Category Archives: Short Sale

We Will Never Have Paris

Most buyers during the later stages of The Great Housing Bubble were buying the fantasy of ever-increasing home prices and unlimited wealth. Fancy cars, prestige, social status, and trips abroad were all part of the dream. It is not going to happen.

As a side rant, today’s post looks at the silliness of real estate pricing.

Today’s featured property is a Quail Hill short sale. Nothing special really. Just a typical example of grossly overpriced real estate that is still going to cause bank losses. Wait until prices really drop and see how much the banks are going to lose.

66 Duet ktichen

Asking Price: $465,425

Address: 66 Duet, Irvine, CA 92603

{book2}

Paris — Friendly Fire

One day we’re gonna live in Paris
I promise
I’m on it
When I’m bringing in the money

Oops! That isn’t going to happen, at least not through flipping real estate. We’ll always have Paris, right? Will the dreams survive? Should they? Many of those with kool-aid intoxicated fantasies of the riches they
were going to obtain from their houses are waking up to the sober
reality of the market.

When you see pictures of people in the Great Depression, you don’t see many happy faces. Perhaps some of this is selection bias of the authors and journalists of the time, but part of it is the underlying truth that depressions are depressing. The Great Depression was so difficult because it lasted so long. As one survivor put it, “The Depression wore you down. It aged you.”

“A man is not old until regrets take the place of dreams.” John Barrymore

Reality must be very unpleasant for your typical specuvestor. I am sure more prefer the comforting denial of beliefs such as: “prices will rebound when the economy picks up” or “this correction is only temporary” or “Irvine real estate has proven to be a good investment in the long term” or “we are closer to the bottom than to the top.” All of these false beliefs cause people to hold on to real estate that is draining all their cash each month and giving them nothing in return.

“I had a dream my life would be different from this hell I am living,
so different from what it seemed. Now life has killed the dream I
dreamed.” Victor Hugo

So how will we know when the housing bubble is behind us?

“An era can be said to end when its basic illusions are exhausted.” Arthur Miller

The dreams of the Great Housing Bubble will be summarily crushed when the market fully capitulates. The low end and fringe markets are capitulating now. Prices in many markets are down 50% or more. Owners there have abandoned all hope–and many have abandoned their properties. It is the high end areas where denial still abounds. It is there where the illusions are not yet exhausted.

Today’s featured property is a Quail Hill short sale. The lender is fishing for bids to get an idea what they will get for it after the foreclosure auction.

66 Duet ktichen

Asking Price: $465,425IrvineRenter

Income Requirement: $116,356

Downpayment Needed: $93,085

Monthly Equity Burn: $3,878

Purchase Price: $421,000

Purchase Date: 4/30/2004

Address: 66 Duet, Irvine, CA 92603

Beds: 2
Baths: 3
Sq. Ft.: 1,030
$/Sq. Ft.: $452
Lot Size:
Property Type: Condominium
Style: Spanish
Year Built: 2004
Stories: 2
Floor: 1
Area: Quail Hill
County: Orange
MLS#: P674408
Source: SoCalMLS
Status: Active
On Redfin: 1 day

New Listing (24 hours)

I can’t fault them for the brevity of their description…

{book3}

  • The owners of this property paid $421,000 on 4/30/2004. They used a $399,600 first mortgage, and a $21,400 downpayment.
  • On 9/21/2004, they refinanced with a $415,000 first mortgage and got most of their downpayment back.
  • On 8/28/2006 they obtained a HELOC for $150,000. They must have taken out this money, or the property would not be a short sale.
  • Total property debt is $565,000.
  • Total mortgage equity withdrawal is $165,400 including their downpayment.

If this property sells for its asking price, and if a 6% commission is paid, the lender stands to lose $127,500. Given that most properties like this one are selling below their 2004 purchase prices, it seems very unlikely that this property will sell for anything close to this asking price. Even in today’s market, they would be lucky to get $380,000 to $400,000.

