When I was growing up, the Christmas season usually kicked off in early December with classic Christmas movies. One that I looked forward to every year was Rudolph the Red Nosed Reindeer. Burl Ives sang all the tunes from that movie. Here we go…

Rudolph, the red-nosed reindeer
had a very shiny nose.
And if you ever saw him,
you would even say it glows.

All of the other reindeer
used to laugh and call him names.
They never let poor Rudolph
join in any reindeer games.

Then one foggy Christmas Eve
Santa came to say:
“Rudolph with your nose so bright,
won’t you guide my sleigh tonight?”

Then all the reindeer loved him
as they shouted out with glee,
Rudolph the red-nosed reindeer,
you’ll go down in history!

Rudolph the Red-Nosed Reindeer — Burl Ives

.Sometimes when I see what people did and how they lived during the bubble, it fills my Reservoir of Schadenfreude. Today’s featured property has a story to tell, and I want to thank Brittney for providing me the detailed mortgage data that allows me to tell it.

Asking Price: $1,249,000

Income Requirement: $312,250

Downpayment Needed: $249,800

Purchase Price: $1,157,000

Purchase Date: 1/6/2005

Address: 24 Shady Lane, Irvine, CA 92603

Beds: 3
Baths: 3.5
Sq. Ft.: 2,629
$/Sq. Ft.: $475
Lot Size: 5,053 sq. ft.
Type: Single Family Residence
Style: Mediterranean
Year Built: 2005
Stories: Two Levels
View(s): City Lights
Area: Turtle Ridge
County: Orange
MLS#: S512996
Status: Active
On Redfin: 8 days

From Redfin, “Best deal around. Great plan 1 in private cul de sac location in the prestige Ledges at Turtle Ridge. Home shows as new very clean private location and great value for the Ledges estate. Nice rear yard area and great street appeal. Truly great deal here priced below most homes in area.”

How can any “plan 1” be worth over $1,000,000?

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This one isn’t a rollback yet, but I doubt the owners care because they have already made their money on the deal. Let’s look at the loan history on this property and see just how these people managed to live over the last 3 years.

The property was purchased in January 2005 for $1,157,000. The combined first and second mortgages totalled $1,156,730 leaving a downpayment of $270. Let’s just call it 100% financing.

By April, they owners were able to find refinancing through Countrywide with a $999,999 first mortgage. This mortgage was an Option ARM with a 1% teaser rate. The minimum payment would be $3,216 per month.

Also in April of 2005, they took out a simultaneous second mortgage for $215,000 pulling out their first $58,000.

So look at their situation: They are living in a million dollar plus home in Turtle Ridge making payments less than those renting, and they “made” $58,000 in their first 4 months of ownership.

Apparently, these owners liked how hard their house was working for them, so they opened a revolving line of credit (HELOC) in August 2005 for $293,000. Did they spend it all? I can’t be sure, but the following certainly suggests they did.

In December of 2005, they extended their HELOC to $397,990.

In June of 2006, they extended their HELOC to $485,000.

In April of 2007, the well ran dry as they did their final HELOC of $491,000. I bet they were pissed when they couldn’t get more money.

So by April 2007, they have a first mortgage (Option ARM with a 1% teaser rate) for $999,999, and a HELOC for $491,000. These owners pulled $333,000 in HELOC money to fuel consumer spending.

Assuming they spent the entire HELOC (does anyone think they didn’t?), and assuming the negative amortization on the first mortgage has increased the loan balance, the total debt on the property exceeds $1,500,000. The asking price of $1,249,000 does not look like a rollback, but if the property actually sells at this price, the lender on the HELOC (Washington Mutual) will lose over $300,000.

These owners will probably just walk away. I doubt they have any assets. They never put any money into the deal, they pulled out $333,000 in cash, and they got to live in Turtle Ridge for 3 years. Not a bad deal — for them.

Karma will not leave these people alone though. They have become accustomed to a lifestyle far beyond their means. Their house was providing them with $111,000 a year in tax-free income. When they get forced out, their credit will be ruined, and they will have to go from living the life of the nouveau riche to being a destitute renter. We can only hope this transition is painful and the memory of what they lost lingers for years.

These people likely drank the kool aid and actually believed this kind of lifestyle could be sustained. That level of ignorance makes it hard to have much sympathy for them. However, when you see the excess of this lifestyle, you can’t help but wonder if it was worth it.

