You Light Up My Life — Debby Boone

If you are renting and waiting for prices to drop further, properties like this one light up your life. Of course, if you are trying to sell and get what little equity you have left out of the property, it doesn’t feel quite the same. Today’s featured property is a rollback on a 2004 purchase, and after 243 days on the market, it probably hasn’t rolled back enough.

This property is part of the market segment that will totally collapse
next. The low end of the market has already been obliterated and is
beginning its slow decline to the bottom. The owners of properties over $500,000 are
still clinging to the hope that the jumbo loan market will come back
and allow buyers to finance the sums necessary to purchase them. It
isn’t going to happen. Most properties requiring a loan in excess of
$417,000 plus a downpayment are sitting on the market. There are few
buyers who can either obtain the financing or truly afford it. The lenders
are requiring people to prove they make enough to afford the payments.
Most can’t.

Asking Price: $570,000

Income Requirement: $142,500

Downpayment Needed: $114,000

Monthly Equity Burn: $4,750

Purchase Price:
$610,000

Purchase Date: 8/26/2004

Address: 8 Lantern, Irvine, CA 92618

Beds:	3
Baths:	2.5
Sq. Ft.:	1,340
$/Sq. Ft.:	$425
Lot Size:	–
Property Type:	Condominium
Style:	French
Year Built:	1999
Stories:	2 Levels
Area:	Oak Creek
County:	Orange
MLS#:	U7004532
Source:	SoCalMLS
Status:	Active
On Redfin:	243 days
Unsold in 90+ days

Nice size backyard for entertaining? If you like to entertain on a tiny patio.

What makes a bath a “great bath?”

When this property was purchased in the summer of 2004, the owners put 10% or $61,000 down. They did not refinance or otherwise extract equity from the property. Right now, they probably wish they had. They behaved responsibly, and they will probably end up with the same credit problems as the irresponsible who got to spend all that free money. If this sells for its asking price, the total loss on the property will be $74,200. The owners will lose their $61,000 downpayment, and the lender will be out $13,200. If these people are as responsible as their history suggests, they may pay the lender off. Morality has a cost. How much would you pay?

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So many nights I sit by my window
Waiting for someone to sing me his song
So many dreams I kept deep inside me
Alone in the dark but now
You’ve come along

It can’t be wrong
When it feels so right
‘Cause You
You light up my life

You Light Up My Life — Debby Boone

This property went back to the bank for
$425,279. That is 26% off the peak. I foresee the 2002 price as its approximate value at the bottom:

Sales History

I’ll have a blue Christmas without you
I’ll be so blue just thinking about you
Decorations of red on a green Christmas tree
Wont be the same dear, if you’re not here with me

And when those blue snowflakes start falling
Thats when those blue memories start calling
You’llbe doin all right, with your Christmas of white
But Ill have a blue, blue blue blue Christmas

Blue Christmas — Elvis Presley
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Today’s listing is a portrait of a bagholder. This ugly property was purchased right at the peak in Mid-2006 with 100% financing. If this property was not purchased with 100% financing, the owners probably would have tried to hold on longer, but with the market tanking, and the payments burning a huge hole in their monthly budget, it is easier to just walk away…

Asking Price: $514,900

Income Requirement: $102,980

Downpayment Needed: $128,725

Purchase Price: $577,000

Purchase Date: 8/8/2006

Address: 5065 Balsawood, Irvine, CA 92612

First Mortgage $461,600
Second Morgage $115,400
Downpayment $0

Beds: 2
Baths: 2
Sq. Ft.: 1,185
$/Sq. Ft.: $435
Lot Size: 2,940 sq. ft.
Type: Single Family Residence
Style: Other
Year Built: 1974
Stories: One Level
Area: University Park
County: Orange
MLS#: P611279
Status: Active
On Redfin: 5 days

From Redfin, “Best value in the Terraces!!! Light, bright, and open single-level Terrace home. Newer paint and carpet. Newer Milgard dual-pane windows, with three skylights that flood warmth and sunlight into this charming home. Vaulted ceilings in living room and in master bedroom. Italian porcelain tile flooring throughout living room, family/kitchen area, and rear courtyard. Located on a cul-de-sac for added privacy but close to HOA pools and spas. Don’t miss out on this great opportunity.”

Nice of the realtor to provide the lovely pictures of the garage door and the front door.

Three exclamation points!!!

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I wrote at length last week on the impact of 100% financing. Properties like this one are on the market because the owners are underwater and they have no money in the deal. We have seen the market is about 20% off the peak right now, particularly for the less desirable properties. I think it likely this price will have to drop another $50K-$75K to find a knife catcher. However, assuming the seller lender gets their asking price, the total loss on the property will be $67,614, assuming a 6% commission.

