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In retrospect, it is easy to see how many people who bought late in the bubble were chasing fool’s gold. The rainbow lead to a pot of gold for many, but many others have been left chasing the rainbow and wondering where their pot of gold lies. The map was easy to follow: you took out a large loan, waited a few months, then sold the property to someone else — the greater fool. The fool who was also chasing their fool’s gold. Everyone is still weighing out their gold as the rest of us watch them sink. The gold is always just around the corner, but in reality a breakdown is just around the bend. We all know where the market is going — down, down, down.

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I’m no clown I wont back down

Down down down down da down down down

I’m standing alone

Fools gold

These boots were made for walking

Breakdowns coming up round the bend

Sometimes you have to try to get along dear

I know the truth and I know what you’re thinking

Down down down down da down down down

Fools gold — Stone Roses

Today’s property demonstrates the distress of Woodbury. This property has been on the market for over a year, and the owners have managed to lower the asking price about 25%, and they still haven’t sold it. We have profiled this street in Woodbury before: here, here, here and here. Today’s seller is not the only failed flipper around.

Asking Price: $449,900

Income Requirement: $124,975

Downpayment Needed: $99,980

Monthly Equity Burn: $4,165

Purchase Price: $532,500

Purchase Date: 12/16/2005

Address: 124 Chantilly, Irvine, CA 92620

‘Pride of Ownership’ shows from the moment you enter from your own private courtyard. Your first floor has a ‘Great Room’ feeling with a gourmet kitchen, casual eating area and spacious living room with fireplace. Master suite with walk-in closet, secondary bedroom plus laundry area complete the second floor. Two car tandem garage features extra storage and has direct access. Sliding ‘hidden’ front door screen, wood window shades, security system are just a few of the upgrades.

‘Pride of Ownership’ — I am sure they are proud of the $100,000 they lost.

Do you get the impression they would have been happier if they had bought a boat?

This is probably the only kitchen in Woodbury without granite counter tops, but yet, this is a gourmet kitchen. I guess if the”gourmet” only needs about 4 square feet of white tile countertop space…

“Two car tandem garage” Always love those.

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Today’s sellers put $975 down on the property, so I think we can call it 100% financing. This property has been on the market since October of 2006, and the initial asking price was $579,500. If these sellers obtain their asking price today of $449,900, their lender stands to lose $108,619, and our sellers stand to lose their $975.

I bet the lender is looking for the pot of gold too.

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Since this is April Fool’s Day, I thought I might share with you the best April Fool’s joke ever played on me.

When my son was a baby, my wife called to me from the other room and said she thought my son might be sick. I went into his room to see what I could do. When I got there, my wife and my mother-in-law (I think they thought this one up together) were standing over my son who was lying down on the changing table. My wife said, “Come look at this.” I walked over to see my son’s diaper filled with a thick, brown gelatinous mass. The first words out of my mouth were, “What did you feed him?” My wife looked at me, looked down at the gigantic glob of goo, stuck her finger in it, and put it in her mouth.

My mouth dropped open…

I couldn’t believe what just happened…

OMG! Are you crazy?

Then my wife and my mother-in-law started to laugh. I stood there dumbfounded trying to figure out what was going on. Then the truth was told…

While I was not paying attention, they had made a warm batch of chocolate pudding, cleaned up my son really well, then filled a clean diaper with the chocolate pudding and positioned him over it as if he had been wearing the diaper and filled it himself. We all had a big laugh, including my son who had no idea what was going on. I remember that joke every year on April Fool’s Day, and I probably will for the rest of my life.

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One of the unique phenomenons of the Great Housing Bubble was the intense speculative activity, particularly the purchase of multiple properties. When speculators who purchased multiple properties implode financially, they allow multiple properties to fall into foreclosure. One of the reason we have had such a dramatic spike in foreclosures even before the bulk of the adjustable rate mortgages begin to reset is because of the collapse of speculators.

Today’s properties are all owned by two men with the same last names. Some of the properties are owned jointly, and some are owned in the name of only one of the men. All of the properties are for sale for less than they paid and less than they owe on them. They can’t feel good about it. When they built their financial empire, they probably thought they would be spending their fortune hanging out chillin’; Instead, they be illin’…

Asking Price: $505,000

Income Requirement: $126,250

Downpayment Needed: $101,000

Monthly Equity Burn: $4,208

Purchase Price: $525,000

Purchase Date: 11/2/2004

Address: 5052 Apple Tree, Irvine, CA 92612

Beautiful home located on cul-de-sac. Concrete tile roof. Inside laundry, built-in microwave, dishwasher and ceiling fan in kitchen. Association pool, spa and clubhouse very close. Close to university!! Lender Approved Short Sale!! Lowest price in the area!

