Irvine Housing Blog

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Will paying borrowers to pay their mortgage prevent strategic default? Posted: 30 Sep 2011 03:30 AM PDT In a sign of extreme desparation, mortgage insurers and lenders are signing up for a new program that pays borrowers to keep paying their mortgage. Irvine Home Address ... 28 GREENFIELD Irvine, CA 92614 Resale Home Price ......  $335,000 Pay me my money down Oh pay me, oh pay me, Pay me my money down, Pay me or go to jail, Pay me my money down Bruce Springsteen -- Pay Me My Money Down I have long contended that people who are underwater and paying more than the cost of a comparable rental should strategically default. They are pouring their money down a black hole never to be seen again. Lenders have tried appealing to morality, but unfortunately for them, strategic default has become common and accepted. Their efforts at appealing to morality have failed. As families strategically default get out from under their crushing mortgage payments and get to keep living in their houses for two years or more, their friends and acquaintances take notice. As others observe the benefits people obtain from strategic default, they consider it themselves. Once people see someone they know and respect strategically default, all moral compunction vanishes. Lenders have tried incentivizing loan owners to continue to pay by modifying the terms of the loan to make payments more affordable. Most of these programs provide a temporary benefit and increase the balance owed. Their only measure of success is how many additional payments they can squeeze out of a borrower before they strategically default. The latest effort to keep loan owners from doing what is in their financial best interest is to dangle a carrot in front of the borrower by offering them direct cash rewards if they continue to pay their loan. This has the same desperate quality as car rebates when the automakers pay people to buy their cars. Perhaps in recognition of how bad things have become that crazy ideas like this are actually being implemented, the American Banker magazine is exploring the ramifications of this loan program. Pay for Performance By Laura Thompson Osuri -- OCT 1, 2011 12:00am EDT With nearly one-fourth of Americans underwater on their mortgages and home prices still on the decline, homeowners who resist the temptation to strategically default and make efforts at meeting their obligations should be applauded. But should they be paid for it? Only a banker would think loan owners should be applauded for pouring money down a rat hole. Loan Value Group, a firm in Rumson, N.J., has been experimenting with the idea. It has a program, called RH Rewards, through which banks, mortgage servicers, hedge funds, insurers—pretty much any institution that carries mortgage risk—can offer a financial incentive to their underwater customers, mainly targeting those who remain current on their mortgage. Once a customer accepts the invitation to the program, every time an on-time mortgage payment is made, the reward grows, up to a predetermined maximum, typically no more than $20,000. When the loan is paid off, either through refinancing or a sale, the homeowner gets the reward. The dangling carrot approach. The lender makes a phantom payment to an account the borrower only gets if they pay on the loan until the loan is paid off by sale, refinance or full amortization. For an underwater loan owner, they can't sell, and they can't refinance, so they only way they see this pittance is to keep paying their mortgage for a decade or more until they have enough equity to get out of their property. Rewarding people just for doing the bare minimum, for following through on promises made of their own volition, feels unsettlingly un-American somehow. No, abdicating lender responsibility and unleashing a Ponzi scheme which dramatically inflated house prices feels unsettingly un-American. Making the bankers eat their losses and bear the consequences of their foolishness feels settlingly just. I am amazed at the mindset of these bankers. This article was written for their consumption. They really believe that debt is as American as apple pie, and the terms of a promissory note are moral obligations. Perhaps widespread strategic default will get them to reconsider their attitudes and actions, but I doubt it. But RH Rewards also borrows from that most American of ideas—using financial incentives to drive desired behavior. That's a concept that has been used in programs to encourage everything from good grades to healthier lifestyles. Bribery is a very old concept, but I hardly consider it American or desirable. In the case of underwater homeowners, establishing rewards for on-time payments is a way to replace incentives for a group whose original payment motivation has been