Real estate markets move like large ocean liners: once they start going a certain way, they tend to continue in that direction for extended periods of time; they are slow to change direction. The credit markets have grabbed the rudder and ordered a price decline. The boat spent the better part of a year changing direction, but now it is clearly headed toward the rocks.

Today’s properties are on the same street in Northpark. One was purchased at the peak and is now offered for sale at a 10% discount. The other was purchased in 2005, and they are hoping for a breakeven sale.

Asking Price: $664,999

Purchase Price: $712,500

Purchase Date: 5/31/2006

Address: 75 Burlingame, Irvine, CA 92602

Beds: 3

Baths: 2.5

Sq. Ft.: 1,664

$/Sq. Ft.: $400

Lot Size: –

Year Built: 2000

Stories: 2

Type: Condominium

View: Park or Green Belt, Trees/Woods

County: Orange

Neighborhood: Northpark

MLS#: S491713

Status: Active

On Redfin: 43 days

From Redfin, “Northpark beauty! Fireplace in the cozy living room, lg. upgraded entertainers kitchen, cathedral ceilings, spacious patio, rare side yard & more. Large master bedroom/bathroom w/ sep. tub & shower. New carpet, fresh paint, plantation shutters. End unit, so feels like detached for attached price! Excellent, private location with attached 2-car garage. Pools, spas, sports courts, walking/bike paths – come enjoy the best Irvine has to offer in this guard-gated, private Northpark townhouse”

I am surprised this unit wasn’t listed as having “custom paint.” I actually like the colors, but I could see how some might not.

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If this seller gets their asking price, they will lose $87,400 after a 6% commission. This unit has been on the market for over 30 days, so it doesn’t appear they are fielding multiple offers over the ask. In short, they will not get their asking price, and they will lose more money.

Asking Price: $545,000

Purchase Price: $550,000

Purchase Date: 4/29/2005

Address: 17 Burlingame, Irvine, CA 92602

Beds: 2

Baths: 2.5

Sq. Ft.: 1,475

$/Sq. Ft.: $369

Lot Size: –

Year Built: 2000

Stories: 2

Type: Condominium

View: Other

County: Orange

Neighborhood: Northpark

MLS#: S495748

Status: Active

On Redfin: 17 days

From Redfin, “Model Perfect With A Large Wrap Around Yard. view Of City Lights, Priva te & Cozy. Highly Upgraded W/ hardwood Floors, Shutters, Custom Paint, ceramic Tile And More. Unique Floor Plan Offering A Full Suite Downstaris With Full Bath And Walk-in. Master Upstairs , Open Living And Dining, Cute Balcony This Is Your Buyers Dream Home. Prestigeous Guard Gated Community Of Northpark. “

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If this seller gets their asking price, they will lose $37,700 after a 6% commission.

With falling home prices, I think we can safely say that for the housing ATM, the game is over.

Like the beautiful image of a Sconset sunset from Nantucket Island shown above, the sun is setting on the Southern California housing bubble. Peoples dreams of endless appreciation and instant riches are slowly wasting away into the silent summer sky.

Asking Price: $629,999

Purchase Price: $780,000

Purchase Date: 5/18/2006

Address: 51 Sconset Lane, Irvine, CA 92620

Beds: 3

Baths: 2.5

Sq. Ft.: 2,000

$/Sq. Ft.: $315

Lot Size: –

Year Built: 2000

Stories: 2

Type: Single Family Residence

County: Orange

Neighborhood: Northwood

MLS#: S497195

Status: Active

On Redfin: 5 days

From Redfin, “This is a great 3 bedroom , loft and 2.5 bath Cottage Style home in No rthwood pointe. Open light floorplan w tile floors on the first level. Gormet kitchen with tile counters and custom backsplash. Check out the master bath!Private yard is perfect for entertaining. “

What is a gormet? Another realtor that gets excited about bathrooms. What would Freud say?

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When I first profiled a property in this neighborhood (The English Garden) I said it is one of my favorites in Irvine. When I first discovered this little enclave, there was a house for sale on this same street for $875,000. It was about the same size but with one more bedroom. How times have changed.

This is one of the most extreme price reductions I have seen to date. I actually admire this seller for accepting the reality of life and setting the price to a level which will sell in this market. Assuming a 6% sales commission, this seller stands to lose $187,800 in just over one year. Think about that for a moment…

I have speculated we will see prices 40% to 50% off the peak in Irvine. Here we are early in the decline, and we have a property selling for 20% off peak pricing. Does that make you believe in a more serious decline as I have speculated, or are you of the opinion this is as bad as it gets?

