May 16, 2008
From the Los Angeles Times’ article “Orange County gives developers a break on building fees“, it looks like everyone these days is getting a “Get out of jail free” card. According to the article, Orange County is postponing the collection of fees for housing construction projects. This decision was reached without any thought to the consequences on Orange County’s revenue and finances… brilliant.
Is it a get out of jail free card to the developers? Depends who you ask. On the one hand, the measure was passed as an economic stimulus. On the other hand, there’s no analysis to back up the idea that this postponement will really help our economy. Per the article:
County officials and building industry representatives characterized the measure as an effort to help builders hit by the credit crunch and the real estate downturn to get projects off the ground. One supervisor, however, questioned whether it would stimulate growth and another critic dismissed it as a favor to the building business.
Orange County is the largest government agency in the state to adopt the change, which is being pushed by the Building Industry Assn., a trade group that lobbies local and state government on behalf of builders, engineers and other industries involved in housing construction.
The group is asking cities and counties throughout California for a similar break as part of a package of measures to ease up-front costs for developers amid an economic downturn that has hit the housing sector hard, particularly in Orange County. More than a dozen cities and counties have adopted the measure. . .
A rough industry estimate is that a developer will pay about $4.5 million in fees for a 100-home development. . .
“Doing something about the fees will stimulate building activity,” Kristine Thalman, chief executive of the Orange County chapter of the Building Industry Assn., told supervisors during the board hearing Tuesday. “This will put funds into the economy and put our builders back to work.”
The article makes the Orange County officials look like a silly circus act, at best. Unfortunately for Orange County, it’s not an unnecessary harsh depiction, but rather deserved. How can you pass a measure that you have no idea the effect it will have? My favorite is the guy that says they weren’t asked to look at the financial effect… say what?! Should you have to be asked?
Officials said Tuesday that they did not know how much the county has collected for such fees in previous years and could not calculate how much interest income would be lost, but maintained the amount was not substantial. . .
Asked why there was no financial study, which is a common facet of virtually every proposal that could affect county finances, Tim Neely, director of planning and development services, said: “We weren’t asked to analyze the fiscal impact.”
Appropriately so, the unanimously passed measure has been met with some harsh criticism. According to the Los Angeles Times:
Darrell Nolta, a close observer of county government, criticized the move as a favor for developers.
“There are many, many people who need to be helped” because of the economic downturn, Nolta said. “Not the builders.”
In a time when it seems like everyone is getting a “Get out of jail free” card, I have to ask… where’s mine and where’s yours?!
May 15, 2008
Kiplinger’s Personal Finance publication that’s coming out for June 2008 will have an article entitled “How to Buy a Foreclosure” by Amy Bickers. The article starts out by painting a beautiful picture of someone that bought a foreclosed condo for $65k less than asking a year ago and is still happy with his purchase… a fairy tale ending with happily ever after and everything.
These stories always romanticize the foreclosure buying experience. “A great deal - instant equity!” “A house we could never afford in a neighborhood we could never afford!” We’ve heard it all. But, what’s the real scoop?
Thankfully, an article that started out all roses, later attempts to paint a true picture of what you’re in for when setting out on the foreclosure or REO adventure:
“The price may be right, but be prepared for the hassles. . .
. . . There’s no guarantee that buying a foreclosure will save money compared with buying the traditional way. Discounts vary tremendously depending on where you live. In fact, many foreclosed homes are priced higher than their true value because sellers are trying to pay off the mortgage and cover taxes and transaction costs. . .
Banks have a lot of these real estate owned, or REO, properties in their portfolios and are actively trying to sell them through agents. And unlike buying at auction, you can usually get a traditional mortgage for an REO. Unfortunately, lenders often list the property at or near market value to recover the outstanding loan amount along with legal fees, property taxes and maintenance costs.”
So, is buying a foreclosure really a great idea? For the average Joe, buying a foreclosure in an auction is next to impossible… who has all that cash to pay up front? Sure the deals are there (as with our prince in the fairy tale above), but what’s the point if they’re out of reach for us normal folks?