lost. A group whose original payment motivations has been lost? LOL! That is the best euphemism I have read in ages. The group they are talking about was motivated to pay as long as prices were going up and they were given more Ponzi debt to make their payments. Once the HELOC money was not forthcoming, they lost their motivation. ~~ giggles to self ~~ "It's a clever way to create a mutual benefit between all parties involved," says Sayta Thallam, director of the financial markets group at the free markets-leaning Mercatus Center at George Mason University. "It's essentially changing the terms of the mortgage, and people do that and refinance all the time. You can't begrudge your neighbor because he refinanced and got a better deal." Yes, you can. In fact, it's relatively easy to begrudge your spendthrift neighbor who got this deal because they borrowed themselves into oblivion with reckless HELOC abuse. The prudent get screwed while the imprudent get rewarded. While the reward will not be enough to make up for the negative equity a homeowner has, Frank Pallotta, a managing partner of Loan Value Group, is confident that that the program, particularly the extra $100 or so up for grabs each month, is enough to make someone rethink a strategic default. "The reward is not intended to put someone 'in the money,' but is more of a 10-year light at the end of tunnel," Pallotta says. The incentive is too small and too far off in the future to have much effect. Ask any employer who has put together an employee benefit program. If the incentives are not tangible and obtainable in a reasonable period of time, employees do not respond, neither will borrowers. While Loan Value Group operates all aspects the program, it does not provide the cash incentive. That's where partner companies come in. There are eight so far, with the latest one, PMI Group, signing up in early July. The Walnut Creek, Calif.-based insurer says it will role out the RH Rewards program to customers in the Florida and Arizona first, and will decide from these results whether to offer the program on a larger scale. Mortgage insurers are the ones with the most to gain by buying time. A mortgage insurer is on the hood for the losses from strategic default. As the party assuming this risk, they have the most incentive to pay people to keep paying their mortgages. Loan Value Group touts that RH Rewards is used in 40 states, offering more than $113 million in rewards covering $1 billion of mortgages. Pallotta says that partner mortgage holders have been able to reduce defaults rate by 50 percent through RH Rewards, with nearly all the invited homeowners agreeing to participate in the program. The default rate among those in the program is "under 5 percent," he says. This program hasn't been going long enough to know if it really cuts down on strategic default. Further, a 5% default rate is still atrocious. Most borrowers who sign up for this program have likely already decided not to strategically default for whatever reason, so for them, this is just free money for doing what they would have done anyway. Why not sign up? Still, this is a very small piece of the $14 trillion mortgage pie. And it provides rewards to only a select group of underwater homeowners, leaving millions of others dutifully paying their mortgages with no cash incentive. Yes, one billion out of a 14 trillion dollar market is very small. Also, it would be interesting to know the criteria they used to select their borrowers. I doubt they were picking Las Vegas borrowers who owe $300,000 on their $120,000 homes. But Alex Edmans, the Wharton finance professor who developed RH Rewards, hopes the program will gain traction with some of the larger banks and mortgage servicers, and that the most distressed homeowners will be moved to the head of the line. "With anything, you first offer the program to those who have the greatest need for it," Edmans says. In his paper last summer outlining the RH Rewards concept, Edmans referenced a statistic from the National Bureau of Economic Research showing that 31 percent of foreclosures in March 2010 were strategic, up from 22 percent a year earlier. More recently, a report from Moody's in July noted that the risk of strategic default is rising among performing mortgages as loans-to-value ratios, a strong predictor of future default, "are now approaching the LTV of loans that have defaulted since 2009." Dean Karlan, an economics professor at Yale University, says that with such unusually high rates of strategic defaults, banks are acting like any other troubled retail business, scrambling to find a way to keep some wayward consumers (homeowners) interested in their product (mortgages). "They are just tinkering with price to find the profit maximizing point," Karlan says. That is exactly what they are doing. If they pay out a few