Before I close today and for the week, I want to rant about asking prices. Not about how high they are, we already know that, but I want to rant about the specific values to which they are set.

In my study of sales and pricing (something I researched when I became a self-publisher), I found that most authors and experienced marketers believe there is a strong psychological impact on potential buyers from lowering leading digits. For example, pricing something at $9.99 will sell better than if you priced it at $10.00. There is no significant financial difference between the two, but there is a significant psychological one.

All one has to do is look at gas station pricing to see this effect in action. Gas prices are very elastic: in other words, people will seek out even a penny’s difference in price. Since gas is a low-priced commodity to begin with, gas stations have used the 9/10 of a cent pricing model to gain this psychological advantage without giving up significant revenue.

In the book pricing world, almost all books are priced with $0.95 at the end. Since a book costs a bit more than a gallon of gas, there is no need to try to get that last nickel. A five-cent discount on a $20 book is only 0.25% of the final sales price. It has psychological impact without having financial impact. However, since it is still a relatively inexpensive item, pricing it a $0.45 or some other amount below a dollar does not increase the psychological impact, but it does hurt the revenue from the sale. It is also very rare to see books priced at $0.99 at the end because people recognize that the discount is so small, that they round it up in their head. This reduces the psychological impact you are trying to achieve by pricing it below a dollar.

With that background, take a look at the ending digits of real estate prices. The best way to price real estate is to round to the nearest $1,000 (at least for prices at or above $200,000). A $1,000 discount on a $400,000 property is also 0.25% of the asking price. Plus, real estate is a negotiated item, not a fixed-price tagged item like you would find in a grocery store or on Amazon.com. To discount the price more than $1,000 from a $10,000 price break is to leave money on the table. To discount less than $1,000 is to reduce the psychological impact of the price reduction.

Also, in my opinion, to discount less than $1,000 on a piece of real estate signals to potential buyers that you are a greedy seller who is not likely to negotiate or make reasonable concessions to close the deal. I doubt I would bid on a property priced with $999 at the end like yesterday’s Love Shacks.

So where does that leave properties like today’s that have a number like $425 at the end? I haven’t a clue. This asking price looks like it came out of some guy’s calculator. It might be 85% of the outstanding loan balance or something like that. I would price this at $469,000 or $464,000, but not the bizarre number they have selected.

Another ridiculous practice is value range pricing. Chuck Ponzi over at Southern California Real Estate Bubble Crash wrote a post on this in early 2007. His rant on the subject is excellent, and I will not regurgitate it here. The one thing I would add is the arrogance a range pricing conveys to potential buyers. The whole idea that sellers will “entertain offers” between such-and-such price is borderline infuriating. As I buyer, I will tell you what you will “entertain.” You will entertain a price between your lowest offer and my highest bid. If you don’t find that “entertaining”, you can go pound sand. If you find my offer insulting, then I suggest you go pound sand even harder (It may help you release your frustrations). I can assure you, I do not give a sand if you are insulted. In fact, I will find it “entertaining”. Idiots.

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}

One day we’re gonna live in Paris
I promise
I’m on it
When I’m bringing in the money
I promise
I’m on it
I’m gonna take you out to club showcase
We’re gonna live it up
I promise
Just hold on a little more

And every night we’ll watch the stars
They’ll be out for us
They’ll be out for us
And every night, the city lights
They’ll be out for us
They’ll be out for us

One day we’re gonna live in Paris
I promise
I’m on it
I’ll find you that French boy,
You’ll find me that French girl
I promise
I’m on it

So go and pack your bags
For the long haul
We’re gonna lose ourselves
I promise
This time it’s you and me for evermore

Paris — Friendly Fire

More Free Money

HELOC abusers really had a good time during the bubble. The economic stimulus they provide becomes apparent now that it is gone.