That leaves the REO’s listed through regular real estate agents. Can you get great deals by buying an REO? Maybe, maybe not. Here are couple examples showing each side.
GOOD DEAL: Three homes, all located within a couple blocks of each other. Which is the best deal? The bank-listed foreclosure with over a $100k discount.
Bank-Listed Foreclosure
144 W Crystal View Ave, Orange 92865; 4 bed/2 bath house; 1,559 sq ft; listed at $460,500
Currently Listed
127 W Brentwood Ave, Orange 92865; 4 bed/2 bath house; 1,561 sq ft; listed at $575,000
Recent Sale
327 W Brentwood Ave, Orange 92865; 4 bed/2 bath house; 1,566 sq ft; sold for $582,000
BAD DEAL: Three condos all in one complex. For less than the bank-listed foreclosure, you could get a two-bedroom unit. Not a good deal!
Bank-Listed Foreclosure
13722 Red Hill Ave #54, Tustin 92780; 1 bed/1 bath condo; N/A sq ft; listed at $204,900
Currently Listed
13722 Red Hill Ave #73, Tustin 92780; 1 bed/1 bath condo; 696 sq ft; listed at $189,000
Recent Sale
13722 Red Hill Ave #90, Tustin 92780; 2 bed/2 bath condo; 1,080 sq ft; sold for $187,000
May 14, 2008
We’re seeing signs that the market is starting to level off a bit. Slight increase in demand and slightly lower inventory are positive indicators of things starting to shape up….for now.
On Sunday Jon Lanser reported, “Online market tracker Zillow reported that roughly half of O.C. homeowners who bought their residence in 2005 through 2007 owe more for their mortgage than their home is now worth.”
For the moment, this is okay. But it’s a time bomb waiting to happen. As each month passes these loans inch closer and closer to their low interest teaser rates ending. That said, I think we need to brace ourselves for what will probably be the next wave of reduced value of our homes. Unless the government’s program works something spectacular we could be in for a second wave of trouble trailing at the end of 2008 and through 2009 as many of these homes could potentially slip into foreclosure.
So it’s time to buoy out and wait for the next wave.
May 13, 2008
It is the nature for most human beings to be competitive. For Americans in particular, we love to establish who’s the best. In sports we have number one rankings and celebrate those that attain the title. Defining winners and losers is something we do almost innately. Who’s the richest, who’s the best tennis player, what’s the best performing company on the stock market? These are all questions that many sit around and debate and sometimes actually argue about.
Eli Broad
When it comes to real estate, the line seems to be a lot more blurred when establishing winners and losers. It is difficult to quantify, (with maybe th exception of Eli Broad of K.B. Homes, Forbes 42nd richest American, 5.8 billion net worth) in today’s market who is winning and who is losing, as most seem to be cast in the same boat. While just a few short years ago, this was certainly not the case, we all have friends that made a truck load of money in the real estate market and establishing them as winning the game was easy. Some have retained that status, most have not. So in the theme of winners and losers, here are a few homes in Huntington Beach that have lost their value. Maybe by purchasing one you can feel like a winner…if only for a minute.
