Monday, March 22, 2010

High-End Owners Compete for Buyers and Dance with Asking Prices

Lenders work to inflate our flagging housing bubble to limit their losses. The lender of today's featured property is hoping for $275,000 extra in its loss recovery efforts. Are you willing to step forward and help them out? 

Irvine Home Address ... 101 LATTICE Irvine, CA 92603
Resale Home Price ...... $1,100,000

 

Oh dancing with myself
Oh dancing with myself
Well there's nothing to lose
And there's nothing to prove
I'll be dancing with myself

Dancing with Myself -- Billy Idol

High-end market pricing is a symbolic, mutually-shared illusion with sellers and lenders -- a group increasingly becoming sellers -- pretending that current pricing is stable and praying preying they find a patsy to pay the huge note. Some gyrate their asking prices in a do-si-do dancing up and down and ending where they started. Today's featured property shuffled two steps back and six steps forward:

Property History for 101 LATTICE

DateEventPrice
Mar 01, 2010 Price Changed $1,100,000
Mar 01, 2010 Price Changed $985,000
Mar 01, 2010 Relisted --
Feb 08, 2010 Price Changed $875,000
Jan 18, 2010 Price Changed $925,000
Jan 12, 2010 Price Changed $895,000
Nov 18, 2009 Delisted --
Nov 16, 2009 Price Changed $825,000
Oct 23, 2009 Delisted --
Oct 21, 2009 Listed $875,000
Feb 28, 2006 Sold (Public Records) $1,380,000

What would possess whoever is in control of this asking price to raise it $275,000 over the last five months? Is this a short sale where the lender keeps raising their approved short-sale price? Did the realtor have influence? I don't think the sellers care any more:

Foreclosure Record
Recording Date: 02/16/2010
Document Type: Notice of Sale (aka Notice of Trustee's Sale)

Foreclosure Record
Recording Date: 11/13/2009
Document Type: Notice of Default

Their $1,104,000 Option ARM blew up.

High-end inventory

According to recent reports, high-end house sellers lower their sights, and anyone selling mansion can expect to wait 3 years. I found these quotes from the first article interesting:

"The market moved, and so with it did the price," Eisenberg said. "The seller is a smart businessman and a reasonable guy -- he gets it -- and the best part is that he is under no real pressure to sell as the property is owned free and clear of any debt."

Therein lies one reason for more overpricing in the luxury home market, said Gary Painter, director of research at the USC Lusk Center for Real Estate.

"What's different about the high end, compared to the general population, is that people who have substantial resources are able to wait longer" to sell, Painter said. "In the bottom of the market you see negative-equity situations, loans going up, people must sell. Outside forces force them to price to sell. Those sorts of outside forces aren't as present [at the upper end]."

We all know this is not true for most properties between $1,000,000 and $3,000,000, and as I demonstrated in  $3,367,500 HELOC Abuse from Hollywood, $5,000,000 HELOC abuse from Laguna Beach, $7,000,000 HELOC abuse in Newport Coast and 18 different properties in Huntington Beach, high end markets are inflated beyond belief, not by cash buyers, but by highly leveraged pretenders who are dancing with their lenders in amend-extend-pretend. 

More so perhaps than in other parts of the nation, Southland sellers have another reason for overpricing at the onset: the magical belief that a star will happen upon their place and be willing to pay any price.

That statement -- complete with its ironic truth about wishful thinking -- is a setup for an even bigger delusion: 

"The story of celebrities knocking on doors and overpaying for a house they 'have to have' still floats around," Malibu agent Gardner said.

Reinforcing the popular myth, Cotton said, is that "every once in a while the real estate god looks down and someone will buy a place that's overpriced." 

In other words, stupid knife catchers are everywhere.

Occasionally, even industry shills have a valid observation (from the OC Register story):

At the current pace, the overall market is a seller’s market without much appreciation at all. The number of distressed homes within the Orange County housing market is keeping a lid on appreciation. On the other hand, the higher end price ranges are experiencing a deep buyer’s market, the higher the price range, the deeper the buyer’s market. The hottest price range is homes priced between $250,000 and $500,000, with an expected market time of 1.75 months. Contrast that with homes priced above $4 million with an expected market time of 33.89 months.