Today’s featured property is a small condo in Deerfield that was drained of all its equity by the owner. The ATM is now closed.

329 Deerfield Ave kitchen 1 329 Deerfield Ave kitchen 2

Asking Price: $349,900

Address: 329 Deerfield, Ave #15, Irvine, CA 92606

Free Money — Patti Smith

Find a ticket, win a lottery,
Scoop the pearls up from the sea
Cash them in and buy you all the things you need.

I had a moment of jealousy this weekend, albeit a bit delayed. Let me explain.

On Saturday, my family and I went to the entertainment center on
Crown Valley Parkway and the 5. We were going to have a family lunch
there, but when we went up to El Torrito Grill,
it was a vacant shell. The restaurant had closed its doors. I looked
across the promenade, and the Versace Italian Restaurant was reduced to
a ghostly imprint on the wall where its signage used to be. We walked
past a number of vacant stores on our way out. The signs of the
recession were unmistakable.

Gross Domestic Product with and without the effect of Mortgage Equity Withdrawal

GDP with and without MEW

On Sunday, we all went to South Coast Plaza. It was a ghost town. I
had to remind myself that it was a weekend. As I reflected on what I
had seen at these two commercial districts, I thought back to how
crowded these same venues were during the housing bubble. I also
thought about all the HELOC abuse posts I have done on the IHB. The
connection between the borrowed money these people were spending and
the reduced economic activity seemed more tangible. I was witnessing an
economy without mortgage equity withdrawal, and it was not very
vibrant. In fact it was dead.

As I contemplated the strength of the connection between borrowed
money and our local economic prosperity, I began to think about all the
HELOC abusers who got to spend this free money. They are not paying any
of this money back. They are all walking from their responsibilities or
praying they can pass them off to someone else. It really was a party
on free money: a party I missed because I did not buy a home during the
frenzy.

Something crept in to my awareness. Something dark that I held deep
inside. There was a little voice in me who was crying out, “I WANT MY
FREE MONEY!” At that moment I felt jealousy toward all the HELOC
abusing spenders I had seen during the bubble. It was something that I
did not feel (or did not acknowledge) when the bubble was inflating.
Perhaps it was my ignorance to where the money was coming from, perhaps
it was my own spiritual training to feel joy for another’s good
fortune, or perhaps I simply suppressed my feelings. No matter the
reason for my lack of jealousy at the time, in that one instant on
Sunday, I realized that some part of me wanted that free money too.

Mortgage Equity Withdrawal 1991-2007

Mortgage Equity Withdrawal 1991-2006

The logical adult in me recognizes that this money was not free.
These people are paying with lowered credit scores, the emotional
fallout of losing their homes, and most difficult of all, the
adjustment to a lifestyle not fueled by free-money spending. I
certainly do not envy any of those circumstances, and anyone who took
out this free money and spent it has to deal with these realities.
However, the emotional child in me wants what he wants when he wants
it; he wants free money. I know because I heard this voice clearly on
Sunday.

I certainly have no regrets about not playing the free money game. I
would not trade places with any of those people who were spending
during the bubble who were conspicuously absent from the stores this
weekend. The hangover from their house party is quite debilitating.

{book}

One interesting phenomenon concerning people’s perception of real
estate is this ongoing connection to free money. In my opinion, there
is a widespread belief in our local culture that house prices are
temporarily depressed due to the economy, and as soon as the economy
recovers so will house prices. This is a faulty perception.

The reality is that house prices were temporarily inflated, and the
falling house prices are a return to value. True value was not the
pricing seen at the top of the bubble. We are not experiencing a
downward departure from value. When the economy recovers, it will serve
to stabilize prices at fundamental valuations, but the likelihood of a
quick rally back to bubble levels is pretty low — unless of course
lenders and investors want to give away a trillion dollars again.

Kool Aid Man

That is exactly what people either want to have happen or believe
will happen: lenders and investors are going to give away more free
money.