incentives but keep a few extra borrowers paying, they will make more than what they pay out. "Consumer firms do that all the time with coupon and sales," Karlan notes. "We do not live in a world in which everyone pays the same price for the same service." There is no justice in finance, and finance professionals are okay with that. California Housing Finance Agency gets stiffed The California Housing Finance Agency has been featured on the IHB twice before. The first was when they implemented their $2 billion loan owner welfare California initiative. The second was when they announced they wanted to give money to HELOC abusers. Today we are going to look at one of their bad deals here in Irvine. This property was purchased on 6/21/2007 for $469,500. The owners used a $455,657 first mortgage and a $14,085 second mortgage to cover the down payment. The buyers put nothing down. The borrowers defaulted, and the California Housing Finance Agency bought paid off the first lender with a $478,584 payment. They are now looking to lose about $150,000 on the liquidation. Idiots. ------------------------------------------------------------------------------------------------------------------------------------------- This property is available for sale via the MLS. Please contact Shevy Akason, #01836707  949.769.1599 sales@idealhomebrokers.com Irvine House Address ...  28 GREENFIELD Irvine, CA 92614 Resale House Price ......  $335,000 Beds:  3 Baths:  2 Sq. Ft.:  1267 $264/SF Property Type: Residential, Condominium Style: One Level, Contemporary Year Built:  1982 Community:  Woodbridge County:  Orange MLS#:  P797311 Source:  SoCalMLS Status:  Active On Redfin: 1 day ------------------------------------------------------------------------------ SPACIOUS FLOOR PLAN WITH BRIGHT LIVING ROOM, COZY FIREPLACE, OPEN KITCHEN, 3 GREAT SIZE BEDROOMS WITH LOTS OF CLOSET SPACE, 2 FULL BATHS, NEW CARPET IN BEDROOMS, NEW INTERIOR PAINT AND MUCH MORE. ASSOCIATION AMENITIES HAS POOL, TENNIS COURT, AND BBQ, GREAT FOR A STARTER FAMILY.  ------------------------------------------------------------------------------------------------------------------------------------------- Proprietary IHB commentary and analysis  What exactly is a starter family? So now we have starter homes for starter families? Resale Home Price ......  $335,000 House Purchase Price … $469,500 House Purchase Date .... 6/21/2007 Net Gain (Loss) .......... ($154,600) Percent Change .......... -32.9% Annual Appreciation … -7.8% Cost of Home Ownership ------------------------------------------------- $335,000 .......... Asking Price $11,725 .......... 3.5% Down FHA Financing 4.10% ............... Mortgage Interest Rate $323,275 .......... 30-Year Mortgage $104,824 .......... Income Requirement  $1,562 .......... Monthly Mortgage Payment  $290 .......... Property Tax (@1.04%) $0 .......... Special Taxes and Levies (Mello Roos) $70 .......... Homeowners Insurance (@ 0.25%) $372 .......... Private Mortgage Insurance $414 .......... Homeowners Association Fees ============================================ $2,708 .......... Monthly Cash Outlays -$244 .......... Tax Savings (% of Interest and Property Tax) -$458 .......... Equity Hidden in Payment (Amortization) $17 .......... Lost Income to Down Payment (net of taxes) $62 .......... Maintenance and Replacement Reserves ============================================ $2,085 .......... Monthly Cost of Ownership  Cash Acquisition Demands ------------------------------------------------------------------------------ $3,350 .......... Furnishing and Move In @1% $3,350 .......... Closing Costs @1% $3,233 ............ Interest Points @1% of Loan $11,725 .......... Down Payment ============================================ $21,658 .......... Total Cash Costs $31,900 ............ Emergency Cash Reserves ============================================ $53,558 .......... Total Savings Needed -------------------------------------------------------------------------------------------------------------------------------------------------------

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architecture 4 us

