Straight crash, home-y

What more can we say? There's been a flat-out crash in these parts. Are we well past the bottom? Nobody knows for sure, but we do know it's going to be an interesting year following local real estate. If you need some additional proof, try this Lake Forest condo on for size.

25206 Chestnutwood, Lake Forest 92630
Asking price: $309,900
Previous sales price: $529,853 (bank)
Previous sales date: 11/25/09

Beds:	3
Baths:	2.5
Sq. Ft.:	1,746
$/Sq. Ft.:	$177
Lot Size:	-
Property Type:	Residential, Condominium, Townhouse
Style:	Two Level
Year Built:	1983
Community:	Lake Forest North
County:	Orange
MLS#:	S600776
Source:	SoCalMLS
Status:	Active This listing is for sale and the sellers are accepting offers.
On Redfin:	13 days

From listing: Charming Townhouse style condo located in the Smoketree neighborhood in lovely Lake Forest. Spacious floorplan features 3 great size bedrooms and 2.5 baths. Large living room with brick fireplace, kitchen has a breakfast nook and bar, formal dining room and family room. Come and see this great property!

Excuse us while we choke at the thought that this property sold for $510,000 in 2005. Was the stainless steel range the part that brought it over the $500k mark? It couldn't have been those lovely "vintage" kitchen cabinets and tile counters, now could it?

Seriously though, that's a price of $292 per square foot. Today, for new construction in South OC, expect on average to find builders' asking prices around $260-$295, depending on the development and location.

In 2000, our subject property also sold for $219,500. So, if we were to assume the bank could unload this property at the current price, it would mean a decade's worth of appreciation of $90,400 or 41% over the total span. Sound like a lot? Well, how does 3.5% average appreciation per year over a decade sound... 'cause that's all that happened for this property when all's said and done.

Just another 50% off

At this point, it's really no surprise that older, small one-bedroom apartments (err, condos), have taken a huge beating. Another example of the spectacular fall from ridiculous heights is this property in Lake Forest.

20702 EL TORO Rd #22 Lake Forest, CA 92630
Asking price: $130,000
Previous sales price: $276,000
Previous sales date: 3/14/06

Beds:	1
Baths:	1
Sq. Ft.:	610
$/Sq. Ft.:	$213
Lot Size:	600 Sq. Ft.
Property Type:	Residential, Condominium
Style:	Two Level, Contemporary
Year Built:	1980
Community:	Lake Forest North
County:	Orange
MLS#:	S582364
Source:	SoCalMLS
Status:	Active This listing is for sale and the sellers are accepting offers.
On Redfin:	165 days

From listing: Very nice upstairs unit close to pool. Large, open feeling in both family room and master bedroom.

According to Redfin records, this property changed hands in 2004 for $250,000; in 2001 for $110,000 and before that $74,000 in 1989.

Between 1989 and 2001 (12 years), the property appreciated $36,000 (49%). Between 2001 and 2004 (three years), the property appreciated $140,000 (127%). When you do the math you see how out-of-touch things got.

Assuming the property sells for the current asking price, it would be $146,000 or 53% off the 2006 price.

Down and Out in Lake Forest

This Lake Forest property was once sold for almost $700,000. Now, it's a vacant REO that's seen better days. The street name is fairly appropriate for this one considering its sorry state....

22271 Cripple Creek, 92630
Asking price: $440,550
Previous sales price: $675,000
Previous sales date: 12/6/05

Beds:	4
Baths:	1.75
Sq. Ft.:	1,674
$/Sq. Ft.:	$263
Lot Size:	6,600 Sq. Ft.
Property Type:	Residential, Single Family
Style:	One Level, Ranch
Year Built:	1979
Community:	Lake Forest North
County:	Orange
MLS#:	S595068
Source:	CARETS
Status:	Active This listing is for sale and the sellers are accepting offers.
On Redfin:	3 days

From listing: Great Value! End of the cul-de-sac, single level home with four bedrooms. Kitchen has a breakfast area. The living and dining rooms are combined. Two car garage with a driveway. The house needs someone to come in and bring it back to its former glory.

As you can see, this house previously sold for $675,000. If you were to put 20% down in 2005 (chuckle), and you got a 5% interest rate with a 30-year fixed-rate loan (chuckle again), your monthly mortgage payment would have been $2,899. There's also the little matter of having $135,000 laying around as a 20% downpayment.

Currently, if you were to put 20% down and got an interest rate of 5%, your mortgage payment would be about $1,892 per month. You would "only" have to come up with $88,110 for a downpayment. Chump change!

Assuming the property sells for the current asking price, it represents a 35% decline in value in about 4 years. A few years ago, that would have seemed unfathomable. Today, it's not too surprising.

