You may be an ambassador to England or France You may like to gamble, you might like to dance You may be the heavyweight champion of the world You may be a socialite with a long string of pearls.
But you’re gonna have to serve somebody, yes indeed You’re gonna have to serve somebody, It may be the devil or it may be the Lord But you’re gonna have to serve somebody.
Since this is a weekend, and you may have more time, I want to call your attention to a 45-minute presentation by John Burns on the real estate market. He is probably the best and most knowledgeable financial forecaster working today.
But we were wrong — the housing bubble is back. Sure, prices aren’t at their old levels, but everything else is in place. Generous government involvement …
These are gains that could suggest the emergence of a new bubble. However if we are to start talking about housing bubbles and of a return to an inflated …
Indeed, such write-downs should be a healthy part of the economy’s readjustment to a post-bubble world. They would help address the housing bubble’s legacy: …
{book2}
Today I want to feature a couple of Irvine condos with designs based on a prison cell-block.
Beds 3 Baths 1 full 1 part baths Size 1,200 sq ft ($299 / sq ft) Lot Size n/a Year Built 1977 Days on Market 5 Listing Updated 10/13/2009 MLS Number S592421 Property Type Condominium, Townhouse, Residential Community El Camino Real Tract Hv
What a showplace! Beautifully remodeled kitchen featuring hardwood cabinets, granite counters, and brand new stainless steel appliances. Luxurious, high quality and stunning hardwood and travertine floors topped off with custom baseboards. Classically elegant 2-tone paint decor with crown molding. All three bedrooms are upstairs and quite large. Downstairs is a huge living room, a remodeled 1/2 bathroom, and a versatile country kitchen that leads to your private patio. Association facilities include a pool area and a large park. Next door is the Heritage Park complex with a world class aquatic center, acres and acres of parks, lagoons, tennis courts, library, recreation clubhouse, and a fine arts center. Unlimited places to shop are just seconds away from Trader Joes to sushi and everything else in between.
Can this ugly condo credibly be called a “showplace?”
Much of Irvine has been around since the 1970s. The older neighborhoods have seen three real estate cycles including The Great Housing Bubble. Each one becomes more volatile than the last. House prices skyrocket, then they fall to earth with a thud. The neighborhood values values begin to come back in time (it will be a very long time in this cycle), and the God's of Kool-Aid reincarnate. The cycle repeats anew.
In the heart of Irvine there are a number of small neighborhoods that are less well known than Woodbridge or Turtle Rock or some of the other larger or newer communities. These neighborhoods are no less interesting or well planned than their more famous brethren. One of these hidden gems is the community of Deerfield.
Deerfield is north of Woodbridge bounded by Irvine Center Drive, Culver Drive, Yale Avenue and the rail line which bisects Irvine. Deerfield Avenue is the main collector street moving traffic throughout the community. There is an apartment complex at the corner of Irvine Center and Culver, and there is other high-density housing north of Deerfield Avenue near the railroad tracks. The remaining housing is a mixture of one and two story dwellings. Deerfield was one of the earlier communities developed. It's buildout was complete in 1976.
Life in Deerfield revolves around the large community park. This park together with an elementary and middle school comprise a large central greenspace. There are a series of pathways linking three satellite parks to the community park. This is a great master plan which allows children to walk or bike to school or the park without crossing busy streets.
This is one of those abstract land planning ideas that comes together really well on the ground. The planners envisioned this community would be as livable and as charming as it is. It is a far superior land plan to the grids of nearby El Camino Real or the Ranch. FWIW, I would buy in this neighborhood.
Some weekend afternoon if you are looking for something to do, go to the Deerfield community park at the entrance off Irvine Center Drive. According to the city of Irvine website:
Deerfield Community Park
55 Deerwood West
Located between Culver and Yale along Irvine Center Drive.