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TRTL, Sustainable Design for Solar Decathlon 2011 of Team Canada Posted: 29 Sep 2011 06:14 PM PDT Another sustainable design has been submitted for Solar Decathlon 2011. This is TRTL, Technological Residence, Traditional Living, submitted by Team Canada from University of Calgary. It has unique shape, this house has been designed to respect the traditions and cultures of native communities of Treaty 7. The shape also makes this home called “Turtle” to simplify its name. This eco friendly construction was developed as a modular home, as a solution for housing problems of native communities in Southern Alberta. It has semi-rounded shape, inspired by tipi's open floorplan. It is completed by two bedrooms, a bathroom, a mechanical core and kitchen in the center. The living room and an open dining room are on the south side to maximize the sun light exposure and daylight. The open layout provide possibilities on having a family gathering. This sustainable building is completed by huge roof  arched solar panels that gives special look for the house. This system may provide 8.3 kW electricity for the house. Eco friendly building materials were also used, considering its durability and low maintenance and long longevity. SIP wall panels were used, while the frames were made from steel materials. For the foundation, temporary screw pile foundation was used. All of these system may provide speed in the assembly process.  Modularity will also provide minimal disturbances to the land surrounded. This eco construction may offer new solution for native people to built house. According to Canada's Indian Act, a permanent building on-reservation can not be owned privately, it automatically becomes the part of the land. This is the problem. This house is modular, and can be non-permanently built and relocated when needed. This will encourage the natives to have a house, maintain it, upgrade it, and use it as their needs. ref

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Irvine Housing Blog

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21.5% of OC loan owners are effectively underwater Posted: 29 Sep 2011 03:34 AM PDT More than 20% of OC loan owners owe more on their mortgage than they could obtain from a sale. With declining prices, this percentage is expected to grow. Foreclosure is the only savior. Irvine Home Address ... 31 CASTILLO Irvine, CA 92620 Resale Home Price ......  $460,000 Well, if you told me you were drowning I would not lend a hand I've seen your face before my friend But I don't know if you know who I am Well, I was there and I saw what you did I saw it with my own two eyes So you can wipe off the grin, I know where you've been It's all been a pack of lies Phil Collins -- In The Air Tonight Many loan owners in OC have no equity. No equity means no real ownership. They own a loan. They are still on title, and most still feel like homeowners, but they have no more financial interest in the property than a renter does, and if they stop paying the rent on the money they borrowed, they will (eventually) get evicted just like a renter. Some who are underwater are victims of poor timing. Many of these people qualify for loan modifications, and they have been helped. Many more are victims of their own poor choices. They HELOCed themselves into an underwater situation, and the government is not throwing them a debt preserver. 1-in-6 O.C. borrowers still ‘under water’ September 15th, 2011, 12:04 am -- posted by Jeff Collins  Real estate data giant CoreLogic reported that 17.3% of Orange County homeowners with a mortgage still owed more than their property was worth at the end of the second quarter. In all, 96,747 Orange County homes were “under water” last spring. Most of these numbers are poor estimates. Zillow for instance only calculates underwater based on the original first mortgage and does not include seconds, refinances or HELOCs. Obviously, that understates the problem. CoreLogic may have better methodology, but the 17.3% seems suspiciously low to me. While the number of underwater homeowners has dropped steadily over the past 18 months, it’s likely that some of that drop is due to lenders foreclosing on a portion of those properties, taking them out of the mix. Since properties have declined more than 10% in value over the last year, many more have submerged beneath the waves. Amortization may have helped a few, but foreclosure is how most of the underwater have been relieved of their burdens. The figures show also that five years after home prices hit their peak and began to fall, large numbers of borrowers still are under water. The CoreLogic figures show also: The number of underwater homeowners fell 5.2% over the past year, a decline of 0.8 of a percentage point. There were 102,000 “negative equity” homes in O.C. at the end of Q2 2010. 0.8%? Less than a 1% drop is not exactly making major progress. At that rate, loan owners will be underwater for about 120 years. 