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I would like to offer a special thanks to Rockysan99 for pointing out this property

Sometimes you come across a listing where something just isn’t right.

Redfin Asking Price: $999,000

Zip Realty Asking Price: $1,213,000

Purchase Price: $1,300,000

Purchase Date: 10/31/2006

Address: 11 Santa Rida, Irvine, CA 92606

Beds: 5

Baths: 3

Sq. Ft.: 2,420

$/Sq. Ft.: $413

Lot Size: –

Year Built: 1997

Stories: 2

Type: Single Family Residence

County: Orange

Neighborhood: Westpark

MLS#: P582566

Status: Active

On Redfin: 33 days

From Redfin, “Rare opportunity for those Buyers with no credit. This beautiful home on a quiet cul-de-sac shows better than a model home. Mr. clean lives here, great marble flooring, too many upgrades to mention. no need to preview. “

There are two statements in this description that are setting off alarms in my head.

1. Rare opportunity for those Buyers with no credit.
2. no need to preview.

How does someone with no credit afford a $999,999 home? My first thought is this must be a fraud scam, but when you see a $300,001 loss based on asking price, that scenario makes no sense. Perhaps the price is a teaser to generate interest and if they find a straw buyer the purchase price will suddenly be raised $500,000?

No need to preview? Is this a realtor note trying to assure another realtor of the quality? Wouldn’t a realtor want to preview it anyway (or are they that lazy?) If you were the realtor, and you had this great listing, wouldn’t you want everyone to see it to generate excitement and hopefully a sale? If this is a note to a potential buyer, I would be very worried. What is it they don’t want me to see? Why no pictures after 30 days? Is there something to hide?

Why the quick sale? This seller just purchased the property 8 months ago. I would consider them a flipper or knife-catcher if they were trying to sell at a profit, but they are looking at a big loss. What is going on?

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Let’s assume for a moment this is a legitimate listing. If so, this seller is going to lose a huge sum of money. At current asking price minus a 6% commission, this seller will lose $ 360,940. Ouch!

I guess Mr. Clean wanted to clean out his bank account. He won’t be doing any favors for the other sellers in Westpark. This is another comp killer.

Part of the bearish argument for a dramatic drop in prices is predicated on an infusion of “must sell” inventory to the housing market. Sellers won’t sell at a loss unless they have no choice. This is why prices generally are sticky in a housing market decline.

Foreclosures and short sales are by their nature must-sell inventory. For this must-sell inventory to be forced onto the market people must be unable or unwilling to make the payments on their mortgage. The “unable” part will come from reseting ARMs with higher interest rates; the “unwilling” part will come from people walking away from 100% financing deals when market prices do not continue to rise.

It is this latter category of unwilling homedebtors that is unusual in this market. In previous bubbles, lenders were not so stupid as to offer 100% financing, so there were not as many people who utilized “jingle mail” as they went underwater. It is my opinion that jingle mail will be epidemic as this bubble unwinds.

Today’s property is a typical short sale. The seller overpaid with 100% financing and now is going to walk away.

Asking Price: $390,000

Purchase Price: $410,000

Purchase Date: 3/20/2006

Prior Purchase or Refi: 10/17/2005 — $405,000

Prior Purchase or Refi: 6/3/2005 — $395,000

Address: 10 Van Buren, Irvine, CA 92620

Beds: 2

Baths: 2

Sq. Ft.: –

Lot Size: –

Year Built: 1987

Stories: 1

Type: Condominium

County: Orange

Neighborhood: Northwood

MLS#: P579283

Status: Active

On Redfin: 53 days

From Redfin, “Lower Unit w/ Front Patio. 2 Bedroom, 2 Bath CONDO. Great Opportunity for First Time Buyers. This is a SHORT-SALE. Sales Price, Terms, Conditions Subjet To Lenders approval of Short Sale. Very clean Unit includes, Range, Microwave, Dishwasher.”

Did you spot the misspelled word?

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The bank is going to lose money. Depending on how much commission they pay (they don’t like to pay 6%) and how much more this unit is discounted, they stand to lose between $20,000 and $80,000. I would guess it will be closer to the bigger number.

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(I GOT SPURS) JINGLE JANGLE JINGLE

Kay Kyser

– words by Frank Loesser, music by Joseph J. Lilley

I got keys that jingle, jangle, jingle

As I go ridin’ merrily along

And they sing, “Oh, ain’t you glad you’re single”

And that song ain’t so very far from wrong

Link to amateur singing Jingle Jangle Jingle