Psychology does not change overnight. The crashing house prices have
changed the psychology somewhat, but there are still enough kool-aid
intoxicated people out there to absorb the current inventory and keep
prices elevated far above fundamentals. There is only one real reason
anyone is buying right now: they believe prices have bottomed, and they
do not want to miss their chance at ownership — they want to make sure
they get access to that free money coming in the future.

There are always some people who buy because they want to provide
shelter for their family, but these are not the people dominating the
market. The declining prices have kept away the buyers looking for
quick appreciation, but it has not kept away the kool aid intoxicated
with a somewhat longer timeframe for ownership.

The psychology of buyers will change slowly as prices continue to
fall, but the lure of free money is very strong. Until those lingering
memories fade away, people will continue to buy to obtain it. Will the
lenders be willing to give out this free money again? Will the
government allow them to? I believe the answer on both counts is “no”.
Our banking system is insolvent because of this practice, so they will
be hesitant to do the stupid things that lost them so much money, and
now that the US taxpayer is on the hook for much of the losses, it
seems likely that politicians will regulate many of these practices out
of existence.

I have no doubt that California buyers would create a new bubble
full of free money handouts if given the chance. Let’s hope the lenders
and our government prevents it — at least until I buy a house, and I
can get some of that free money…

Today’s featured property was this owner’s personal piggy bank. She
would raid it periodically, and now that the piggy bank is empty, she
is unloading the property.

329 Deerfield Ave kitchen 1 329 Deerfield Ave kitchen 2

Asking Price: $349,900IrvineRenter

Income Requirement: $87,475

Downpayment Needed: $69,980

Monthly Equity Burn: $2,915

Purchase Price: $161,000

Purchase Date: 11/20/1989

Address: 329 Deerfield, Ave #15, Irvine, CA 92606

Beds: 2
Baths: 1
Sq. Ft.: 952
$/Sq. Ft.: $368
Lot Size:
Property Type: Condominium
Style: Cape Cod
Year Built: 1984
Stories: 1
Floor: 2
Area: Walnut
County: Orange
MLS#: P671994
Source: SoCalMLS
Status: Active
On Redfin: 9 days

You might find a REO or Short Sale for less, but you will not find a
home as meticulously maintained and with as many upgrades as this home
-at this price!! Some of the upgrades done within the last two and half
years are: Paint and carpet, energy efficient plantation shutters,
porcelain tile in the kitchen and bathroom, dishwasher and faucet in
kitchen, sinks and faucets in the bathroom, ac/heat unit and 50 gal.
water heater. You’ll also be happy to have a garden window in the
kitchen, washer/dryer hookup in closet, ceiling fan in dining area,
smooth ceilings, professionally installed alarm and fire system and a
garage. Off the master bedroom you will find a separate sink and vanity
in addition to the one full bath. All this plus a ‘pet friendly’
community. Who could ask for anything more?

At least they didn’t call this a gourmet kitchen. It looks more like an airplane galley.

Notice the $900 greed indicator in the asking price.

Redfin calls this a short sale, but based on what I see in the property records it isn’t. After years of HELOC abuse, it is close, and it may yet be a short sale, but as of today, it doesn’t appear to be one.

  • This property was purchased in the last bubble on 11/20/1989 for $161,000. The owner’s financing details on the original purchase are not available.
  • On 11/9/1999, there was a first mortgage for $158,150. This was probably a refinance once the property was no longer underwater from the first bubble.
  • On 4/8/2003, the first mortgage was refinanced for $216,000.
  • On 8/27/2004, the first mortgage was refinanced for $235,000.
  • On 8/2/2006, the first mortgage was refinanced for $280,000.
  • On 12/27/2006, the first mortgage was refinanced for $314,500.
  • On 1/22/2008, the first mortgage was refinanced for $317,500.

