Well alright, you gave it all up for a dream

Fate proved unkind,

to lock the door and leave no key

You’re unsure,

Well baby I’m scared too

When the world crushes you

Let me be your shelter, shelter

From the storm outside

Let me be your shelter, shelter

From the endless night

Disillusion has an edge so sharp

It tears at your soul and leaves a stain upon your heart

I need you, to wash mine clean

You’ve felt it too, and you need me

Shelter — Lone Justice

Buyers late to the rally gave it all up for a dream, and fate proved very unkind. It is time to lock the doors and mail back the keys. Their world is crushed; they are disillusioned, and this will leave lasting scars in their memories…

.

.

There is another neighborhood in Quail Hill experiencing a race to the bottom. Anyone remember Stepping Down? This is not a bad neighborhood. It is everything Irvine has come to stand for. There are greenspaces on two sides, a great park nearby, and the elementary school is walking distance. The houses are attractive, alley-loaded homes averaging about 2000 SF. There are no negatives preventing this neighborhood from selling well — other than the predicted credit crunch. To see distress in this segment of the market is to see it everywhere…

The three homes we are comparing today are nearly identical, and of course, they all have gourmet kitchens. These are presented in order to match our house price ratings graphic to the left. First, we have a LOL price (which is today’s market). Second, we have an OMG wishing price, and third, to complete the trifecta, a WTF fantasy price.

Asking Price: $789,000

Income Requirement: $197,250

Downpayment Needed: $157,800

Purchase Price: $594,000

Purchase Date: 9/30/2003

Address: 36 Canopy, Irvine, CA 92603

First Mortgage $616,000

Second Mortgage $115,500

Total Debt $731,500

Beds:	4
Baths:	2.5
Sq. Ft.:	2,100
$/Sq. Ft.:	$376
Lot Size:	–
Type:	Condominium
Style:	French
Year Built:	2003
Stories:	Two Levels
View(s):	Canyon, Hills
Area:	Quail Hill
County:	Orange
MLS#:	S508410
Status:	Active
On Redfin:	99 days
Unsold in 90+ days

WOW $ 175,000 less than the last sale * * * DON’T MISS BRING your OFFER, GORGEOUS DETACHED4BR+ FAMILY ROOM+FORMAL LIVING & DINING ROOM+2 FIRPLACES, GORMET KITCHEN WITH SOLID GRANITE, HIGH END FLORING WITH BRAND NEW CARPET, TRAVERTINE AND CERAMIC TILES. LARGE MASTER W/ HUGE WALKING CLOSET & BALCONY, GREAT YARD AND LOCATION. AWARD WINIG SCHOOLS. AMINITIES ARE WALK/BIKE TRAILS, 3SETS OF POOL & SPAS, SPORT COURTS, TOTLOTS, BAR-B-Q AND FITNESS CENTER. VERY MOTIVATED SELLER.

FIRPLACES? GORMET? FLORING? WINIG? AMINITIES? TOTLOTS? ALL CAPS?

Notice the kool aid advertising at $175,000 less than last sale. I think this is supposed to imply this is a bargain. It tells me prices are in free fall.

.

.

Typical story here: The seller bought the rally, refinanced to get some pocket change, and now they are hoping to get out before the market drops past their breakeven point. This listing started at $895,000 and has now seen $105,000 in price reductions over the last 100 days. They are still chasing the market down. Perhaps if they had not started at a WTF price, they might have found a knife catcher. I suspect the asking price might start to get sticky soon because they need to get near their current asking price not to go underwater.

Asking Price: $859,000

Income Requirement: $214,750

Downpayment Needed: $171,800

Address: 48 Canopy, Irvine, CA 92603

Beds:	4
Baths:	2.5
Sq. Ft.:	2,100
$/Sq. Ft.:	$409
Lot Size:	–
Type:	Condominium
Style:	Mediterranean
Year Built:	2004
Stories:	Two Levels
View(s):	Hills, Mountain, Park or Green Belt
Area:	Quail Hill
County:	Orange
MLS#:	S512470
Status:	Active
On Redfin:	64 days

Acres of OPEN SPACE in your own backyard! This 3BR+LOFT, 2.5BA DETACHED HOME w/ 2-car direct acc. gar. across from nature preserve & walking trails!Formal Liv/Dining areas; Sep. FamRm w/ Freplce & media niche; extensive hrdwd flring thruout!Plantation shutters, french doors gourmet kitchen w/ stainless steel appliances, opulent master suite, tranquil bkyd patio w/ KOI POND & lush vegetation!Award-winning Alderwood Basics+ & Uni HS!REDUCED $1,000’S!!!

The schizophrenic use of abbreviations, CAPS, slashes and unusual punctuation make this description very difficult to read.

.

.

This property is now $70,000 behind our low price leader. I imagine if you ask the seller, they could give you a litany of reasons why their property is worth the extra $70,000. At 64 days on the market, it appears the market thinks it is overpriced.

