Money’s Too Tight to Mention — Simply Red

Everyone was livin’ large with all that HELOC money coming in. Now that the housing ATM has been shut off, money is too tight to mention.

Asking Price: $549,900

Income Requirement: $137,475

Downpayment Needed: $109,980

Lender Purchase Price: $459,200

Lender Purchase Date: 3/12/2008

FB Purchase Price: $649,500

FB Purchase Date: 12/28/2006

Address: 37 Olivehurst, Irvine, CA 92602

Did you notice the pergraniteel?

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I find it interesting that this property went for $459,200 at auction. The flippers wouldn’t even step up to buy it. I also think it is interesting that the lenders have modified their loss mitigation procedures and are no longer automatically bidding the amount of the first mortgage. They appear to be letting these go at 10%-15% discounts off the first — if someone will take it. I suppose it is better to take the 10%-15% loss than deal with a larger loss on REO. The owners who lost the property put $129,900 down, unless their is a 2nd that doesn’t show in Sitex. Despite the hefty downpayment, this went into foreclosure in just over 14 months. They could not have made too many payments before opting to let it go back to the bank. If the bank can get their asking price, they won’t lose any money, but it doesn’t seem likely they will get a quick sale on this one given how low it went at auction. We will see.

Have any of you noticed signs of a slowdown in our local economy? Do you have any stories for us?

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I been laid off from work my rent is due
My kids all need brand new shoes
So I went to the bank to see what they could do
They said son looks like bad luck got a hold on you

Moneys too tight to mention
Oh money money money money
Moneys too tight to mention
I cant even qualify for my pension

Money’s Too Tight to Mention — Simply Red

The Ballad of Gilligan’s Island — George Wyle and Sherwood Shwartz

Would you like to get stranded on Alicante Isle? (I know it is spelled Aisle and it means something else, but just go with it.) People buying properties as flips during the down cycle are betting on the return of the market. There is no shortage of ignorant prognostications of the bottom, and if flippers are foolish enough to believe them, then they deserve to become bagholders. If flippers and lenders became the bagholders for the decline, Karma would be delivering its comeuppance. Flippers hope to get in and out of a property quickly, and like the passengers on the US Minnow who thought they were going on a 3 hour tour, getting off the island will likely take much longer than planned. They end up stranded in a condo searching desperately for a way to get out. The market will eventually rescue them. The castaways of Gilligan’s Island were only trapped for 4 years until the series was mercifully cancelled. The flipper who gets trapped in today’s featured property will likely be there much longer.

Asking Price: $322,000

Income Requirement: $80,500

Downpayment Needed: $64,400

Lender Purchase Price: $349,000

Lender Purchase Date: 1/17/2008

FB Purchase Price: $440,000

FB Purchase Date: 5/6/2004

Address: 79 Alicante Aisle #64, Irvine, CA 92614

Carport adjacent to
unit? That is a plus…

light &
bright — This expression is like “nails on a chalkboard” for me, and it makes me think of a toy I had as a child.

Just eyeballing it, I would say we are back at 2003 prices.

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We are setting new records every day here. This property is being offered 27% off a 2004 price.

The buyer who got this property in May of 2004 put 10% down and used a 80/10 combo loan. The downpayment was lost during the foreclosure, and the second mortgage was wiped out as well. As you can see from the asking price, the first mortgage holder is just trying to get out with a minimal loss. If they get their asking price and pay a 6% commission, they stand to lose $46,320. Each of the three losers in this deal lost around $45K or 10% of the purchase price.

Have you noticed the lenders are getting more aggressive in unloading their properties? I received an email a few days ago from an REO liquidator who wishes to remain anonymous. He told me that some of the lenders are giving him many of their properties, and he is able to sell them at whatever price he wants. The lender literally does not care as long as it is a legitimate, arms-length transaction. The lenders have absolutely no concern for the neighborhood comps; their only concern is the liquidation of their REO inventory. It is a classic prisoner’s dilemma when it comes to these REOs. If the lenders all stick together, they can get better pricing, but the first one to cut pricing and sell out is going to get a better deal. The lenders selling right now are trying to get out before the market drops even farther. I am sure they are enjoying some of the bottom calling going on, but their actions show that they do not believe a word of it.