4.2% of O.C. homeowners with a mortgage are above water but have debt representing 95% or more of their home’s value. More than 23,300 homeowners are just barely above water because they owe 95% or more of their home’s value. When the dubious 17.3% number who are underwater is added to the 4.2% who couldn't pay a realtor commission to get out, and 21.5% of loan owners are effectively underwater and unable to sell. With 21.5% unable to sell without bank permission, and with no buyers in the last 10 years having any move-up equity, it shouldn't be a big surprise that the move-up market is dead and sales volumes are more than 25% below historic norms. Orange County has about 120,000 underwater borrowers by CoreLogic's measure, but what about the rest of the country? Mortgage Delinquencies Drop By Kevin Chiu -- Published September 23, 2011 The number of homeowners behind on their mortgages has dropped as a result of a higher number of mortgage modifications, according to one of the nation’s largest providers of mortgage data. The drop in mortgage delinquencies is a positive sign for the housing market, despite an uphill battle banks and mortgage companies are waging with the foreclosure crisis. Mortgage delinquencies fell 2.5% in August from July, according to Lender Processing Services, which gathers its data from nearly 40 million mortgages it tracks for the U.S. lending industry. Total delinquencies, which include loans that are 30 days or more past due, dropped to 8.13% last month. Still, however, the number of single family homes 90 days or more delinquent are near record highs with 1,866,000 late but not in the foreclosure pipeline. Another 4.25-million homes are 30 days or more past due on their mortgages, but not in foreclosure. About 6.4-million homes are 30 days or more delinquent or in the foreclosure process. 6.4 million homes are 30 days or more delinquent or in the foreclosure process. That is an astonishingly high number. And it's expected to get worse as there are 10 million more mortgage delinquencies to come. The drop in delinquencies, however, is not a clear indication that foreclosures are easing nor are they expected to slow by real estate analysts over the next few years. Aggressive action by government leaders combined with bankers are the only avenues that could aid the housing market as high unemployment and other financial worries trouble the nation’s economy forcing more mortgage holders from their homes, and at risk of foreclosure. Forcing more mortgage holders from their homes? He means to say that more loan owners will be relieved of their debt burdens on properties they have no ownership in. The language we use to convey information has hidden assumptions and meanings. The people who go through foreclosure are being forcibly removed from properties they no longer own. Many of them had no equity in the property, or they would have sold it prior to the foreclosure. Nobody sheds a tear when a renter gets evicted, but government is supposed to do everything in its power to stop a loan owner from facing the same fate. I think that's bullshit. Losing HELOC income: when the house in unemployed During the rally of the housing bubble, houses were like a third wage earner in the family. In fact, for nearly five years in Irvine, the median home price went up by an amount equal to the median income. With access to this windfall through HELOCs, every home owner had another source of income, and best of all, this income was not taxed. The former owners of todays featured property bought back in 1993. By April of 2006, they ran up a $487,000 mortgage. This was easily double what they paid. But the house was not done working for them. They stopped paying in early 2008, and they were allowed to squat for 3 full years. Foreclosure Record Recording Date: 03/25/2010  Document Type: Notice of Sale    Foreclosure Record Recording Date: 12/24/2009  Document Type: Notice of Default   Foreclosure Record Recording Date: 03/04/2009  Document Type: Notice of Rescission  Foreclosure Record Recording Date: 12/01/2008  Document Type: Notice of Sale    Foreclosure Record Recording Date: 08/22/2008  Document Type: Notice of Default Irvine real estate is wonderful, isn't it? ------------------------------------------------------------------------------------------------------------------------------------------- This property is available for sale via the MLS. Please contact Shevy Akason, #01836707  949.769.1599 sales@idealhomebrokers.com Irvine House Address ...  31 CASTILLO Irvine, CA 92620 Resale House Price ......  $460,000 Beds:  3 Baths:  2 Sq. Ft.:  1337 $344/SF Property Type: Residential, Single Family Style: One Level, Contemporary Year Built:  1977 Community:  Northwood County:  Orange MLS#:  S674172 Source:  SoCalMLS Status:  Active On Redfin:  3 days ------------------------------------------------------------------------------ This REO property is located in the highly desired area of Irvine, Northwood. Close to the 'Blue Ribbon' high school, Northwood High, shopping and hiking trails. No Mello Roos and low HOA which includes a tennis court. Walking distance to shopping and parks. This single story home has an open floor plan with vaulted ceilings in the living/ dining area. A side entry for privacy. A real brick wood burning fireplace for your family to gather around on those cold winter nights. With a little work this could be the home of your dreams.  ------------------------------------------------------------------------------------------------------------------------------------------- Proprietary IHB commentary and analysis  Resale Home Price ......  $460,000 House Purchase Price … $200,000 House Purchase Date .... 8/5/1993 Net Gain (Loss) .......... $232,400 Percent Change .......... 116.2% Annual Appreciation … 4.5% Cost of Home Ownership ------------------------------------------------- $460,000 .......... Asking Price $16,100 .......... 3.5% Down FHA Financing 4.10% ............... Mortgage Interest Rate $443,900 .......... 30-Year Mortgage $124,254 .......... Income Requirement  $2,145 .......... Monthly Mortgage Payment  $399 .......... Property Tax (@1.04%) $0 .......... Special Taxes and Levies (Mello Roos) $96 .......... Homeowners Insurance (@ 0.25%) $510 .......... Private Mortgage Insurance $60 .......... Homeowners Association Fees ============================================ $3,210 .......... Monthly Cash Outlays -$335 .......... Tax Savings (% of Interest and Property Tax) -$628 .......... Equity Hidden in Payment (Amortization) $23 .......... Lost Income to Down Payment (net of taxes) $78 .......... Maintenance and Replacement Reserves ============================================ $2,347 .......... Monthly Cost of Ownership  Cash Acquisition Demands ------------------------------------------------------------------------------ $4,600 .......... Furnishing and Move In @1% $4,600 .......... Closing Costs @1% $4,439 ............ Interest Points @1% of Loan $16,100 .......... Down Payment ============================================ $29,739 .......... Total Cash Costs $35,900 ............ Emergency Cash Reserves ============================================ $65,639 .......... Total Savings Needed -------------------------------------------------------------------------------------------------------------------------------------------------------

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Society greatly benefits from the housing bust Posted: 28 Sep 2011 03:30 AM PDT Far from being the end of the world, the pain of the Great Recession caused by the housing bust will have long term beneficial effects on society -- assuming we learn the right lessons.   Irvine Home Address ... 34 BROOKSTONE Irvine, CA 92604 Resale Home Price ......  $484,900 Always look on the light side of life... If life seems jolly rotten, There's something you've forgotten! And that's to laugh and smile and dance and sing, When you're feeling in the dumps, Don't be silly chumps, Just purse your lips and whistle -- that's the thing! And... always look on the bright side of life... Monte Python -- Always Look On the Bright Side of Life The fact that prices are falling is not a bad thing, not that loan owners who rely on HELOC income would agree. Financial market implosions purge irresponsible and unsustainable habits from the populace. HELOC dependency serves no one, not even the sheeple who got to enjoy it for a time. The unceremonious fall from entitlement is inevitable, and although the fall is emotionally devastating, getting off the HELOC heroin is better for borrowers in the long term. Falling prices bring affordability to the prudent who understand valuation and their cost of ownership. Many people have put off their purchases because they understand the power of rental parity. Those people will be rewarded with lower debts, and the ability to move without feeding a black hole on their family balance sheet. The lower debt service payments will benefit the local economy as money that used to go to a lender is now circulating in the local economy to buy goods and services. The housing bust has a good side Published 03:15 p.m., Friday, September 23, 2011 Anyone who has seen a friend kick an addiction -- be it to alcohol, drugs or cigarettes -- knows the extreme discomfort and force of will required. America has long suffered repeated bouts of binging on real estate. The booms inevitably trigger busts, one of which we're now in deep. But there is some bright side here. As they say, with pain comes gain. The collapse in house prices could help the environment, stabilize family finances and strengthen our economic base over the long term. True, the housing crash continues to drag down today's economy. Prices have fallen nearly 32 percent from their 2005 high, according to the Standard & Poor's Case-Shiller 20-city index. One in five Americans with a mortgage is "underwater." That means these owners owe more on their home than the home can sell for. Economists expect house prices to rise only about 1 percent between now and 2015, leading some to call this a "lost decade" for homeowning. Housing woes are still the primary cause of our weak economy. An entire industry is sitting on the sidelines. Construction