Welcome to Lake Forest

"WELCOME HOME TO THE CITY OF LAKE FOREST," the listing description shouts. We say, welcome home to your new bank-owned apart-condo. If there's any risk that the market will stay bottomed out and you'd be stuck living in this type of property for the next 7-10 years, is there any reason to jump in now?


20702 El Toro Rd #240, 92679
Asking price: $192,500
Previous sales price (bank): $222,304
Purchase date: 9/24/09

Beds:	2
Baths:	2
Sq. Ft.:	950
$/Sq. Ft.:	$203
Lot Size:	-
Property Type:	Condominium
Style:	Contemporary
Stories:	1
Floor:	2
View:	Greenbelt
Year Built:	1980
Community:	Lake Forest North
County:	Orange
MLS#:	U9004575
Source:	SoCalMLS
Status:	Active
On Redfin:	5 days

From listing: WELCOME HOME TO THE CITY OF LAKE FOREST. THIS MAY BE ONE OF THE BEST LOCATIONS IN THE CITY, AND WE THINK ONE OF THE BEST ASSOCIATIONS IN THE AREA. THE PROPERTY IS A TWO BEDROOM TWO BATHROOM CONDO THAT FEATURES CLOSE TO 950 SQUARE FEET OF INTERIOR LIVING SPACE. THE ASSOCIATION IS FANTASTIC, IT HAS WATER FEATURES RUNNING THROUGHOUT THE COMPLEX WHICH CREATE THE FEELING OF LIVING IN A MOUNTAIN RESORT. YOU WILL ENJOY THE H.O.A POOL, AND SPA, TENNIS AND BASKETBALL. SO COME HOME TO LAKE FOREST AND START TO ENJOY THE BEST OF ORANGE COUNTY TODAY.

On the positive side, it's good to see that a property like this appears to have quickly moved through the foreclosure pipeline and that it's going to probably be unloaded quickly to a new owner. Hopefully one that doesn't pay $368,000 for this shoebox.

To give you an idea of how crazy that is, we estimate your monthly housing expense at about $2,700 per month (after mortgage principle and interest, HOA dues and property taxes and before the mortgage interest deduction, assuming 3% down with an interest rate of 5% and no PMI). After the generous government benefits to owning, your total monthly cost of ownership would be somewhere around $1,950. Really, $1,950 to live in this place?! Well, if you actually bought the property when the previous owners did, you probably used an exotic loan product to lower the monthly cost.

What few rental properties we saw offered on the MLS in this city, at this size, seem to say this property is probably rentable at about $1,300-$1,400 per month. Our back-of-the-napkin calculation with a 160 GRM target for an owner-occupant tells us this property is "worth" about $200,000. So as you can see, we're at rental parity...if you would actually consider owning this as a long-term solution. We would argue the actual GRM should be much lower, or it should be an investor who purchases this and holds and rents.

Let the bidding begin in Lake Forest

Three important letters: REO. What are you waiting for....put your bid in for this Lake Forest property before its price hits the stratosphere and you're locked out forever! Or exercise some logic and restraint, and move on...

24832 Glenwood Dr, 92630
Asking price: $499,900
Asking price/ sq ft: $201
Bank purchase price: $513,589
Purchase date: 5/21/09
Size: 4 beds, 3 baths, 2,492 sq ft (built in 1976)
MLS: S579869 (8 days on Redfin)
HOA dues: $140
Type: Single Family Residence
Style: Traditional
Stories: 2
Lot size: 6,975 Sq. Ft.
From listing: Large tri-level home surrounded by eucalyptus trees fully fenced..Wood flooring throughtout..Upgraded baths and kitchen..Very impressive two story livingroom with center fireplace..Rear wrap around deck off the open family room..Main floor bedroom with full bath..You will not be disappointed..

No need to even take a look at the pictures...just send your deposit money in a plain white envelope. Pay no attention to the awful yellow and green interior paint job that is going to need to be redone prior to regular habitation when this property sells.

Speaking of sales, this house last sold for $610,000 in 2004, which makes the current asking price 18% below the sales price more than five years ago. Think about that...half a decade, seriously negative appreciation. And, it's likely to be many years before the house is worth that much again.

We also know that the 2003 sales price was $461,000...so this means the bank's first asking price is $38,900 above the September 2003 sales price. Would you be willing to outbid some others to buy this property and feel confident you got a great deal for half a mil? We'll pass and see what's out there come fall...or winter...or spring 2010...or...

Out the door in Lake Forest

Lots of "are we at the bottom?" and market improvement talk on Monday. Even Reality Check blogger Diana Olick was in the act. Of course, the IHB had its own compelling take of this possibly being a bear trap. Right now, 37% of homes listed for sale in OC are distressed. That includes more than 60% of the market between $0 and $500k. In case you haven't guessed, a large majority of locals are looking at that price range to buy.