20092 Bayfront Ln. #202: 1 Beds 1 Baths, 924 SQ. FT. The list price was “$309,000″ and changed to “$299,000″
20191 Cape Coral Ln. #212: 2 Beds, 2 Baths, 1,000 SQ. FT. The list price was “$424,900″ and changed to “$439,900″
7402 Coho Dr. #105: 3 Beds, 4 Baths, 2,100 SQ. FT. The list price was “$649,000″ and changed to “$639,000″
7412 Seabluff Dr. #104: 3 Beds, 2.5 Baths, 2,000 SQ. FT.
519 17th St: 4 Beds, 3 Baths, 1,886 SQ. FT. The list price was “$899,950″ and changed to “$875,000″
19242 Harding Ln: 3 Beds, 2 Baths, 1,150 SQ. FT. The list price was “$593,500″ and changed to “$568,000″
9162 Heatherton Cr: 3 Beds, 2 Baths, 1,500 SQ. FT. The list price was “$679,900″ and changed to “$655,000″
6691 Brentwood Dr: 3 Beds, 3 Baths, 2,560 SQ. FT. The list price was “$1,149,000″ and changed to “$1,129,000″
9525 Kensington Dr: 3 Beds, 2 Baths, 1,100 SQ. FT. The list price was “$349,000″ and changed to “$334,900″
8211 Mainsail Dr. #204: 2 Beds, 2 Baths, 1,211 SQ. FT. The list price was “$459,450″ and changed to “$438,900″
711 Ocean Ave. #325: 2 Beds, 1 Bath, 968 SQ. FT. The list price was “$1,000,000″ and changed to “$850,000″
118 Park St: 4 Beds, 3 Beds, 3,025 SQ. FT. The list price was “$1,895,000″ and changed to “$1,850,000″
7088 Rockway Ct: 3 Beds, 3 Baths, 1,575 SQ. FT. The list price was “$649,000″ and changed to “$625,000″
May 12, 2008
On this post, we revisit long time real estate lender/mortgage consultant, Ben Cotton. About one year ago, Mr. Cotton sat down with me to discuss the Orange County real estate market. It was then that Mr. Cotton looked into the future to see were the O.C. would be as it pertains to the real estate market. As it turns out, he was not far off the mark at all. Today we will see what Mr. Cotton’s thoughts are to navigate through the market, retain what property you do have and plan a possible exit strategy if need be.
Brian J. Murphy: Thanks for joining us once again, I know that market has been a little shaky for you, but through your previous and wise real estate decisions you have been able to keep your head above water. What can you recommend for those that have fond themselves in a tight real estate bind, such as a foreclosure?
B.C: Go ahead and walk away if you can’t pay for it. If you can’t get out of the hole, walk away. You will take a credit hit either way you look at it, if you are in the situation and you have exhausted all your options, there is no getting around it.
B.J.M: For people that would like to unload a property that they can’t afford, what do you suggest their first course of action be?
B.C: Try to rent it out, if you can’t rent it, you should be able to, but if you can, renting it can buy you some time. You may want to consider a Deed in Lieu Of. Which is basically giving your house back to the bank. It is like you volunteer to give your house back to the bank. You will still take a hit on your credit report.
B.J.M: We are now considered to be in what people are calling a buyer’s market. While there is some obvious truth to that do you see any immediate danger for people looking to buy now?
B.C: No, not at all. I think that it’s a great time. If you are going to do it, do it now. There is going to be a short window and once it is closed, that is going to be it. I would say you have around two years to take advantage of this situation we are in now.
B.J.M: How do you think that Orange County is dealing with the real estate crisis compared to the rest of the country?
B.C: Like everyone else really, taking it in stride. The only difference is that the houses are higher and depending on the area, less foreclosures. But only depending on the area, for the most part the O.C. is a declining market, the whole state is for that matter.
B.J.M: In closing, we know that real estate is cyclical, so when do you think that the tide will change for what we are experiencing?
B.C: Within the next five years for sure. The way things are now is sure to change. Again, my suggestion is to take advantage of it now while things are still affordable.
May 12, 2008
In a post on Friday (”Real Homes of Genius: Biggest Ever Percentage Housing Drop Ever in Santa Ana! 68 Percent Drop in 1 Year. The Journey of One Home in an Epic Housing Bubble.“) on the Dr. Housing Bubble blog, Santa Ana was slammed for being the home to a property that has dropped 68% in its list price in one year. This property was the recipient of the Dr. Housing Bubble’s “Real Home of Genius” award… not quite the award you strive for, I suppose.