We can all speculate as to why this person needed the money or what she spent it on. Perhaps she developed a chronic illness as prices began to rise that required periodic visits to the housing ATM. Who knows? The fact is she took out the money because she could. It was made available to her, and she did not see any downside to spending it. Worst case scenario, she would just sell the property — which is what she is doing now. Hopefully, for her, someone will come along and pay her asking price and pay off her debts. It is too bad the ATM has shut off for her. I imagine her buyer thinks the ATM will start working for them soon enough.

{book}

Every night before I go to sleep
Find a ticket, win a lottery,
Scoop the pearls up from the sea
Cash them in and buy you all the things you need.

Every night before I rest my head
See those dollar bills go swirling ’round my bed.
I know they’re stolen, but I don’t feel bad.
I take that money, buy you things you never had.

Oh, baby, it would mean so much to me,
Oh, baby, to buy you all the things you need for free.
I’ll buy you a jet plane, baby,
Get you on a higher plane to a jet stream
And take you through the stratosphere
And check out the planets there and then take you down
Deep where it’s hot, hot in Arabia, babia, then cool, cold fields of snow
And we’ll roll, dream, roll, dream, roll, roll, dream, dream.
When we dream it, when we dream it, when we dream it,
We’ll dream it, dream it for free, free money,
Free money, free money, free money, free money, free money, free money.

Every night before I go to sleep
Find a ticket, win a lottery.
Every night before I rest my head
See those dollar bills go swirling ’round my bed.

Oh, baby, it would mean so much to me,
Baby, I know our troubles will be gone.
Oh, I know our troubles will be gone, goin’ gone
If we dream, dream, dream for free.
And when we dream it, when we dream it, when we dream it,
Let’s dream it, we’ll dream it for free, free money,
Free money, free money, free money,
Free money, free money, free money, free.


Free Money
— Patti Smith

Bamboo Hoo

Boo Hoo — Guy Lombardo and His Royal Canadians

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?

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

“Real estate always goes up, or so buyers are bamboozled into
believing by realtors. It only takes a few nervous neighbors to drive
down property values in an entire neighborhood. Comps are set at the
fringes where the transactions take place.”

Remember when prices used to look like that? Pay careful attention to that last listing as it is also today’s featured property.

{book}

In the second post from September of 2007, I had this observation:

“Another neighborhood showing increased listings and more racing to find the bottom is Northwood II.

Northwood II

Like all the new neighborhoods in Irvine, this one is populated by
specuvestors who are starting to realize they made a terrible mistake.
The homes priced in the $750K to $950K range, so these are not the
small condos we are seeing struggle everywhere else. This is the first
sign of fear spreading from the low-end of the market to the move-up
SFD market.”

So what is going on there now?

CrybabyToday, there is 1 bank owned property, 4 scheduled auctions, and 5 in pre-foreclosure. There are also 15 homes offered for sale on Redfin (some of which are also one of the aforementioned categories). This is not a big neighborhood, and there has already been a lot of turnover from original owners selling out.

Perhaps it is just my perception, but I always saw this neighborhood as being full of speculators and flippers. I feel sadder for many of the young families that bought into Woodbury who were just starting out. The homes in Northwood II are generally larger, move-up homes. So for all the speculators and flippers who are getting burned, I proffer my phony boo hoo for you.

While we are taking a trip down memory lane, I came across this post from 2007. It is a letter to the editor at the OC Register from a realtor who just lost over $100,000 on a flip in Irvine. For people who want to understand why I often do not have the best opinion of realtors, you need to read what this guy wrote. Besides, in historical context, it is hilarious.

64 Bamboo front 64 Bamboo kitchen

Asking Price: $780,000IrvineRenter

Income Requirement: $195,000

Downpayment Needed: $156,000

Monthly Equity Burn: $6,500

Purchase Price: $950,000

Purchase Date: 11/16/2004

Address: 64 Bamboo, Irvine, CA 92620

Beds: 4
Baths: 3
Sq. Ft.: 2,460
$/Sq. Ft.: $317
Lot Size: 3,970

Sq. Ft.