Will be painting soon…choose your colors… RARE 4 BEDROOMS + OFFICE/DEN!!! – MASTER BEDROOM + ONE BEDROOM + OFICE/DEN + 2 BATHROOMS DOWN – 2 BEDROOMS + BATHROOM UP – EXPANDED,UPGRADED,UPDATED – BEST LOCATION, On a quiet,inside street, away from traffic-Steps to pool,spa and park-KIDS CAN WALK TO SCHOOL WITHOUT CROSSING A SINGLE STREET -Faces the morning sun-GREAT CURB APPEAL,Brick and Stucco, Manicured Landscaping–Vaulted ceilings-Wood Floors in Entry, Hall, Dining Room, Family Room-Plantation shutters throughout-Custom recessed lighting,Updated Kitchen, warm-tone Oak Cabinets,Ceramic tile, Smooth-top range, Double oven – BATHROOMS have beed updated-HUGE Family Room features…Dramatic,used brick fireplace- Inside Laundry Room-Very private back yard-Newer concrete shake roof- SELLERS SAY SELL…Will work with offers.
When you look at this house in this neighborhood, you can see someone making $130,000 a year living there. The affordability as measured by payment and income qualifications is good, but look at the price; isn't that just wrong?
It is difficult to get your mind around prices at very low interest rates. If you change interest rates to 8% and kept the other numbers the same, the resale home price would drop over $200,000 due to the reduced loan size. At $509,000, the numbers all make sense for a rational world where the FED doesn't engineer interest rates. How long will the FED keep this up?
At least over the weekend….
Thank you for reading the Irvine Housing Blog: astutely observing the Irvine home market and combating California Kool-Aid since September 2006.
I leave you with photographs Pictures of trickery Stains on the carpet and Stains on the scenery Songs about happiness murmured in dreams When we both us knew How the ending would be…
Isn’t there a certain inevitability to the disintegration of the market? Isn’t foreclosure really the cure? The previous owners that had this house overborrowed and overpaid. The property is being recycled, and the new owners will borrow much less and will borrow with much more stable terms. It isn’t that the process is painless; it is the ending we know is coming, and it must simply be endured.
In the meantime… we have flippers trying to make a quick buck. Today’s featured property was purchased for $764,150 at auction. The flippers are trying to make about $125,000 after commissions for providing the liquidity that is required at auction. They can turn around and sell it in the financed resale market for 10% to 20% more, so they do.
I am sick of flippers.
I would rather see a family get a property like this at auction prices, but it is difficult to learn the process and research the properties to find deals — difficult, time-consuming and intimidating, particularly for novices, and the penalty for a mistake is tens of thousands of dollars.
Wouldn’t it be great if families with cash had a seasoned trustee sale buyer to help them? I am working on that one…
Beds 4 Baths 2 full 1 part baths Size 3,069 sq ft ($309 / sq ft) Lot Size 4,820 sq ft Year Built 2005 Days on Market 2 Listing Updated 10/15/2009 MLS Number S592736 Property Type Single Family, Residential Community Northwood Tract Came
EQUITY SELLER, Not a short sale or REO. Corporate owned, free and clear. Bring your pre-approved buyers and close FAST! Gorgeous, like new home located in the gated community of Northwood. Shows like a model home. Fabulous kitchen with granite countertops and brand new Viking appliances including a new refrigerator. Huge Master Suite with large walk-in closet. Large studio over garage with separate entry. Travertine tile, hardwood flooring and upgraded carpet. Built-in stainless steel BBQ island in backyard.
Of course it is an equity seller; it is a flipper!
I would be ready to close fast too if I stood to make $127,910.
The conditions of the market cause sellers to change their motivations when pricing properties. The ones that do not need to sell, generally do not. Our market is almost exclusively motivated sellers.
Cross off the names Of all who died here, And I’ll become the sacred faith you lost. I’m thinking… Every second changes everything In my life. Every second changes everything – The panic will see me through.
Sellers are feeling the upper hand in the market locally due to the lack of available inventory. Motivation is suffering and WTF listing prices are springing up like greedy weeds. Buyers are beginning to panic — hopefully, the IHB readership is calm during this storm. You are not priced out forever.
