Market distress is clearly working its way up the market strata. Today’s featured property is a Northwood II 4/4 asking $285/SF.

Asking Price: $680,000

Address: 34 Bombay, Irvine, CA 92620

{book3}

S.O.S. — Dr. Bombay

We lived outside Calcutta in a little wooden house
I lived there with my family and 21 cows
But now they all are gone and life is not so fun
But what can you expect here in Tigerland

One of the first new communities in Irvine to start showing stress
as prices weakened was Northwood II. I first profiled the abundance of
listings in this small neighborhood back in March of 2007 in the post Bamboozled. I have also featured this neighborhood in Is fear gripping the market?, Bombs Away, and Bamboo Hoo. There is even a thread in our forums devoted to the observation that The gated Northwood II is getting killed.

In the first post, Bamboozled, I had this little chart:

Remember when prices used to look like that?

Toxic financing has already begun wiping out owners in this tract. At this point, only those who put more than 25% down are above water; every other homeowner in Northwood II is currently underwater.

Well, some are getting out. With little or no chance of appreciation–appreciation is why most of them bought here–there isn’t much point in continuing to pay the bloated mortgage on these properties, so the owners are bailing out.

There is plenty of distress in this neighborhood to go around. Check out these properties:

Asking Price: $680,000

Income Requirement: $170,000

Downpayment Needed: $136,000

Monthly Equity Burn: $5,666

Purchase Price: $789,000

Purchase Date: 9/29/2004

Address: 34 Bombay, Irvine, CA 92620

How many times must I comment on the three exclamation point nonsense before realtors stop doing it? Let me put this in language every realtor understands: THREE EXCLAMATION POINTS MAKES YOU LOOK AMATEURISH!!!

The first 80% of this description is fine, then it concluded with “downstair, and much much more!!! A must must
see!!!” A misspelled word followed by realtorese and exclamation points. Stop! Please!

• This property was purchase on 9/29/2004 for $789,000. The owner used a $630,848 first mortgage and a $158,152 downpayment.
• On 1/25/2005 he refinanced the first mortgage with a $636,600 Option ARM with a 1% teaser rate and opened a HELOC for $78,850.
• On 3/14/2005 he opened a HELOC for $150,000 and got out his downpayment.
• On 2/21/2006 he refinanced the first mortage with a $792,000 Option ARM with a 1% teaser rate.
• On 3/9/2006 he opened a HELOC for $100,000.
• Total property debt is $892,000 plus negative amortization.
• Total mortgage equity withdrawal is $255,400 including his downpayment.

If this property sells for its current asking price, and if a 6% commission is paid, the total loss to the lender will be $252,800 plus negative amortization.

{book4}

I live in Tigerland I’m an indiana man
I’m used to walk around with a snake in my hand
Dr Bombay is my name and my father has the same
But everything it changed here in Tigerland

We lived outside Calcutta in a little wooden house
I lived there with my family and 21 cows
But now they all are gone and life is not so fun
But what can you expect here in Tigerland

S.O.S. — Dr. Bombay

There has been an upwelling of bearish sentiment lately, justifiably so. Rents are dropping, unemployment is rising, and foreclosures are increasing: macroeconomic forces are working against the market. So it makes me wonder, “Could it really get that bad?”

Asking Price: $599,900

Address: 8 Safeguard Place, Irvine, CA 92602

{book7}

Holiday Road — Lindsey Buckingham

Jack be nible, Jack be quick
Take a ride on a West Coast kick

Two years ago, I wondered How Bad Could Bad Get? So far I have noted that I Was Wrong, It’s Worse than my original Predictions for the Irvine Housing Market. Since then, even the professional economists have been jumping on the bearish bandwagon.

Our little bear rally is being precipitated by artificial government stimulus and a lack of inventory due to the artificial constraint on supply from the foreclosure moratorium. Notice the key word “artificial” was used twice to describe how both the supply and the demand is being manipulated. These manipulations will both end and fail, but probably not before bringing a new round of knife catchers into the market over the next couple of months.