Property Type: Single Family Residence
Style: Contemporary
Year Built: 2004
Stories: 2
Area: Northwood
County: Orange
MLS#: S560596
Source: SoCalMLS
Status: Active
On Redfin: 2 days

Move in condition home with over $100,000 in upgrades. Great cul-de-sac
location with full driveway. Custom granite counters in kitchen with
stainless steel appliances. Plantation shutters, built-in entertainment
center. Fourth room/loft is currently used as a gym on the second
floor.Additional office space on the second floor. Cozy fireplace in
living room. Hardwood floors. This gorgeous home is located in the
gated community of Northwood II. Association offers pool, spa, BBQ.
Home is located in the with in walking distance of shopping and
restaurants. Located in the Northwood high school district.

Move in condition? As opposed to trashed out in foreclosure…

This property was purchased on 11/16/2004 for $950,000. The owner used a $758,450 Option ARM first mortgage with a 3.94% teaser rate and a $191,550 downpayment. The guy first tried to sell this place in early 2007 when he was asking $1,049,900. Notice the extra $900 on the end? That is my greed indicator. Notice his current price doesn’t have this $900 added to it. That is a sign of capitulation.

If this property sells for its current asking price, and if a 6% commission is paid, the total loss would be $216,800. In all likelihood this is a short sale. The $191,550 downpayment is gone.

This property is being offered for 18% off its 2004 purchase price. It was new in 2004.

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.

🙂

{book}

Nobody Wants This One

Gotta Be Somebody — Nickelback

Cause nobody wants to be the last one there

It must be very difficult to sell a really undesirable property. It must be very difficult to admit to yourself that you are the bagholder. You were the greater fool. You were the one who paid a King’s Ransom for a piece of crap nobody else wants. This is even more difficult when it is a short sale, and the lender is not willing to lower the price enough for you to sell it. The reality of your folly must be hard to ignore when you can’t get rid of it.

Today’s featured property is a large home on a big lot in Irvine. One would think this combination would be an easy sell. Apparently it is not.

You have to love this realtor comment: “Needs some TLC such as carpet, paint (inside & out),remodeling, landscaping, etc., but very nice neighborhood.”

Translation, “OMG, this is a POS. Well, it is in Irvine…”

Asking Price: $599,900IrvineRenter

Income Requirement: $149,975

Downpayment Needed: $119,980

Monthly Equity Burn: $5,000

Purchase Price: $760,000

Purchase Date: 5/13/2005

Address: 3671 Claremont St., Irvine, CA 92614

Beds: 5
Baths: 3
Sq. Ft.: 2,533
$/Sq. Ft.: $237
Lot Size: 5,100

Sq. Ft.

Property Type: Single Family Residence
Style: Contemporary
Year Built: 1969
Stories: 2
Area: Westpark
County: Orange
MLS#: S528724
Source: SoCalMLS
Status: Active
On Redfin: 277 days

Unsold in 90+ days

Fixer-upper

Westpark Home in nice neighborhood. Needs some TLC such as carpet,
paint (inside & out),remodeling, landscaping, etc., but very nice
neighborhood.

So let me get this straight: This house is a trashed and needs to be completely done over inside and out. Before I can even begin, I have to spend $600,000. I will need a $120,000 downpayment, plus cash reserves, plus another $100,000 to fix the place up. When I am done, I will be out-of-pocket over $220,000 cash, I will have a $480,000 mortgage, and I will have a 40-year old property in Irvine that will be worth less than my mortgage in two years.

WHAT A DEAL!!!