related unemployment is over 30%, and new home sales continue to set record lows. Realtors and mortgage brokers are similarly hurting as lower prices and lower transaction volumes have caused sales commissions to plummet. None of these industries is forecast to improve in the near term. What we really have is a return to certain realities obscured by the housing bubble. Ten years ago, soaring house prices created a "wealth effect." This was an illusion of newfound prosperity, which prompted homeowners to borrow heavily off their rising equity and spend the money, much of it at the mall. Apparently, I am not the only one who noticed. You don't read much about rampant HELOC abuse in the mainstream media. They didn't save much for retirement, figuring that they could live off the proceeds from selling their home. i am always shocked when I read about the stupid things some people did to destroy their security in retirement. Shabby lending practices exploded, snaring many Americans who could not afford what they were buying into paycheck-to-paycheck existences or foreclosure. The only way out for many struggle families is strategic default. Those with the most financial distress have already walked away, but those who are barely getting by are continuing to hold on with hope that rising prices will give them equity again soon. Unfortunately for them, prices will fall, and even with the lower balance of an amortizing mortgage, many households will be years before they have equity again. When the music stopped, the wealth effect geared into reverse. Families pulled back on spending. They began to "de-leverage" their finances -- that is, start paying off their debt. Construction workers, landscapers, salespeople and others living off the bubble lost their jobs. The resulting unemployment is troublesome, but won't the American economy become stronger when families start carefully investing for their future, rather than relying on the magic-mushroom "high" of ever-rising home prices?    Isn't it better for the environment that prospective homebuyers now value smaller houses that use less energy, take up less space and are often located closer to work, schools and shopping? And isn't it good for American towns and cities where these smaller and older houses are located? Once rejected by status-conscious house hunters as "starter homes," bungalows and capes are becoming the permanent and beloved family residences that they were a couple of generations ago. Neighborhoods populated mainly by older folks and unmarried hipsters now draw families with children, bringing new life to formerly struggling commercial centers. The housing bust in California has enabled many renters to buy properties closer in to employment centers. The commute through the valley on the 91 is no longer a necessary price to pay to have a nice house for many who work in Orange County. Speaking of which, the so-called lost decade for homeowners has become a "found decade" for homebuyers. Young people can easily find far more affordable housing, although getting a mortgage has become tougher. They don't have start off their working lives drowning in debt. The mainstream media is so caught up in the distress of loan owners that they completely fail to mention the befits current buyers are obtaining. For the first time in a decade, people are able to buy houses with a lower cost of ownership than a comparable rental. One must feel for the homeowners who now owe more on their mortgages than their homes' value. Some borrowed recklessly, but many just got caught up in a frenzy whipped by powerful interests. The real-estate industry peddled homes as no-lose investments. Deregulated lenders became debt pushers (while passing the risks onto others).   The Federal Reserve sustained the market's boil by keeping interest rates very low, with the Fed chairman himself dismissing the manic speculation as "froth." The boom-bust cycle in real estate has repeated itself so often in our history that it would be foolish to declare the housing addiction "cured." We are, after all, a land of bounteous acreage and a certain grandiosity when it comes to the material. But since this latest excess had to come to an ugly end, let's at least get something good out of it. It's natural for people to want free money. When a Ponzi virus is released into the financial system, it spreads because it's human nature to want something for nothing. People wanted house prices to continue to rise in order to fund their spending. People were willing to push prices every higher to obtain the free money that came from ownership. The system worked until the pipers stopped the music and demanded to get paid. The damage this Ponzi virus did to the US economy is evident in this recession that goes on and on. The government tells us the recession ended two years ago. Does