Just how common are 100% financing deals? Are there enough of these to really hurt the market?

According to Credit Suisse, more than 60% of loan originations in Southern California had piggy back loans. Subprime loans had an astounding 94% average loan-to-value ratio. Of more importance to Irvine’s market 55% of Alt-A Jumbo loans had piggy-back loans attached to them. If Irvine is supposed to be a move-up market and everyone is sitting on mountains of equity, why would anyone need a piggyback? Given the high transaction volumes of the bubble rally and the subsequent 20% decline in individual property prices we have demonstrated on this blog, one can speculate there are large numbers of underwater homeowners with loan-to-value ratios in excess of 100%. It is likely we will see a plethora of short sales in 2008.

Think for a Minute — Housemartins

Have you noticed how silent the bulls have become? The ones that used to hold their heads high now hang their heads in shame. Perhaps, if they had thought for a minute about paying double for real estate, they wouldn’t have so many troubles now. Today’s featured property has been on the market since April 10, 2007 — a whopping 428 days. It is a story of a year of stress and wishful thinking about the market.

Asking Price: $530,000

Income Requirement: $132,500

Downpayment Needed: $106,000

Monthly Equity Burn: $4,416

Purchase Price: $628,000

Purchase Date: 1/12/2006

Address: 963 Sumerville, Irvine, CA 92620

Beds:	3
Baths:	3
Sq. Ft.:	1,481
$/Sq. Ft.:	$358
Lot Size:	–
Property Type:	Condominium
Style:	Contemporary/Modern
Year Built:	1999
Stories:	2 Levels
Area:	Northwood
County:	Orange
MLS#:	S482981
Source:	SoCalMLS
Status:	Active
On Redfin:	427 days
Unsold in 90+ days

It looks like the realtor put together a nice website.

Perhaps English is not her native language. We have this sentence-ender we call a period. I don’t know where the double asterisk comes from.

When I looked through the records on this property, I was struck by the stress this property must be causing the owners. It was purchased by a married woman as her “sole and separate property” on January 12, 2006. The property was put into a family trust in August of 2006, and the husbands name was on the property. In January of 2008, after 8 months of the property failing to sell, the husband removed his name from the title. I speculate this was done in an attempt to save his credit in the event of a short sale. I can just imagine the conversations these two must have had as she purchased the property without him, then he was brought into the deal, and then he wanted out. Most family arguments are about money. Add a white elephant like this to the mix, and there are bound to be issues. I hope I am wrong. I would not wish that on anyone. Through situations like this one, the housing crash is going to have a detrimental impact on families everywhere.

When this property was purchased for $628,000, the owner put 10% ($62,800) down. They didn’t HELOC out their equity, although I imagine they wished they would have at this point. This property was first listed for $645,000. The seller was going to lose a bit of their downpayment at that price due to the sales commission, but the loss would have been minor. It didn’t sell. After 90 days, they lowered the price to $599,980. At this price level, their equity would have evaporated, but they would have received enough from the sale to pay off the debt. For obvious reasons, the price did not budge for another 10 months. Even the stubborn and intractable give up eventually. Last month, they accepted that their equity was gone and their credit is shot, and they lowered the price to $530,000 were it sits today. Unfortunately, the market has moved down even faster than their price, and they are still grossly overpriced. The property still is not going to sell. If it did sell, and if the sellers paid a 6% commission, the total loss on the property would be $129,800. The seller would lose $62,800, and the lender would lose $67,000.

Perhaps 2006 was not a great time to buy…

Something’s going on, change is taking place,
Children smiling in the streets have gone without a trace.
This street used to be full, it used to make me smile,
And now it seems that everyone is walking single file

Think for a minute, stop for a minute
Think for a minute, stop for a minute

Think for a Minute — Housemartin

Want to see how to really destroy the neighborhood comps? How about lowering an asking price nearly 20%…

Address: 1714 Timberwood Drive, Irvine, CA 92620

Old Asking Price: $499,000

New Asking Price: $429,000

What Goes Around… Comes Around — Justin Timberlake

What goes up must go down, and what goes around comes around. Markets move in cycles, and although they can trend for significant periods of time, all price trends eventually reverse. Real estate markets usually trend for very long periods, and we are only 2 years into what is likely to be a 6-8 year decline. We are nowhere near the bottom. I imagine most people with toxic financing who need to refinance really don’t want to think about it. It is probably making them sick, and they can’t believe it is ending this way. They are shocked it is going down. As Justin Timberlake points out, “What Goes Around… Comes Around.”