Ignoring the short term manipulations and returning to the long-term relationship between prices and fundamental valuations, it is apparent that prices must still fall. The only real question is by how much, and when will it stop. The chart below is from my worst-case scenario two years ago. The question of the day is, “Could it really get that bad?”

Market Decline Extreme Spreadsheet

Asking Price: $599,900

Income Requirement: $149,975

Downpayment Needed: $119,980

Monthly Equity Burn: $5,000

Purchase Price: $810,000

Purchase Date: 4/25/2006

Address: 8 Safeguard Place, Irvine, CA 92602

This property was purchased on 4/25/2006 for $810,000. The owners used a $648,000 first mortgage, a $121,500 second mortgage, and a $40,500 downpayment. If this property sells for its current asking price, and if a 6% commission is paid, the total loss on the property will be $246,094. Another day, another quarter million dollar loss in Irvine.

I hope you have enjoyed this week at the Irvine Housing Blog. Come back next week as we
continue chronicling ‘the seventh circle of real estate hell.’ Have a great weekend.

🙂

{book6}

I found out long ago
It’s a long way down the Holiday Road

Holiday Road
Holiday Road
Holiday Road
Holiday Road

Holiday Road — Lindsey Buckingham

The way Irvine was planned, there are residential properties very close to the freeways. How much of a discount would you require to live on the 5?

Asking Price: $650,000

Address: 28 Nebraska, Irvine, CA 92606

Keep On Movin’ — Five

Get on up when youre down
Baby, take a good look around
I know its not much, but its okay
Keep on moving anyway

Before you can answer the question of the day, you need to see just how close to the 5 this house really is. The wall in the picture and the street out front is the only thing separating this property from the freeway. Check out the images below:

I found an interesting website that discusses the effects of freeway pollution on health. I found the following on that site:

“The majority of studies show that health effects begin along roadways that carry 20,000 or more vehicles per day, and are strongest for persons who live, work or go to school within about 3 football fields from the edge of a freeway….

Why is freeway pollution bad?

More than 100 major studies have been published over the last decade documenting the relationship between freeway pollution and health. These are some of the findings:

* Children who lived within 200 meters of a high-traffic roadway were nearly two times more likely to be hospitalized for asthma than similar children who lived further away from traffic (Lin et al., 2002).
* Cough during the first year of life correlated strongly with the level of vehicle-related air pollution measured in front of the child’s home (Gehring et al., 2002).
* Children exposed to higher levels of traffic-related pollution before the age of 3 were more than two times more likely to develop asthma than similar children exposed to lower levels of traffic pollution (Zmirou et al., 2004).
* Pregnant women who lived close to high-traffic roadways during pregnancy were more likely to give birth prematurely or have a low-weight baby, putting the child at risk for health problems in life (Wilhelm and Ritz, 2003)
* Increasing residential exposure to particulate pollution from roadway traffic was strongly associated with an increased risk of being admitted to a hospital for heart problems (Janssen et al., 2002).
* Adults who lived within 200 meters of a busy roadway were 7 percent more likely to die from a stroke than those who lived further from the roadway (Maheswaran and Elliott, 2003).”

It doesn’t make you want to live by a freeway, does it?

People do live by freeways, and they will continue to do so. The real question is “how much does a property need to be discounted for you to live by a freeway?”

Asking Price: $650,000

Income Requirement: $130,000

Downpayment Needed: $162,500

Monthly Equity Burn: $5,416

Purchase Price: $850,000

Purchase Date: 11/10/2005

Address: 28 Nebraska, Irvine, CA 92606

home will not last long!! Do you feel the sense of urgency to buy, buy! BUY!!!

thru out

As you can see, this description has two of my favorite realtorspeak expressions: Turnkey and light and bright.