Dr. Housing Bubble has an interesting point in that when outsiders think of the grand “OC”, they’re not thinking of Santa Ana (the most populous city in Orange County):
“Orange County, an area with over 3,098,121 people sometimes has a reputation at least nationwide as being an exclusively prime area. What most people that don’t live or work here realize is that the media perception of the “OC” is guided by a few prime cities such as Laguna Hills and Newport Beach. These tiny cities hold a very small percentage of the overall county population. The largest city Santa Ana, has 353,428 people making up for over 11 percent of the entire county.”
Hit TV shows like the O.C. and Laguna Beach make outsiders think we all live in 4,200+ square foot homes with a pool and spa in the backyard. Well, those of us that live in Tustin, Orange, and Santa Ana (and many other OC cities), know better.
Dr. Housing Bubble picks on a property (recipient of their “Real Home of Genius” award) that has reduced it’s price 49 times in the last year. Seems a little (if not a lot!) ridiculous. My guess is that this property is a short sale and the sellers had to show good faith to the bank to show they were trying to get over asking. I can’t find this property in Redfin, so I can’t verify any of the details Dr. Housing Bubble posted. I don’t doubt the story is true, just peruse Santa Ana listings and you’ll find many others that tell the same tale.
May 11, 2008
GRAPH COURTESY CITY-DATA
Here are what some two-bedroom condos in Irvine’s El Camino neighborhood sold for recently.
106 Kazan #48, Irvine 92604
What: 1971 condo, 2 beds/1 bath, 862 SF
Listed for: $309,900 (reduced from $339,900)
Sold for: $292,400 on 02/13/2008
61 Kazan Street #60, Irvine 92604
What: 1971 condo, 2 beds/1 bath, 862 SF
Listed for: N/A
Sold for: $273,000 on 03/12/08 ($342.950 on 07/02/07)
39 Snapdragon #21, Irvine 92604
What: 1975 condo, 2 beds/2 baths, 1068 SF
Listed for: N/A
Sold for: $354,240 on 04/07/08
84 Elksford Avenue, Irvine 92604
What: 1975 condo, 2beds/2 baths, 1078 SF
Listed for: $599,000 (reduced from $619,000)
Sold for: $5000 on 03/20/08 (No other sales information is showing. This appears to be a foreclosure.)
And thrown in for comparison purposes, here are what some two bedrooms in Irvine’s nearby Woodbridge sold for recently. Woodbridge tends to be a somewhat pricier neighborhood than El Camino.
13 Wintergreen #12, Irvine 92604
What: 1975 condo, 2 master suites/2.5 baths, 1120 SF
Listed for: $434,000 (reduced from $439,000)
Sold for: $410,000 on 04/14/08
Note: The past sales history for this home reveals the ups and downs of the pricing trends
in this area in the last five years: sold for $320,000 on 01/15/08; $481,500 on 12/28/05; $330,000 on 09/12/03.
22 Lone Pine#1, Irvine 92604
What: 1980 condo, 2 beds/2.5 baths, 1150 SF
Listed for: N/A
Sold for: $530,000 on 02/13/08
May 11, 2008
Have you heard the story about the pet alligators that get flushed down the toilets and live in NYC? Yeah, they grow and mutate like Ninja Turtles in the sewer and could eat public works employees in one quick nab.
Or have you heard about the lady who was disgruntled with the outrageous price of the Nieman Marcus recipe so she’s circulating it around the internet.
Oh yeah, how could I forget about the E.L.F makeup. Nordstrom’s bought them out so everything on their website is $1 and you can buy the makeup at a huge discount?
Urban legends - we’ve all heard them. Some of us have fallen victim to them. What starts out as a small scale story turns into a fable of mythic proportions.
Today the New York Times printed a story explaining the “jingle mail” legend. The most contemporary of all. What they found - not as many of our neighbors are just walking away from their overextended mortgages. It turns out it’s not as easy as some of the media are making it. The costs, the legality, and the inconvenience are far too great for Mr. and Mrs. McNeighbor to just walk away from their mortgage.