The third column represents seller motivation. As their motivation increases, they just want to get rid of the property, and they lower their price until they do so. Today, we are going to look at two properties purchased by knife catchers in early 2007. One of them has accepted his fate as a knife catcher and priced the property to sell; the other has not.
Beds 3 Baths 2 full 1 part baths Size 1,900 sq ft ($447 / sq ft) Lot Size 3,988 sq ft Year Built 1997 Days on Market 5 Listing Updated 10/11/2009 MLS Number S592398 Property Type Single Family, Residential Community Northwood Tract Trem
SHOWS LIKE MODEL Private community in a quiet area within Northwood. Living Room w/ textured hardwood floors & vaulted ceilings w/ plenty of natural light. Travertine throughout the kitchen w/ whisper-quiet BOSCH dishwasher & enjoy the spacious Family room w/ cozy fireplace- watch a movie w/ a built-in space saving entertainment area; The garage has cabinets, shelves, and overhead storage; Best schools in the Nation; Olympic-size pool and largest Neighborhood park in Irvine just steps away!
Do you think this property has appreciated since late 2007? This seller is following the typical pattern: (1) price to breakeven, (2) price to preserve some equity, (3) price to avoid short sale, (4) give up.
The owner of our second featured property is more motivated — or he has given up — the results are the same; lower prices.
Beds 2 Baths 2 baths Size 1,112 sq ft ($341 / sq ft) Lot Size n/a Year Built 2004 Days on Market 2 Listing Updated 10/14/2009 MLS Number S592734 Property Type Condominium, Residential Community Quail Hill Tract Ambr
According to the listing agent, this listing may be a pre-foreclosure or short sale.
Quiet upper end unit with no one above or below. Centrally located close to Irvine Spectrum. Resort style amenities including association pool, tennis courts, gym and parks.
The family losing this place at least tried to be responsible. They overpaid, but they put some money down, and when they refinanced in 2007, they did not take out much equity. They still had some of their own money in the property when prices when south.
{book2}
Maybe some sellers just need a little more motivation….
People are afraid to face the hard landing, so we prompt our officials to endlessly support the market to avoid an uncertain fate. Which is better? crashing hard? or landing soft?
I felt all flushed with fever, embarrassed by the crowd, I felt he found my letters and read each one out loud. I prayed that he would finish but he just kept right on …
Strumming my pain with his fingers, Singing my life with his words, Killing me softly with his song, Killing me softly with his song, Telling my whole life with his words, Killing me softly with his song …
The mess in our housing and financial markets are slowly draining the life out of us. The powers-that-be are killing us softly with their endless song and dance. Our government and the Federal Reserve want to engineer the fabled “soft landing.” So how would we measure their success?
A soft landing for the FED would be a slow and controlled decline of
house prices to levels sustainable by local incomes and free-market
financing conditions. The reason they will let it drop is to shorten
the time they have to support the market. The reason the Federal Reserve does not want to let it crash hard… they do not want their member banks to lose any more money. Wait, perhaps you thought it was because the US Government cares about you and your home prices… victim of the spin machine.
The FED’s mechanism for making the soft landing happen is the control of mortgage interest rates through direct purchase of agency paper. If the government insures it and the FED buys it, they could theoretically completely support the US housing market. There is no limit to the size of the Federal Reserve’s balance sheet. I doubt it would come to that.
The mechanism for recycling bad debt is (1) for the GSEs and the FHA to encase it in a new 30-year fixed loan at very low interest rates and (2) have the Federal Reserve buy that paper and hold it through maturity. The FED would not care about its actual value, it is merely stockpiling the detritus from the housing bubble… A toxic mortgage enema… The Federal Reserve’s Yucca Mountain… It will fester on the FEDs balance sheet — a pestilence contained in a paper sarcophagus where nobody looks and nobody cares.
{book4}
Soft Landing?
