gary Watts said that was “in the bag,” not that a realtor would make overly optimistic projections of appreciation….

At the $280,000 sales price, this property is likely at or below rental parity. Of course, it is a condo which should trade at a discount to rental parity, but it is certainly a good sign for the housing market. When more properties reach price levels where the cost of ownership is less than rent, a bottom will form. Until then, local prices will continue to grind lower and affordability will improve.

Irvine House Address … 39 SMOKESTONE #36 Irvine, CA 92614

Resale House Price …… $280,000

House Purchase Price … $451,500

House Purchase Date …. 12/29/2006

Net Gain (Loss) ………. ($188,300)

Percent Change ………. -41.7%

Annual Appreciation … -10.6%

Cost of House Ownership

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$280,000 ………. Asking Price

$9,800 ………. 3.5% Down FHA Financing

4.49% …………… Mortgage Interest Rate

$270,200 ………. 30-Year Mortgage

$58,605 ………. Income Requirement

$1,367 ………. Monthly Mortgage Payment

$243 ………. Property Tax (@1.04%)

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

$58 ………. Homeowners Insurance (@ 0.25%)

$311 ………. Private Mortgage Insurance

$315 ………. Homeowners Association Fees

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$2,294 ………. Monthly Cash Outlays

-$125 ………. Tax Savings (% of Interest and Property Tax)

-$356 ………. Equity Hidden in Payment (Amortization)

$16 ………. Lost Income to Down Payment (net of taxes)

$55 ………. Maintenance and Replacement Reserves

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$1,884 ………. Monthly Cost of Ownership

Cash Acquisition Demands

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$2,800 ………. Furnishing and Move In @1%

$2,800 ………. Closing Costs @1%

$2,702 ………… Interest Points @1% of Loan

$9,800 ………. Down Payment

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$18,102 ………. Total Cash Costs

$28,800 ………… Emergency Cash Reserves

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

$46,902 ………. Total Savings Needed

Property Details for 39 SMOKESTONE #36 Irvine, CA 92614

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Beds: 3

Baths: 2

Sq. Ft.: 1117

$251/SF

Property Type: Residential, Condominium

Style: One Level, Contemporary

View: Park/Green Belt, Yes

Year Built: 1980

Community: Woodbridge

County: Orange

MLS#: S602164

Source: SoCalMLS

Status: Closed

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WOW!! THIS IS AN OUTSTANDING VALUE FOR WOODBRIDGE! SPACIOUS THREE BEDROOM TWO BATHROOM LIGHT AND BRIGHT CONDO IN PRESTIGIOUS WOODBRIDGE COMMUNITY CLOSE TO FREEWAYS, UNIVERSITY, AWARD-WINNING SCHOOLS, MAJOR SHOPPING AREAS, AND WITH LAKE AND ASSOCIATION PRIVILEGES! CLOSE TO PARKING AND WELCOMING VIEWS OF THE GREENBELT, THIS CONDO IS AN END UNIT WITH A PRIVATE ENTRY BALCONY PORCH, VISTA OF TREES, A LARGE LIVING ROOM WITH WINDOWS ON TWO WALLS, A SEPARATE DINING ROOM, A SUNNY KITCHEN WITH UPGRADED COUNTERS, A LARGE MASTER SUITE WITH SMALL BALCONY PLUS A DRESSING AREA WITH A WASHER/DRYER CLOSET, AND A SEPARATE BATHROOM WITH SHOWER/TUB.