it feel that way to you? It doesn't if you work in real estate. The Great Recession will finally end, and prosperity will return. When it does, I hope we have learned the lessons of history. So far, I haven't seen any of the causes of this debacle cured through preventative legislation. Our collective memories will only last so long, and when the Siren's song of free money beckons, the next Ponzi weed will find a fertile soil in which to germinate. Happy Birthday IHB! The Irvine Housing Blog turned five years old yesterday. Welcome to the Irvine Housing Blog! Kitchen is ready for your personal touch and upgrades This house has no kitchen. The previous owner must have ripped it out and sold it before moving on. The bank took this property back at the end of June and has no idea what to do with it. The strategy right now is to find an all-cash buyer who will put in their own kitchen. This all-cash buyer must be willing to pay $337/SF for a property which backs onto the the Culver/Warner intersection. Never going to happen. This property might fetch $525,000 if the kitchen were in place, but nobody looking to profit on the flip would touch this place for $484,900, and given its inherent negatives, I don't foresee many all-cash owner occupants willing to buy this place. Either the bank is going to have to lower its price significantly, or they are going to have to spend the money to put in a kitchen and hope for the best. ------------------------------------------------------------------------------------------------------------------------------------------- This property is available for sale via the MLS. Please contact Shevy Akason, #01836707  949.769.1599 sales@idealhomebrokers.com   Irvine House Address ...  34 BROOKSTONE Irvine, CA 92604 Resale House Price ......  $484,900 Beds:  3 Baths:  2 Sq. Ft.:  1440 $337/SF Property Type: Residential, Single Family Style: One Level Year Built:  1981 Community:  Woodbridge County:  Orange MLS#:  K11124093 Source:  CRMLS Status:  Active On Redfin: 2 days ------------------------------------------------------------------------------ GREAT opportunity to own your piece of Woodbridge. Close to Northlake and many of the other association amenties, including one of their many parks, pools, sports courts etc!! Seller is contemplating repairs, send your CASH offers to get this price. .. 3 bedrooms and 2 baths, kitchen is ready for your personal touches and upgrades. Brick fireplace in family room and sliding glass door to rear patio area. ------------------------------------------------------------------------------------------------------------------------------------------- Proprietary IHB commentary and analysis  Resale Home Price ......  $484,900 House Purchase Price … $635,000 House Purchase Date .... 8/26/2004 Net Gain (Loss) .......... ($179,194) Percent Change .......... -28.2% Annual Appreciation … -3.7% Cost of Home Ownership ------------------------------------------------- $484,900 .......... Asking Price $16,972 .......... 3.5% Down FHA Financing 4.10% ............... Mortgage Interest Rate $467,928 .......... 30-Year Mortgage $131,822 .......... Income Requirement  $2,261 .......... Monthly Mortgage Payment  $420 .......... Property Tax (@1.04%) $0 .......... Special Taxes and Levies (Mello Roos) $101 .......... Homeowners Insurance (@ 0.25%) $538 .......... Private Mortgage Insurance $85 .......... Homeowners Association Fees ============================================ $3,405 .......... Monthly Cash Outlays -$353 .......... Tax Savings (% of Interest and Property Tax) -$662 .......... Equity Hidden in Payment (Amortization) $25 .......... Lost Income to Down Payment (net of taxes) $81 .......... Maintenance and Replacement Reserves ============================================ $2,495 .......... Monthly Cost of Ownership  Cash Acquisition Demands ------------------------------------------------------------------------------ $4,849 .......... Furnishing and Move In @1% $4,849 .......... Closing Costs @1% $4,679 ............ Interest Points @1% of Loan $16,972 .......... Down Payment ============================================ $31,349 .......... Total Cash Costs $38,200 ............ Emergency Cash Reserves ============================================ $69,549 .......... Total Savings Needed ------------------------------------------------------------------------------------------------------------------------------------------------------- Two presentations this evening Wednesday, September 28, 2011 We still have seating available for tonight's presentations. I hope to see you at the offices of Intercap Lending (9401 Jeronimo, Suite 200, Irvine, CA 92618). You may still attend if you have not provided an RSVP; however, if the crowd is too large, you may have to stand in the back.

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