Here is a single family home in Lake Forest that fits some of the critieria we just talked about: It's for sale; it's a short sale (distressed); and it's below $500,000.

22293 Vista Verde Dr, 92630
Asking price: $280,000-$300,000
Asking price/ sq ft: about $186
Purchase price: $462,000
Purchase date: 6/13/07
Size: 3 beds, 2.5 baths, 1,504 sq ft (built in 1979)
MLS: S546548 (213 days on Redfin)
HOA dues: $260
Type: Single Family Residence
Style: Contemporary
Stories: 2
Lot size: 704 Sq. Ft.
From listing: Great Value! Completely remodeled. Laminate flooring, 6' floorboards, remodeled kitchen with top of the line Maytag appliances, all baths have been refixured with new pipes, new recessed lighting throughout the great room and Master bedroom. All new woodwork and new interior doors. Nestled in the forest with views from the balcony and patio. Lots of storage. Nearby award winning schools, Lake Forest 1 Assn amenities.


There isn't a photo of the exterior with the listing, so we hope you enjoy a nice view of the current resident(s) packing up and taking off. It's probably an unfortunate story, but of course we don't know the whole situation.

This property will certainly be a big loser, assuming it can even get sold. As you can see, the asking price is well below Redfin's reported 2007 price, leading us to believe this property has probably had multiple offers during its 200+ days for sale, but the lender or lenders didn't allow the deal to be closed.

If we were to believe this property could actually be sold for $300,000, and we subtract 6% for sales costs, the loss would be $180,000. Not including sales costs, it would mean a depreciation of 35%. Bottoms up!

Flippin' in Lake Forest

Thanks to reader EE for pointing this one out. Did you think real estate OC real estate flipping was dead in late 2008? Nope! Here's a former REO in Lake Forest that has been majorly upgraded and is now back on the market at a healthy premium.

24242 Palmek Cir, 92630
Asking price: $499,000
Asking price/ sq ft: $416
Purchase price: $331,500
Purchase date: 10/3/08
Size: 3 beds, 1.75 baths, 1,200 sq ft (built in 1965)
MLS: S557507 (19 days on Redfin)
ZipRealty price tracker: Price Reduced: 1/07/09 -- $525,000 to $499,000
Zillow Zestimate: $422,500
Type: Single Family Residence
Style: Ranch
Stories: 1
Lot size: 7,434 Sq. Ft.
From listing: New, New, New! This home has been totally remodeled from the inside out. $100,000 in upgrades. Everything has been done first-rate. Granite slab counters in kitchen and baths, travertine floors in kitchen, hall and baths. Travertine master bath and guest bath. All brand new stainless appliances including custom counter-depth fridg. maple cabinets, center island with eating counter. All new fixtures - new sinks, faucets, shower valves, toilets, bath tub, etc. All new designer lighting and ceiling fans. Frameless glass shower doors. Travertine fireplace with wood mantle. All new raised panel interior doors, mirrored closets. All double pane windows and doors and a brand new front door. All new paint inside an out. Large flat back yard surrounded with trees for privacy. Large driveway on semi-cul-de-sac street. Walk to the new Arbor Shopping area, Starbucks, Banking, etc. Elementary school earned the 2004 National Blue Ribbon. This home is truly move-in ready.


View Larger Map

Our source summed this situation up perfectly: "They did a fine job, but a markup of $192k in this market? In that neighborhood? Best of luck to them."

Granite, stainless steel and travertine kitchen...check! The house does looks good. The singular question is: Does someone want to pay half a million dollars for 1,200 square feet in this part of Lake Forest?

The $414 per square foot asking price - in this neighborhood - is laughable. Nearby properties are asking between $365,000 for a slightly smaller property and $450,000, though the majority are in the mid to high $300,000s. There is an issue of whether this home is simply priced too high and too upgraded compared to other houses in the neighborhood. We tend to think yes.

We have to admit, we're very interested with the decorating approach. Christmas decorations outside, an un-ornamented tree in the middle of the floor inside but not really much furniture. Patio furniture outside, but a blank bedroom inside. There was an attempt to bring some level of personality, but it was still blatantly obvious that nobody lives there.

Coincidentally, 24141 Palmek Circle is listed on ForeclosureRadar as an REO. That property sold for $480,000 in 2004. By the time those owners left, they rung up $600,000 worth of loans.

Our subject property has just been reduced for the first time, so we're wondering if there hasn't been as much action as the owner would like. If we assume the description is spot on and the flipper spent exactly $100,000 on upgrades, we could estimate their expenses of buying and rehabbing the property to be $431,500 (not including any interest on mortgage payments, but for simplicity we'll assume they paid cash so there is no mortgage).