If you knew prices were going to collapse, and the lifestyle was not sustainable (like many on this board did,) would you have done it anyway? When you see the lives led by people like today’s owners, it is not difficult to see why so many chose that life.

Variations on Canon — George Winston

Today’s listing is a perfect example of how bad timing and unrealistic expectation can be a costly combination.

Asking Price: $675,000

Income Requirement: $168,750

Downpayment Needed: $135,000

Purchase Price: approximately $725,000

Purchase Date: unknown 2004/2005

Address: 27 Wonderland, Irvine, CA 92620

Beds: 3
Baths: 3
Sq. Ft.: 2,146
$/Sq. Ft.: $315
Lot Size: –
Type: Condominium
Style: Mediterranean
Year Built: 2004
Stories: Two Levels
Area: Northwood
County: Orange
MLS#: S490583
Status: Active
On Redfin: 172 days
Unsold in 90+ days

From Redfin, “Move in condition, highly upgraded spacious home. This gorgeous home offers 3 bedrooms and a huge bonus room. There are two master bedrooms, one down plus additional bedroom and another master upstairs with a huge bonus room and builtin computer area. Upgraded hardwood flooring and carpeting, plus plantation shutters. Formal dining room, spacious kitchen upgraded with granite counters and wood cabinetry and stainless steel appliances.”

That is a well written listing. You don’t see those very often…

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Price Reduced: 08/07/07 — $818,000 to $780,000
Price Reduced: 09/06/07 — $780,000 to $760,000
Price Reduced: 10/13/07 — $760,000 to $730,000
Price Reduced: 10/26/07 — $730,000 to $699,000
Price Reduced: 11/02/07 — $699,000 to $675,000

The asking prices started somewhere in Wonderland on the exact day the credit crunch took hold. From there, the seller has slowly and methodically chased the market down, always staying one step behind the drops necessary to make a sale.

George Winston’s version of Carol of the Bells has been a favorite of mine for years. The somber tone captures the bleak beauty of December. The degree of difficulty to play this must be very high. You can hear each of his hands are playing something completely different and very complex. Beyond that, it is just beautiful. I hope you enjoy it.

Carol of the Bells — George Winston

Asking Price: $549,900

Income Requirement: $137,475

Downpayment Needed: $109,980

Purchase Price: $570,000

Purchase Date: 5/28/2004

Address: 15 Moonstone, Irvine, CA 92602

First Mortgage $450,000
Second Mortgage $60,000
Total Debt $510,000
Downpayment $60,000

Beds: 3
Baths: 2.5
Sq. Ft.: 1,500
$/Sq. Ft.: $367
Lot Size: 1 sq. ft.
Type: Condominium
Style: Contemporary, Spanish
Year Built: 2001
Stories: Two Levels
Area: West Irvine
County: Orange
MLS#: S495371
Status: Active
On Redfin: 135 days
Unsold in 90+ days

From Redfin, “Stunning 3 bedroom, 2.5 bath luxury townhome with attached 2-car garage. Marble-look Italian porcelain tile floors, recessed lighting through-out, custom beech-wood cabinetry and durable Corian counter tops in kitchen. Romantic raised fireplace in living room, fire and security alarm, custom-finished floor in garage, slate hardscape in front and much more! ”

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This is the first owner we have seen in a while that actually put money into the property. Of course, they are about to lose all of it, but the lender will not get hurt on this one. If this property sells for asking price — which doesn’t seem very likely after 135 days on the market — and assuming a 6% commission, the seller will lose $53,094. I guess with $6,906 in equity left over, they can afford to pay a mover to take them to their rental…

Finding songs to relate to the real estate market has been a source of great fun and a unique creative outlet for me. However, there are many great songs that do not relate to the collapse of the housing market. Since we are entering the holiday season, and since the real estate bulls are thoroughly defeated, I will take a break from our normal routine and feature holiday music now through the end of the year. To start, I want to feature one of my favorite artists: George Winston. His album, December, begins with a song called Thanksgiving and follows with a series of Christmas Carols set to piano as only George Winston can. Enjoy.

From Turtle Ridge, the land of WTF listing prices and decadent kool-aid parties, we have a 2004 rollback. This can’t be making the neighbors too happy.