Asking Price: $943,900

Income Requirement: $235,975

Downpayment Needed: $188,780

Address: 45 Canopy, Irvine, CA 92603

Beds:	3
Baths:	2.5
Sq. Ft.:	2,073
$/Sq. Ft.:	$455
Lot Size:	–
Property Type:	Condominium, Attached
Year Built:	2003
Stories:	Two Levels
View:	Yes, Hills, Park/Green Belt
Area:	Out Of Area
County:	Orange
MLS#:	K07103117
Status:	Active
On Redfin:	185 days
Unsold in 90+ days

This the best 3 bedroom home in Quail Hill. Gourmet Kitchen With Slab Granite counters with Stainless steel Appliances. Formal living, Dinning, and a family room. This 2 Story includes Recessed lighting thru out, large shutters, large crown and baseboard molding thru out home. you will love the flooring, carpet, tile, marble, spa tub and master shower are up graded. a plus is study and or office. an enclosed back yard with covered patio, stainless steel BBQ, Custom Decking, lighting, fountain, flowers, grass, and this is a great place to entertain. a gated court yard up front with wonderful views. Included is a attached 2 car garage, sealed flooring, White detailed walls, custom lighting and auto door opener. This has many more option that you have to see for yourself. Location, location, location, Shopping, schools, movies, fwys, and the pacific ocean beaches.

“This the best 3 bedroom home in Quail Hill.” Bullshit.

This place has the “pacific ocean beaches?”

This author must have something against capital letters… Or perhaps they used up their quota in the first three sentences and couldn’t use any more?

.

.

You have to wonder what goes through this seller’s mind. They are $150,000 over comps, and these comps are aggressively lowering their price and they still haven’t found the market. What is this seller waiting for? Perhaps they need this post to embarrass them into doing something — something like — lower the price! If they lowered the price today $200,000, they might find a buyer; otherwise, this property is going to sit on the market forever (it has already been there half a year.) Also, they need to get the realtor to take some pictures. The tiny picture on the web is not helping matters any.

.

These price drops are breathtaking. Real estate markets usually do not decline so quickly. So how bad is it getting? From DataQuick:

All Home Sales… Median Dec-06. Median Dec-07 .Percent Change

Los Angeles………. $525,000………. $470,000………. -10.5%

Orange……………….$630,000………. $565,000………. -10.3%

Riverside………….. $432,000………. $355,000………. -17.8%

San Bernardino… $370,000………. $315,000………. -14.9%

San Diego…………. $495,000………. $430,000………. -13.1%

Ventura……………. $590,000………. $525,250………. -11.0%

SoCal………………….$490,000………. $425,000………. -13.3%

.

Since I went country today, I thought I would share with you a song selection from a reader. Thank you.

.

.

I saw Star Wars at least eight times,

Had the Pacman pattern memorized

And I’ve seen the stuff they put inside Stretch Armstrong

Well I was Roger Stauback in my backyard,

Had a shoebox full of baseball cards,

And a couple of Evil Knievil scars on my right arm

Well I was a kid when Elvis died,

And my mama cried.

It was 1970 somethin’, in the world that I grew up in.

Farrah Fawcett hair-do days, bellbottoms and 8-track tapes.

Looking back now, I can see me.

Oh man, did I look cheesy.

I wouldn’t trade those days for nothin’,

Oh it was 1970 somethin’.

It was the dawning of a new decade,

When we got our first microwave.

Dad broke down and finally shaved them old sideburns off.

I took the stickers off my Rubiks cube,

Watched MTV all afternoon.

My first love was Daisy Duke in them cutoff jeans.

Space shuttle fell out of the sky,

And the whole world cried.

It was 1980 somethin’, in the world that I grew up in.

Skating rinks and black Trans-Ams, big hair and parachute pants.

And looking back now, I can see me.

And oh man, did I look cheesy.

I wouldn’t trade those days for nothin’,

Oh it was 1980 somethin’.

Now Ive got a mortgage and an SUV

But all this responsibility

Makes me wish sometimes –

It was 1980 something, in the world that I grew up in.

Skating rinks and black Trans-Ams, big hair and parachute pants.

And looking back now, I can see me.

Oh man, did I look cheesy.

I wouldn’t trade those days for nothin’,

Oh it was 1980 somethin’.

19 Seventy Somethin’

Oh it was 19 somethin’.

Well, I can see no reason,

You’re living on your nerves.

When someone drops a cup and I submerge.

I’m swimming in a circle.

I feel I’m going down.

There has to be a fool to play my part.

Show Me the Way — Peter Frampton

.

.

Today I want to show you how to chase the market down. Sometimes I feel sorry for all the FBs. Their nerves must be frayed as they drop deeper and deeper underwater. If only they could find a greater fool to bail them out…

Today’s property was first featured and updated New Century Condo – 2005 Flip ** Update 1 **. It appears the new year has given new resolve to the seller who relisted with a significant reduction in price.