Remember O.C. has 13 months of unlisted foreclosures, so the market-time is quickly approaching infinity. Lenders are very concerned about the massive losses they will take as the high end deflates, and they are doing everything possible to prevent it, but moving back to sustainable lending standards means that people really must have the incomes to support the loans.

This is a nice house, but is it the property fitting to someone making $230,000 a year with over $220,000 in the bank? That is who will buy this. Are there enough of these high wage earners to support the number of homes that must wash through the system? That is really the question we are exploring. According to sales volumes, the number of listings and the total shadow inventory, the answer appears to be a resounding "no" -- unless you believe the cartel will hold together. I don't. 

Irvine Home Address ... 101 LATTICE Irvine, CA 92603

Resale Home Price ... $1,100,000

Home Purchase Price … $1,380,000
Home Purchase Date .... 2/28/2006

Net Gain (Loss) .......... $(346,000)
Percent Change .......... -20.3%
Annual Appreciation … -5.3%

Cost of Ownership
-------------------------------------------------
$1,100,000 .......... Asking Price
$220,000 .......... 20% Down Conventional
5.06% ............... Mortgage Interest Rate
$880,000 .......... 30-Year Mortgage
$229,324 .......... Income Requirement

$4,756 .......... Monthly Mortgage Payment

$953 .......... Property Tax
$242 .......... Special Taxes and Levies (Mello Roos)
$92 .......... Homeowners Insurance
$252 .......... Homeowners Association Fees
=============================================
$6,295 .......... Monthly Cash Outlays

-$1306 .......... Tax Savings (% of Interest and Property Tax)
-$1046 .......... Equity Hidden in Payment
$435 .......... Lost Income to Down Payment (net of taxes)
$138 .......... Maintenance and Replacement Reserves
=============================================
$4,516 .......... Monthly Cost of Ownership

Cash Acquisition Demands
--------------------------------------------------------------------------------
$11,000 .......... Furnishing and Move In @1%
$11,000 .......... Closing Costs @1%
$8,800 ............ Interest Points
$220,000 .......... Down Payment
=============================================
$250,800 .......... Total Cash Costs
$69,200 ............ Emergency Cash Reserves
=============================================
$320,000 .......... Total Savings Needed

Property Details for 101 LATTICE Irvine, CA 92603
--------------------------------------------------------------------------------
3 Beds
2 full 1 part baths Baths
2,460 sq ft Home Size
($447 / sq ft)
6,154 sq ft Lot Size
Year Built 2004
141 Days on Market
MLS Number S593530
Single Family, Residential Property Type
Quail Hill Community
Tract Othr
--------------------------------------------------------------------------------

According to the listing agent, this listing may be a pre-foreclosure or short sale.

Nice home in Quail hill overlooking hospital, city area and local highways...Somewhat open spacious floor plan with vaulted ceilings, plantation shutters, canned lighting, newer carpet, hardwood flooring in some areas, partly travertine flooring, stainless steel appliances, granite countertop in kitchen, wood banister leading upstairs to smaller bedrooms and master has a small view balcony off the room....backyard has built in island bbq with room for entertaining with slight local freeway noise.

Did you read the honesty in that description? Somewhat open... slight local freeway noise... This description provides a balanced account of the property and mentions negatives, something quite rare. There is no puffing or realtorese in the description. I want to thank rkp for sharing this property in the astute observations.

 

Astute Observations

Astute Observation by AZDavidPhx
2010-03-03 05:28 AM

WhoLetTheDogsOut.jpg

Astute Observation by Sue in Irvine
2010-03-03 07:51 AM

What a cute little dog. I hope he wasn’t abandoned during the foreclosure.

Astute Observation by AZDavidPhx
2010-03-03 08:45 AM

I think it’s a new realtor (little ‘r’) staging technique.

http://www.irvinehousingblog.com/

Posted via web from The Newport Beach Lifestyle

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