Asking Price: $574,900

Income Requirement: $143,725

Downpayment Needed: $114,980

Purchase Price: $581,000

Purchase Date: 12/17/2004

Address: 100 Coral Rose, Irvine, CA 92603

First Mortgage $580,950
HELOC $33,000
Total Debt $613,950

Beds: 2
Baths: 2.5
Sq. Ft.: 1,155
$/Sq. Ft.: $498
Lot Size: –
Type: Condominium
Style: Mediterranean
Year Built: 2003
Stories: Three or More Levels
View(s): City Lights, Hills
Area: Turtle Ridge
County: Orange
MLS#: U7003293
Status: Active
On Redfin: 105 days
Unsold in 90+ days

From Redfin, “Best Buy in the Community!!! Exquisite former Sutton Model in Turtle Ridge’s Ashton Green featuring 2 bedrooms & 2.5 baths. Light & birght end unit in the best location with open hill views. Upgraded kitchen with custom distressed cabinetry and upgraded appliances to match, designer counters & back splash. Bathrooms are all upgraded with the custom cabinetry & designer wall paper. The master bathroom has beautiful custom stone on the counters & in the shower. So many more upgrades to list.”

The obligatory three exclamation points.

designer wall paper? Is there another kind?

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Date Price
05/27/2005 $599,000
04/26/2005 $606,000
04/08/2005 $722,500
03/30/2005 $620,000
03/28/2005 $627,500
03/22/2005 $618,500
03/21/2005 $615,500
03/11/2005 $611,000
12/28/2004 $572,000
12/22/2004 $640,000
12/21/2004 $615,000
12/17/2004 $581,000
12/15/2004 $583,000
It is difficult to tell from the sale history (it reads like an appraisal history,) but the property records show this house was purchased in late 2004 for more than the current asking price. If they get this price and pay a 6% commission, the lender stands to lose $74,390.

The lender won’t be having a happy Thanksgiving, but I hope you will.

I am thankful for…

• My family and friends.
• Enjoyable work.
• The IHB community.
• Life balance and inner peace.

What are you thankful for?

There’s a port on a western bay
And it serves a hundred ships a day
Lonely sailors pass the time away
And talk about their homes

Brandy — Looking Glass

Everyone sitting around talking about their homes. Sounds like every western port, doesn’t it? Certainly the ones in California.

Today’s property isn’t a rollback yet, but it still has an interesting story to tell. The property is located in the land of kool aid and real estate zealots: Turtle Ridge. The property has been on the market just short of forever, but the seller still refuses to lower the price. Why is that? Does it have something to do with the amount of debt on the property?

Asking Price: $1,629,000

Income Requirement: $407,250

Downpayment Needed: $325,800

Purchase Price: $1,433,000

Purchase Date: 11/9/2004

Address: 24 Trumpet Vine, Irvine, CA 92603

First Mortgage $1,500,000
HELOC $200,000
Total Debt $1,700,000

Beds: 4
Baths: 3.5
Sq. Ft.: 3,046
$/Sq. Ft.: $535
Lot Size: –
Type: Single Family Residence
Style: Mediterranean
Year Built: 2004
Stories: Two Levels
View(s): Hills
Area: Turtle Ridge
County: Orange
MLS#: U7000774
Status: Active
On Redfin: 270 days
Unsold in 90+ days

From Redfin, “Ideal End of Cul-de-Sac Location. Taylor Woodrow Bontanica Plan 2 with Casita Garden Suite + Highly upgraded with Crown Moldings, Custom Built-ins. Private Courtyard. Rear yard with Grass, and Patio area with Built-in Grill. Desirable Guard Gated ‘Summit Park’. Owner will consider Trade for Smaller Home in the Area. “

What do you make of the trade-down idea?

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I don’t know how much of the $200,000 HELOC has been borrowed and spent, but I think we can make an educated guess. When an asking price doesn’t drop after 9 months on the market, there must be a reason (other than foolish stubbornness.) If the seller gets her asking price and pays a 6% commission, she will be left with $1,531,260. The first mortgage is listed as conventional, so we can assume very little of the $1,500,000 has been paid down since August of 2006 when it was initiated (the first mortgage is a refi.) Therefore, if our seller has borrowed more than $35,000 on the $200,000 HELOC, she is looking at a short sale.

Quite honestly, I doubt she cares. This was a 100% financing deal from the outset, and she has already pulled over $67,000 out with the refinance on the first mortgage. Any of the HELOC she walks away with is a bonus. The bank will get to eat the rest.

Anybody want to estimate how much the bank will lose on this one?