Asking Price: $449,000

Income Requirement: $112,250

Downpayment Needed: $89,800

Purchase Price: $565,000

Purchase Date: 5/26/2005

Address: 1 Montgomery #46, Irvine, CA 92604

First Mortgage $452,000

Second Mortgage $113,000

Downpayment $0

Beds:	3
Baths:	2.5
Sq. Ft.:	1,639
$/Sq. Ft.:	$274
Lot Size:	–
Type:	Condominium
Style:	Townhouse
Year Built:	1977
Stories:	Two Levels
View(s):	Hills
Area:	Walnut
County:	Orange
MLS#:	P615271
Status:	Active
On Redfin:	12 days

GREAT VALUE IN IRVINE. TWO STORY TOWNHOUSE WITH 3 BEDROOMS AND 2.5 BATHS, 2 GARAGE IN DESIRABLE HERITAGE PARK. OPEN FLOOR PLAN WITH LARGE ROOMS. BLUE RIBBON SCHOOLS. CLOSE TO SCHOOLS SHOPPING AND FREEWAYS. NICE ASSOCTAION WITH ASSOCIATION POOL, SPA, PARKS, AND WALKS. LOW HOA DUES $175.00 AND NO MELLO-ROOS.

ALL CAPS…

DESIRABLE HERITAGE PARK? I suppose it is also I-5 proximate.

LOW HOA DUES $175.00. Low compared to what?

ASSOCTAION? Ass tachyons? The Tachyonics Society of America

.

.

New Century issued these loans, so who is going to lose the money? Despite its bankruptcy, the business plan for New Century was basically a good one: build an unsustainable business, take out as much in fees and stock sales as you can, and disappear letting others hold the bag. Since the loan issuer is no longer in business, the investor has nobody to sue to repurchase the bad loan. These shell companies make a great way to compartmentalize losses. Anyway, some CDO or SIV somewhere is going to lose $142,940 after a 6% commission. That is an amazingly large loss on a such a small unit. The asking price is 20% under the most recent sale which was a full year before the peak. Are you getting a sense of how bad this is becoming for lenders and investors?

So how does one chase the market down? Do what this seller did. First, you list a property for $610,000 which would cover your commissions and make you a few bucks. You keep this listing price far beyond 90 days when the market is telling you, “it is priced too high.” Then you reduce the price to something approximating the market at the time, and keep it there for another several months while the market deteriorates. When it finally dawns on you that you have missed the market, you lower your price in a panic and hope to find a knife catcher. At this point a market chaser would wait 3 to 6 months before lowering the price again. A real seller would lower the price every 30 days by a significant amount until they got out. What do you think this seller will do?

Trapped in purgatory

A lifeless object, alive

Awaiting reprisal

Death will be their acquisition

The sky is turning red

Return to power draws near

Fall into me, the sky’s crimson tears

Abolish the rules made of stone

Raining Blood — Slayer

.

.

Trapped in the purgatory of their home, awaiting repossession, the slow death of bank acquisition. The sky is falling; it is raining blood; the return to renting is near.

Asking Price: $695,000

Income Requirement: $173,750

Downpayment Needed: $139,000

Purchase Price: $778,000

Purchase Date: 7/28/2005

Address: 21 Carriage, Irvine, CA 92602

First Mortgage $622,400

Second Mortgage $150,000

Downpayment $5,600

Beds:	4
Baths:	2.5
Sq. Ft.:	2,250
$/Sq. Ft.:	$309
Lot Size:	–
Type:	Single Family Residence
Style:	Traditional
Year Built:	1998
Stories:	Two Levels
Area:	West Irvine
County:	Orange
MLS#:	P615321
Status:	Active
On Redfin:	11 days

Quality shows throughout in this beautiful Fieldstone home. The great functional kitchen with walk-in pantry and glistening black granite on counters and center island opens into a huge family room with fireplace, and French doors lead into the broad backyard. Off the vast master bedroom is a bath suite with separate tub and shower and giant walk-in closet. Upstairs are three more roomy bedrooms and even a walk-in linen closet. Myford Elementary and Pioneer Middle are both California Distinguished Schools and this beautiful, nearly new community has NO association dues!

That is a well-written MLS description.

Do you see how the “r” and the “i” run together to turn carriage into carnage?

.

.

How much will the lenders lose today? Well, assuming a 6% commission, the total loss on the property will be $124,700. The people who have been renting from the bank — sorry, the owners — will lose $5,600. The lender will lose $119,100. This gets worse. There is a HELOC for $192,500 issued on 3-8-2007. I have no idea how much if any of this money has been borrowed. If the owners were smart, they would take it all out and hide the cash somewhere. Of course, a HELOC is a recourse loan, and they would still be required to pay it back, but if it is already borrowed and spent…

There has been plenty of carnage in our real estate market, and if you are in to that sort of thing, there will be plenty more as Armageddon approaches. The God of bear markets is hungry, and he is consuming everyone in his path. He gives new meaning to “Credit Crunch.”

Come back next week as we continue chronicling ‘the seventh circle of real estate hell.’