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Just sit right back and you’ll hear a tale,
A tale of a fateful trip
That started from this tropic port
Aboard this tiny ship.

The ship set ground on the shore of this uncharted desert isle
With Gilligan
The Skipper too,
The millionaire and his wife,
The movie star
The professor and Mary Ann,
Here on Gilligans Isle.

So join us here each week my freinds,
You’re sure to get a smile,
From seven stranded castways,
Here on “Gilligan’s Isle.”

The Ballad of Gilligan’s Island — George Wyle and Sherwood Shwartz

Ghost Town — The Specials

Did you see the recent CNN article on Irvine, Welcome to subprime’s ghost town? How about the post at Calculated Risk on the See-through buildings – reminiscent of the ’80s. The Business Week article The Other Orange County about the boom town gone bust? We are becoming the center of attention as the housing bubble deflates because the activities here were largely responsible for inflating it. Are we reaping what we sowed? The rest of the nation seems to think so…

Today’s featured property was featured before back in November of 2007. It is back now as REO. Last year it was offered as a short sale for $529,000. Anyone who thought about buying that one will be happy they didn’t. Now it is for sale for $459,900.

Asking Price: $459,900

Income Requirement: $114,975

Downpayment Needed: $91,980

Lender Purchase Price: $535,500

Lender Purchase Date: 1/28/2008

FB Purchase Price: $567,500

FB Purchase Date: 12/29/2004

Address: 109 Reunion, Irvine, CA 92603

When I see ALL CAPS, my eyes glaze over and I don’t even want to read it. I force myself to only for the blog.

THIS IS A TWO BEDROOM TWO BATHROOM CONDO THAT
PRESENTS WHAT AN UPSCALE HOME SHOULD BE. WTF? When did two bedroom condos start representing upscale living? This is one of the more ridiculous statements I have seen a realtor make in a while.

START LIVING THE ORANGE COUNTY
LIFESTYLE TODAY. Has anyone else noticed this statement appearing in REO descriptions lately?

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The owners in Quail Hell are underwater. This comp is being offered for 20% off its 2004 purchase price which is the new value in the neighborhood. I know, not all of Quail Hill can be valued by this one comp; I am sure some neighborhoods are “different.” At least that is what residents will be telling themselves.

This was a 100% financing deal (aren’t they all?) Countrywide originated the refi that went into delinquency and foreclosure. Some bagholder represented by the Bank of New York is going to lose some money. If this property sells for it asking price and if there is a 6% commission, the bagholders stand to lose $135,194. Not a big loss by Irvine standards. That is rather amazing when you think about it. We have been watching this for so long that a loss of less than $200,000 hardly seems worth noting. $135,194 is a lot of money. These bankers could have gone and bought themselves a fancy sportscar instead of making this loan, and they would have been much better off.

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This town, is coming like a ghost town
All the clubs have been closed down
This place, is coming like a ghost town
Bands won’t play no more
too much fighting on the dance floor

This town, is coming like a ghost town
This town, is coming like a ghost town
This town, is coming like a ghost town
This town, is coming like a ghost town

Ghost Town — The Special

Water Runs Dry — Boys II Men

Don’t buy now. Just say no. Don’t let your downpayment wash away with the declining market. As Boys II Men say “We’ll make the biggest mistake of our lives. Don’t do it baby”