This property was purchased on 11/10/2005 for $850,000–almost a million dollars to live on a freeway. The owner used a $650,000 first mortgage, a $200,000 HELOC, and a $0 downpayment. If the house sells for its current asking price, and if a 6% commission is paid, the total loss to the lender will be $239,000. This property is being offered for 24% off its 2005 purchase price.

{book6}

Get on up when youre down
Baby, take a good look around
I know its not much, but its okay
Keep on moving anyway

Feels like I should be screaming
Trying to get it through to my friends
Sometimes it feels that life has no meaning
But I know things will be alright in the end

Keep On Movin’ — Five

Short sales are a market oddity. They are there, and you can see them, but yet they have no substance because you can’t buy one. Short sales constitute our Ghost Inventory.

Asking Price: $425,000

Address: 140 Talmadge, Irvine, CA 92602

{book4}

Ghosts — Ladytron

In the first days of the spring time
made you up and split from one thousand enemies
made a trail of, of a thousand tears
made you a prisoner inside your own secrecy

Back in February, I described short sales as Foreclosures-In-Waiting, and they are because very few short sales avoid foreclosure auction. They are technically listed as inventory, but since banks rarely approve short sales, it is as if they don’t exist.

Several local realtors have been attempting to apply techniques of measuring available inventory and sales velocity to compute time on the market. This is one of the least predictive and most useless indicators of market direction. It does provide some indication of whether or not buyers and sellers may currently have a market advantage in negotiation, but it does little else.

Currently the computation of inventory is distorted because short sales are counted, but they are not really there. It is currently much more of a seller’s market than what the time on the market would suggest. There is very little real inventory available right now, and what there is is mostly REO. A seller’s market does not mean that prices will rise, but the REO sellers that are in the market will not need to make as many concessions to sell the property. The non-REO sellers are priced above the market, and they are largely wasting their time.

The remaining inventory can be categorized by asking prices in two different strata: (1) the organic sales owners with WTF asking prices, and (2) REO priced to move. There are very few organic sales (defined as not being a short sale or REO), and there will not be many going forward. Sales volumes are still anemic by historical standards, and the volume that is occurring will not absorb the REOs entering the system. So despite the seller’s market, prices will go down. (Don’t take my word for it, check out Mr. Mortgage’s 2009 Upper-End Housing Market Outlook)

In the meantime, keep watching the short sale listings. They do not tell you much about the current market, but they speak volumes about where the market is going. The short sales you see advertised today will be REO in a year. There are plenty of short sales in the market right now, so the pipeline of REO will continue to flow.

Asking Price: $425,000

Income Requirement: $106,250

Downpayment Needed: $85,000

Monthly Equity Burn: $3,541

Purchase Price: $600,000

Purchase Date: 10/31/2006

Address: 140 Talmadge, Irvine, CA 92602

Beds:	2
Baths:	2
Sq. Ft.:	1,449
$/Sq. Ft.:	$293
Lot Size:	–
Property Type:	Condominium
Style:	Townhouse
Year Built:	2002
Stories:	2
Floor:	1
Area:	Northpark
County:	Orange
MLS#:	S557725
Source:	SoCalMLS
Status:	Active
On Redfin:	111 days
Unsold in 90+ days

Just as a rhetorical, philosophical question, “Can beauty be absolute?”

Why Is This In Title Case?

Staineless?

The realtor has a nice Mercedes with the custom rims. Why did he put it in this picture?

This property was purchased on 10/31/2006 (Halloween? Is that where the ghost theme came from?). The owner used a $480,000 first mortgage, a $120,000 second mortgage and a $0 downpayment. I doubt she cares much about the price given her investment.

If this property sells for its asking price, the total loss to the lender will be $200,500 after a 6% commission.

{book5}

In the first days of the spring time
made you up and split from one thousand enemies
made a trail of, of a thousand tears
made you a prisoner inside your own secrecy

There’s a ghost in me
who wants to say “I’m sorry”
Doesn’t mean I’m sorry.

Ghosts — Ladytron