Today’s property is part of the ongoing carnage in the Collage complex in Northwood. We have profiled this neighborhood before. It is one neighborhood in Northwood showing serious distress. The featured property is a toxic financing victim (and we even have a new graphic to go with it.) The owner purchased in early 2006 with an 80% first mortgage which was a 1% Option ARM. There is a 10% HELOC, which was probably used as purchase money, and a 10% downpayment. Two years on, and the payments are rising, the values are dropping, and the owner is walking. What a surprise…

Asking Price: $499,000

Income Requirement: $124,750

Downpayment Needed: $98,800

Monthly Equity Burn: $4,158

Purchase Price: $596,000

Purchase Date: 2/22/2006

Address: 1714 Timberwood Drive, Irvine, CA 92620

Is that the kitchen in the background or a closet?

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If this seller gets their asking price and pays a 6% commission, the total loss on the property will be $126,940. The owner will have lost their $59,600 downpayment, the second mortgage holder would lose their $59,600, and the first mortgage holder would lose $7,740. Of course, since this was a neg am loan with a 1% teaser rate, the loss on the first mortgage will likely be much higher. Gotta love that toxic financing…

This neighborhood is a mess. The unit at 1520 Timberwood is a bank REO, and it is dragging down the comps. It is currently offered at $303/SF which is significanly less than the other properties for sale nearby, including this one. The REO is going to make it impossible for the other sellers because their buyers will not be able to get a large loan (Does anyone remember this oldie? Your Buyer’s Loan Terms) In short, the other sellers are pwned. 1512 Timberwood was purchased last August about a week before the credit crunch hit (if this was a flip, it was a really stupid one.) The buyer paid $520,000, and now they are hoping to get out at $470,000. Then there is the truly delusional seller at 800 Timberwood hoping to get $400K for a 1 bedroom condo. WTF? Are there any buyers out there who are that stupid? I hope not.

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Don’t want to think about it
Don’t want to talk about it
I’m just so sick about it
Can’t believe it’s ending this way

What goes around, goes around, goes around
Comes all the way back around
What goes around, goes around, goes around
Comes all the way back around
What goes around, goes around, goes around
Comes all the way back around
What goes around, goes around, goes around
Comes all the way back around

What Goes Around… Comes Around — Justin Timberlake

This property went back to the bank on 1/10/2008 for $850,719. It was sold on 2/28/2008 to a couple who spent $789,000. They took out a $700,000 first mortgage, and they took out a $50,000 second on 4/14/2008. They now have $39,000 of their money into this property. Are they in it for the long haul? Or do you think they will abandon ship when the value of this drops down to about $600,000?

Dream if you can a courtyard
An ocean of violets in bloom
Animals strike curious poses
They feel the heat
The heat between me and you

How can you just leave me standing?
Alone in a world thats so cold? (so cold)
Maybe I’m just too demanding
Maybe I’m just like my father too bold
Maybe you’re just like my mother
Shes never satisfied (shes never satisfied)
Why do we scream at each other
This is what it sounds like
When doves cry

Touch if you will my stomach
Feel how it trembles inside
You’ve got the butterflies all tied up
Don’t make me chase you
Even doves have pride

When doves cry
When doves cry (doves cry, doves cry)
When doves cry (doves cry, doves cry)

Don’t cry (don’t cry)

When Doves Cry — Prince

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How do you explain to your children the family has to move out of their house? How much of an emotional toll does a foreclosure exact on a family? There are many reasons Houses Should Not Be a Commodity, but this one of the most important that does not involve money. There are those who are innocent victims of this mess. Who weeps for the children or for the pets?

Asking Price: $789,900

Income Requirement: $197,475

Downpayment Needed: $157,980

Purchase Price: $1,000,000

Purchase Date: 6/22/2005

Address: 5 Morning Dove, Irvine, CA 92604

Hot Buy in Irvine. Home features a large backyard, recessed lighting, skylights, inside laundry room, a living room with a fireplace. 2 bedrooms have been added making this home feautre 6 bedrooms (permits unknown). Hurry and don’t miss this great opportunity.

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This listing really caught my eye. I came across this property by checking out foreclosureradar.com. The asking price is 21% off the purchase price in 2005. If this seller gets their asking price and pays a 6% commission, the total loss would be $257,494.

Lately, I haven’t even been interested unless the loss in measured in 6 figures. If I were more ambitious, I would add up the documented losses in the blog posts. I imagine the total is in the tens of millions just here in Irvine. No wonder the major banks are taking multi-billion dollar write downs. I suspect there is some crying on Wall Street…