But there’s no denying that the so-called walk away is happening more often. So who is it? The article speculates that the investors are the ones most likely to just walk from the defunct mortgages than a typical homeowner.
Here are some current Mission Viejo foreclosures. Did they walk away or go about it the traditional way? Who knows?
21781 Tegley
3 beds / 2 baths / 1,200 Sq Ft
Listed For: $429,900
Last Sold: $605,000 (8.8.05)
27738 Rubidoux
3 beds / 3 baths /1,437 Sq Ft
Listed For: $435,000
Last Sold: $570,000 (5.11.06)
26944 Begonia
3 beds / 2.5 baths / 1,250 Sq Ft
Listed For: $389,000
Last Sold: $500,000 (8.17.05)
27121 Benidorm
4 beds / 2 baths / 1,472 Sq Ft
Listed For: $437,900
Last Sold: $635,000 (8.4.05)
26502 Montiel
2 beds / 2 baths / 1,743 Sq Ft
Listed For: $430,000
Last Sold: $620,000 (12.13.06)
May 10, 2008
Here is a snapshot of what is happening with homes in various price categories in Eastside Costa Mesa (approximately $500K, $800K, and over $1M). All these homes have been on the market for over 120 days.
2510 Alder Lane, Costa Mesa: 1979 condominium, 3 bedroom/1.5 baths, 1655 SF, 1716 SF lot (in Laurel Point)
Current asking price: $500,000 ($302/SF)
Previous asking price: $585,000 under a previous listing
Under current listing:
Apr 02, 2008 $500,000
May 07, 2008 $419,900
May 09, 2008 $500,000
Previously sold for: $630,000 on September 15, 2006
Days on Redfin: 127
1830 Fullerton Avenue, Costa Mesa: 1929 detached residence, 4 bedrooms/2 bath, 1940 SF, 6,500 SF lot
Current asking price: $698,000 as of March 30, 2008 ($451/SF)
Previous asking price: $925,000 and later reduced to $875,000 under a previous listing
Under the current listing number:
Nov 09, 2007 $798,000
Feb 20, 2008 $724,900
Previously sold for: N/A
Days on Redfin: 183
1913 Santa Ana Avenue, Costa Mesa: 2007detached, 4 beds/3 baths, 2400 SF, 7276 SF lot
Current asking price: $1,339,000 as of December 07, 2007 ($558/SF)
Previous asking price:
Jun 05, 2007 $1,499,000
Jul 26, 2007 $1,450,000
Aug 18, 2007 $1,399,000
Sep 14, 2007 $1,369,000
Oct 17, 2007 $1,349,000
Previously sold for: $816,000 on March 20, 2006
Days on Redfin: 340
May 10, 2008
It seemed that March roared in like a lion and out like a lamb. A few weeks ago I reported (See “Skeptical”) about how there was a bit of positive news reported in March and everyone started crying bottom. Yet, more news is out that the lion/lamb thing wasn’t much of a reality.
A few weeks ago Dataquick News reported that foreclosure activity in California had spiked. They reported that 47,171 homes were lost to foreclosure in the first quarter of 2008 alone.
As you can see from this chart, the numbers are continuing to not only rise, but spike sharply. With this continued trend we just might see that predicted loss of value on homes rounding 20% in 2008 rather quickly here.
This influx of foreclosed homes will certainly not help home values any. Perhaps these Mission Viejo sellers are feeling that pressure and are reducing their asking prices accordingly.
24573 Pallas Way
4 beds / 2 baths / 2,389 Sq Ft
Previously Listed: $600,000
Currently Listed: $575,000
21145 Foxtail
3 beds / 3 baths / 1,700 Sq Ft
Previously Listed: $650,000
Currently Listed: $585,000
28322 Leticia
3 beds / 2 baths / 1,584 Sq Ft
Previously Listed: $687,000
Currently Listed: $657,000
23361 Via Arevalo
2 beds / 2 baths / 1,200 Sq Ft
Previously Listed: $469,900
Currently Listed: $449,900