The property records on this house are incomplete. There are a number of people listed as buyers who never took possession. It is difficult to ascertain what is going on or how much is owed. There is a recorded mortgage for $608,000 which may explain why the $600,000 price threshold has been so sticky with this seller. Check out this listing history:

Date Event Price Appreciation Source
Jan 14, 2009 Price Changed $599,900 SoCalMLS #S528724
Jan 07, 2009 Price Changed $625,000 SoCalMLS #S528724
Jan 07, 2009 Relisted SoCalMLS #S528724
Jan 07, 2009 Off Redfin SoCalMLS #S528724
Oct 26, 2008 Price Changed $599,900 SoCalMLS #S528724
Oct 22, 2008 Relisted SoCalMLS #S528724
Sep 23, 2008 Price Changed $597,500 SoCalMLS #S528724
Aug 05, 2008 Price Changed $610,000 SoCalMLS #S528724
Jul 01, 2008 Price Changed $629,900 SoCalMLS #S528724
Jul 01, 2008 Relisted SoCalMLS #S528724
Jun 09, 2008 Off Redfin SoCalMLS #S528724
Jun 03, 2008 Relisted SoCalMLS #S528724
Apr 21, 2008 Off Redfin SoCalMLS #S528724
Apr 13, 2008 Listed $670,000 SoCalMLS #S528724
May 13, 2005 Sold $760,000 Public Records

It is not clear whether or not this is a short sale. It may be that the $600,000 price is necessary to prevent a short sale. It appears as if the market is saying this isn’t low enough. Given this property’s state of repair, further price reductions are going to be necessary to sell it.

So let me hear some creative solutions to this problem: You have an undesirable property you need to sell, but you can’t reduce your price. If anyone can solve this dilemma, there are several million sellers out there waiting to hear from you…

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.

🙂

{book}

This time, I wonder what it feels like
To find the one in this life, the one we all dream of
But dreams just aren’t enough
So I’ll be waiting for the real thing, I’ll know it by the feeling
The moment when we’re meeting, will play out like a scene
Straight off the silver screen
So I’ll be holding my own breath, right up ’til the end
Until that moment when, I find the one that I’ll spend forever with
Nickelback
Cause nobody wants to be the last one there
Cause everyone wants to feel like someone cares
Someone to love with my life in their hands
There’s gotta be somebody for me like that
Cause nobody wants to do it on their own
And everyone wants to know they’re not alone
There’s somebody else that feels the same somewhere
There’s gotta be somebody for me out there

Tonight, out on the street, out in the moonlight
And dammit this feels too right, it’s just like deja vu
Me standing here with you
So I’ll be holding my own breath, could this be the end
Is it that moment when, I find the one that I’ll spend forever with

Cause nobody wants to be the last one there
Cause everyone wants to feel like someone cares
Someone to love with my life in their hands
There’s gotta be somebody for me like that
Cause nobody wants to do it on their own
And everyone wants to know they’re not alone
There’s somebody else that feels the same somewhere
There’s gotta be somebody for me out there

Gotta Be Somebody — Nickelback

We've Only Just Begun

We’ve Only Just Begun — The Carpenters

{book}

The truth about real estate is that most people will buy and sell due to life’s circumstances. If a family wants to own a home for stability and security because they have small children or if a baby is on the way, they are not concerned with whether or not they are properly timing the real estate cycle. Unfortunately, the real estate cycle moves independantly of our life cycle.

We’ve only just begun to live,
White lace and promises
A kiss for luck and we’re on our way.

The innocent people who got caught up in the housing bubble — and there are many buyers who were not motivated by greed — are paying an hefty price for their own bad timing. Look at what a difference a few years makes.

Let’s say you graduated college in 1994. You were probably a bit bummed because the California economy was not doing that well, but if you found a job, you could begin your life. People in that circumstance might have been ready for marriage shortly thereafter, and they probably bought a house between 1997 and 2000. These people, assuming they did not abuse their HELOCs, are not going to lose their homes in foreclosure.