Today’s featured property is a major comp killer establishing a new low water mark in the Watermarke development. They developers of this property are geniuses. They started a high-end apartment complex just as the bubble was taking off, and being opportunistic, they decided to convert the properties to condos, and they made a fortune off the frenzied buying of the Great Housing Bubble. The property was purchased on May 18, 2005 for $367,500. It was flipped on July 3, 2006 for $435,000 right at the peak. The 2006 purchaser used 100% financing (big surprise,) with a $348,000 first and a $78,000 second. The property went REO on January 23, 2008 for $324,900. It appears as if the loans were originated by IndyMac. It was purchased by Deutsche Bank National Trust Company, and the Federal National Mortgage Association (Fannie Mae.) This is the first property I have seen where Fannie Mae has been on the hook. Fannie Mae is one of the Government Sponsored Entities (GSEs) that makes its money by insuring mortgages to facilitate transactions in the secondary mortgage market. Although the GSEs are explicitly not backed by the Federal Government, investors behave as if they are, and if they keep seeing huge losses like the one today, the Federal Government may step in to rescue these companies. If there is going to be a federal bailout, it will probably be caused by the collapse of one of the GSEs. Did you realize your tax dollars are implicitly backing the secondary mortgage market? They are…

Asking Price: $263,000

Income Requirement: $65,750

Downpayment Needed: $52,600

Monthly Equity Burn: $2,191

Purchase Price: $435,000

Purchase Date: 7/3/2006

Address: 3415 Watermarke Place, Irvine, CA 92612

Hurry, you don’t want to miss your chance to be trapped in a 635 sqaure foot apartment for the next several years…

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This unit is being offered for 40% off its peak purchase price. Let that sink in a moment… 40% off in Irvine… Who would have thought that was possible? Oh yeah, we would have…

I must admit, I did not think we would be seeing such large discounts so quickly, but then again, this property will probably fall further — who wants to own a tiny, one-bedroom apartment? An investor might, but a cashflow investor would want to see a positive cashflow, and considering the $290 a month dues, this property probably needs to fall to $125,000 to be a true cashflow investment.

If this property sells for its asking price (some knife-catcher will think this is a bargain) the total loss will be $187,780. That is the lender loss on a 635 SF condo. When we start seeing losses that large on properties that small, what will the losses on the larger properties look like? I hope Fannie Mae has some significant loss provisions set aside, or we will end up paying for it in the bailout.

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Wait
Don’t wait for the water
Wait
Don’t wait for the water

We don’t even talk anymore
And we don’t even know what we argue about
Don’t even say I love you no more
’cause saying how we feel is no longer allowed
Some people will work things out
And some just don’t know how to change

Now they can see the tears in our eyes
But we deny the pain that lies deep in our hearts
Well maybe that’s a pain we can’t hide
’cause everybody knows that we’re both torn apart
Why do we hurt each other
Why do we push love away

Water Runs Dry — Boys II Men

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Another day, another market crushing REO. I have to wonder when the knife catchers will start to realize there is a steady flow of these properties entering the market. It isn't like you need to buy this one because it is the only good deal in the market, and it isn't going to be the only one we will see in the future. In fact, as each one of these comes on the market, they lower the comps and cause a whole new wave of foreclosures as all the overextended homeowners in the area lose their ability to refinance. We are witnessing the first stage of the market's downward spiral.

Asking Price: $601,400

Income Requirement: $150,350

Downpayment Needed: $120,280

Monthly Equity Burn: $5,011

Lender Purchase Price: $625,338

Borrower Purchase Price: $745,000

Lender Purchase Date: 3/27/2008

Borrower Purchase Date: 11/30/2006

Address: 176 Vintage, Irvine, CA 92620

HOOME IS CLISE TO AL? What?

ALL CAPS?

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This property has an interesting history. It was first purchased from Pulte homes in May of 2005 for $650,000. The first owner obviously grossly overpaid, but they were fortunate enough to find the greater fool to buy this property for $745,000 on November 30, 2006. Even after commissions, this original buyer made $50,000 for holding the property just over a year. The second owner was not so fortunate. This owner put $149,000 down and lost it all. The bank purchased the property for $625,338 which appears to be the outstanding balance on the mortgage when the missed payments are added on. If the lender gets their asking price (some knife-catcher will probably step up,) they stand to lose about $60,000 after commissions. A relatively small loss by Irvine standards. Of course, the total loss on the property is over $200,000, but the buyer lost the majority of it. It wasn't a particularly successful flip. Also noteworthy is the asking price is a full 20% under the peak sales price. We are 20% off the peak and still falling…

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In my place, in my place

Yeah, how long must you wait for it?

In My Place — Coldplay