Payments are now affordable with conventional financing on most
properties, particularly those outside of Irvine. This is just a fact. The Federal Reserve has accomplished its primary market objective — stabilize prices through creating affordability. I believe prices will continue to fall for a number of other reasons, but payment affordability is no longer driving the price decline.
Now that we have reached payment affordability, how stable is that
affordability? and what happens if the system collapses?
You get Las Vegas.
Hard Landing?
Above is the Las Vegas S&P Case-Shiller Index with the conceptual stages of a bubble superimposed on it. Las Vegas landed hard; I am bullish on Las Vegas real estate. As you can see,
the despair stage can go on for a while and prices can remain depressed
and even fall further, but in my opinion, you have much greater
downside risk in Orange County than you do in Las Vegas.
Soft Landing? or Hard Crash?
The most common metaphor for a soft or a hard landing is removing a
band-aid quickly or slowly. You get the idea, but it doesn’t convey the
emotional trauma of an economic recession. The soft landing — to
continue the medical metaphor — is like a series painful bruises and
abrasions. It isn’t life threatening, but there is nothing pleasant
about daily pounding and skin scraping.
The hard crash is like a violent faceplant that is both humiliating and extremely painful — for a short period of
time, but then it is over, and you can move on with your life.
In many ways, the hard crash is better. Which would you prefer?
{book2}
Good Photo Presentation?
It is easy to make fun of the poor quality of marketing display on listings in the MLS because so many of them are so bad. Today, I want to compliment the photo presentation of this listing. The first photo on the listing display is not the drab front elevation, it is the best interior photo of the group. This presentation is much more eye-catching in a positive way. That’s the good…. Using the fisheye lens and distorting reality… that is not so good.
Beds 2 Baths 2 baths Size 1,598 sq ft Lot Size n/a Year Built 2004 Days on Market 6 Listing Updated 10/15/2009 MLS Number L31191 Property Type Condominium, Residential Community Turtle Ridge Tract Whgl
According to the listing agent, this listing may be a pre-foreclosure or short sale.
BEAUTIFUL HIGHLY UP GRADED SHORT SALE! Spacious 2 Bedroom and Den, Soring ceiling with lots of windows and light! Gorgeous hardwood floors,upgraded carpets in carpeted areas, upgraded tile in entry, MaBa, Laundry, Guest Bath. Upgraded cabinets & cabinet hardware throughout. Granite kitchen counter tops, upgraded tile backsplash & stainless appliances. Remote controlled shades in upper windows. Doorbell hookup to phone line. Master bedroom closets by California Closets, mirrored doors. Frosted glass/wood windows sliders in Master Bedroom. Silhouette brand window treatments. UV window tint on patio door and stairway windows. Phone trunk in Master Bedroom closet wired with wireless router & ethernet for jacks. Keypad entry at garage exterior, Epoxy garage floors. Park across street has Tennis, Basketball, etc. Near Beach, Newport Beach: Fashion Island, Corporate Plaza. Newport Coast Plaza. Orange County Airport, Freeways. Beautiful area! A must see home!
The pictures were good, but the description still needs work….
Master Bedroom closet wired with wireless router & ethernet for jacks? Is there a big demand for that?
This property was purchased on 12/2/2004 for $636,000. The owners used a $508,712 first mortgage and a $127,288 downpayment.
They did not waste much time before starting on the HELOC gravy train ride.
On 11/14/2006 they refinanced with a $652,000 Option ARM and a $81,410 HELOC.
Total property debt $733,410 plus negative amortization.
Total mortgage equity withdrawal is $224,698 which includes their downpayment.
The gave up early this year…
Foreclosure Record Recording Date: 07/16/2009 Document Type: Notice of Default Document #: 2009000379425
Irvine Company News
For those interested in what the Irvine Company is doing, you may have seen the story on Sunday, Irvine Co. bets on homebuyer sensibility. Below are links to the support materials also released by the Irvine Company.
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