Now look at the circumstances of someone who graduated in 2001. They should not have been ready to buy until perhaps 2008, but with innovations in home mortgage finance, they were able to enter the real estate market early. They were “pulled forward” into 2004, 2005 or 2006. These are not real estate experts (although some probably thought they were), they are just 20-somethings who were given an opportunity to own a home with little sacrifice or saving on their part. Why would they have turned this opportunity down?

Well, the people who were graduating in 1994 are doing OK whereas those who graduated in 2001 or later are totally screwed.

Is this right? Should the real estate cycle really be allowed to have such a capricious impact on people’s lives? Does anyone think this system works?

The housing bubble is having an enormous impact on the health of individuals, families and entire
communities. As
with any mass delusion, it is difficult to see beyond the comforting
fallacies to understand the deeper truth; however, it is essential to
do so because the cost in emotional and financial terms of getting
caught up in the mania is very high. Foreclosure and bankruptcy are bad
for individuals, bad for families, and bad for society.

So much of life ahead
We’ll find a place where there’s room to grow,

When I saw the listing photos for today’s featured property, I couldn’t help but feel compassion for the innocent. (Do you think this means I have emptied my Reservoir of Schadenfreude?) When you see the first photo, your eye cannot help but be draw to the wedding photo on the wall over the fireplace (followed by the bottle on the counter…) Then when you see the kitchen photo, you see all the pictures on the refrigerator. There is another photo with a picture of the happy couple near the TV. (This is horrible staging, BTW).

This couple, this family, is watching their future get destroyed by the housing bubble.

Now before we break out the violins, this was a 100% financing deal, and they owners are not losing any of their money, but their dreams of climbing the property ladder are gone, their credit score will plummet, and they will be shut out of the housing market for the foreseeable future. All because their life cycle lead them to buy at the worst possible time in the housing cycle.

2206 Apricot Dr Living Room 2206 Apricot Dr Kitchen

Asking Price: $274,999IrvineRenter

Income Requirement: $68,750

Downpayment Needed: $55,000

Monthly Equity Burn: $2,291

Purchase Price: $389,000

Purchase Date: 6/21/2006

Address: 2206 Apricot Dr #206, Irvine, CA 92618

Beds: 2
Baths: 2
Sq. Ft.: 910
$/Sq. Ft.: $302
Lot Size:
Property Type: Condominium
Style: Contemporary/Modern
Year Built: 1979
Stories: 1
Floor: 1
View: Mountain, Pool
Area: Orangetree
County: Orange
MLS#: S559747
Source: SoCalMLS
Status: Active
On Redfin: 1 day

New Listing (24 hours)

Single level condo on 2nd floor with elevator access. 2 Bedroom and 2
Bath condo with Patio/Balcony out Master and Dining Area. Open floor
plan. Fireplace in Living area. Close to shopping and Freeway. Secured
building. Elevator and intercom. Handicap access. HOA provides water,
gas, trash, maintenance, pool spa, lit tennis courts, basketball court
and tot lot.

This property was purchased on 6/21/2006, right at the peak of the bubble. The owner used a $311,200 first mortgage, a $77,800 second mortgage, and a $0 downpayment. If this property sells for its asking price, the lender stands to lose $130,500 after a 6% commission. BTW, most of this loss was a second mortgage insured by the GSEs. In other words, you and I will be paying for this loss with tax dollars.

So how do you feel about this now? Are these people predatory borrowers betting on appreciation? Were they innocent victims just trying to live their lives? Are they something in between?

{book}

We’ve only just begun to live,
White lace and promises
A kiss for luck and we’re on our way.
And yes, We’ve just begun.

Before the rising sun we fly,
So many roads to choose
We start our walking and learn to run.
And yes, We’ve just begun.

Sharing horizons that are new to us,
Watching the signs along the way,
Talking it over just the two of us,
Working together day to day
Together.

And when the evening comes we smile,
So much of life ahead
We’ll find a place where there’s room to grow,
And yes, We’ve just begun.

We’ve Only Just Begun — The Carpenter