Note the restrained use of exclamation points, he only used two instead of three to end his sentences.

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This was our tycoons’s first property. It was purchased in November of 2004 for $525,000. The buyers put 5% down ($26,250) and took out two loans totaling $498,500. In March of 2005, they refinanced into a 1% adjustable. At that point, they still had their downpayment in the property. In October of 2005 they refinanced again with a $500,000 first and an $85,000 HELOC. It appears as if this HELOC money was used as the downpayment to acquire property #3 today as it was purchased 10 days after the refinance, and the downpayment was $65,000. The cash-out refinancing means that between this property and property #3, our tycoons have a total of $6,250 in equity invested between them. Aren’t Ponzi Schemes great?

If the sellers manage to get their current asking price, Countrywide stands to lose $110,300.

In April of 2005, just after their first refinance of property #1, our tycoons purchased property #2:

Asking Price: $390,000

Income Requirement: $97,500

Downpayment Needed: $78,000

Monthly Equity Burn: $3,250

Purchase Price: $485,000

Purchase Date: 5/11/2005

Address: 13 Deodar, Irvine, CA 92604

BEAUTIFUL HOME IN TURNKEY CONDITION!! 2 CAR ATTACHED GARAGE. BIG ENCLOSED PATIO, STEPS TO IRVINE BIKE TRAILS, END UNIT, MOTIVATED SELLER!!! CLOSE TO UNIVERSITY!

MOTIVATED SELLER!!! LOL! Why would this seller care? Their 5% down is long gone…

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This property was first mentioned in the post Deodar of Destruction that came out on June 12, 2007. At the time, they were asking $565,000 for this property. A 30% drop in asking price is some first-class market chasing. If they manage to find a buyer at this price and pay a 6% commission, the total loss will be $118,400. The sellers will lose $48,500 plus their carrying costs, and Countrywide will lose $69,900, assuming the sellers are current on their payments. All three of today’s properties are soon to be owned by Countrywide. As if Countrywide didn’t own enough homes in California already…

Asking Price: $539,000

Income Requirement: $134,750

Downpayment Needed: $107,000

Monthly Equity Burn: $4,491

Purchase Price: $650,000

Purchase Date: 10/28/2005

Address: 4932 Seaford, Irvine, CA 92604

4 bedroom, 2 bath, plus bonus room den. Currently 5 renters, great rental income $2,700-$3,300. New kitchen is currently being installed. Great neighborhood and location. Lender approved Short Sale!!

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Five renters! I guess that is one of the reasons you want an HOA so you can police this kind of thing (I don’t believe this neighborhood of El Camino Real has one). Do you think they get 5 cars in the driveway? I am guessing the circular grass dead spot in the back is remnant of a keg party, but I could be wrong. BTW, do you think these guys are current on all their payments to Countrywide, or are they skimming these people’s rent?

As I mentioned above, the downpayment for this property appears to have been financed with equity extraction from property #1. Plus the first mortgage is a 1.5% negative amortization loan. If it was a 2/28, it exploded in November of last year. If they manage to get their selling price on this property and pay a 6% commission, the total loss on the property will be $143,340. Since I accounted for the loss of the $65,000 downpayment on property #1, Countrywide will only lose $78,340 on this one.

Countrywide must have really liked doing business with these gentlemen. On property #1, they lost $110,300, on property #2 they lost $69,900, and on property #3, they lost $78,340 for a total loss of $258,540. Our tycoons did lose some of their own money. They lost $6,250 between properties 1 and 3, and they lost $48,500 on property number 2. Their total loss was $54,750.

Another day, another quarter-million dollar loss in Irvine.

I hope you have enjoyed this week at the Irvine Housing Blog. I wanted to return to our roots and profile properties without all the intense analysis. More analysis posts are coming, for those of you that look forward to them, but it was nice to take a break and just enjoy the schadenfreude for a while. Come back next week as we continue chronicling ‘the seventh circle of real estate hell.’ Have a great weekend.

🙂

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(One) day when I was chillin’ in Kentucky Fried Chicken

You be illin’

You Be Illin’ — Run-D.M.C.