If they can find a buyer able and willing to take this home for the current asking price, they would be in for a nice payday. If we include 6% sales costs, the profit would be $37,560. Nowhere near a bubble-era flipping windfall, but we would consider it a nice feat given the current real estate market, economy and choice of property. Then again, we're doubtful a sale is coming any time soon. Stay tuned...

An end to it all

When is the bottom? How long until we should expect an economic recovery? Of course, nobody knows for sure, but this academic (yet easy to read) paper takes a good stab at it. It analyzes the aftermath of major financial crises in more than 20 international economies - including the U.S. in 1929 - in an attempt to see our future through history's eye.

Here is the Cliffs Notes version of some of what we might expect - if what has happened elsewhere and before goes to plan in the U.S.:

• Unemployment rises about 7% after a financial crisis, and doesn't peak until 4 years after it ends. So, we could be looking at double-digit unemployment in 2011.
• Housing downturns last six years, on average. That means there won't be a full-fledged recovery (on a national scale) for about three years.
• Stock market declines usually cost 55% and last three and a half years. Dow 6500?
• Government debt soars to 86% of GDP. And, by the way, financial stimuli are nothing new.
  

The Wall Street Journal does a good job summarizing the findings.

Here's a property in Lake Forest that is likely near the bottom in terms of price declines.

22293 Vista Verde Dr, 92630
Asking price: $280,000
Asking price/ sq ft: $186
Purchase price: $462,000
Purchase date: 6/13/07
Size: 3 beds, 3 baths, 1,504 sq ft (built in 1979)
MLS: S546548 (122 days on Redfin)
ZipRealty price tracker: Price Reduced: 11/03/08 -- $300,000 to $280,000
Zillow Zestimate: $554,500
HOA dues: $260 + $94
Type: Single Family Residence (actually a townhouse)
Style: Contemporary
Stories: 2
Lot size: 704 Sq. Ft.
From listing: Great Value! Completely remodeled. Laminate flooring, 6' floorboards, remodeled kitchen with top of the line Maytag appliances, all baths have been refixured with new pipes, new recessed lighting throughout the great room and Master bedroom. All new woodwork and new interior doors. Nestled in the forest with views from the balcony and patio. Lots of storage. Nearby award winning schools, Lake Forest 1 Assn amenities.

This property is a short sale. The current asking price is 39% off the mid-2007 price. If we assume a gross rent multiplier of 160, we would estimate the property achieves rental parity if its market rental rate is about $1,750 per month. We do know smaller 2-bedroom units in this neighborhood have been on the market for $1,650 a month recently, so we assume that at this price, the townhome does achieve rental parity.

Whether the lender lets that happen considering how much debt is likely on the property is another matter. Assuming 6% sales costs, the loss on the home would be $198,800, assuming a successful sale for the full asking price.

Freaky Friday

Another week has come and is now almost over. Wells Fargo snatched Wachovia from Citigroup's grasp. And, our representatives in the House may be on the verge of passing a historic bailout bill - complete with a super helping of pork. Without its passage, California could very well be freaking doomed.

Phew. Speaking of oddities...how about a 1988 rollback? It's an update of a property we chronicled before.

23004 Ditz Lane, 92630
Asking price (then): $269,900
Asking price (now): $88,000
Bank purchase price: $248,940
Bank purchase date: 3/6/08
Size: 2 beds, 1 bath, 912 sq ft (built in 1972)
Old MLS: U8001820
New MLS: S541315 (72 days on Redfin)
Listing description (then): Single-story ground level end unit in nice neighborhood. Enclosed patio, two-car garage and lots of windows --- shows light and bright.
Listing description (now): Single story home in Lake Forest. This home features 2 bedrooms, 1 bathroom, a 2 car garage, a family room, and enclosed patio. Cosmetic repairs needed. Located as an end unit in a great neighborhood. Home has plenty of potential.

This property sold for $415,000 at the peak in 2005. At the current asking price of $88,000 (original asking price was $219,900), it represents a 79% decline from the peak. The asking price also is $17,000 below the June 1988 price of $105,000.

More distress in Lake Forest

Two thirds of the Lake Forest properties listed for sale on the MLS are either foreclosures or short sales. Today's is both a short sale and a preforeclosure.

26871 Apache Trail Dr, 92630
Asking price: $380,000
Asking price/ sq ft: $271
Purchase price: $620,000
Purchase date: 12/8/05
Size: 3 beds, 2 baths, 1,400 sq ft (built in 1979)
MLS: P651323 (16 days on Redfin)
Zillow Zestimate: $457,500
HOA dues: $80
Type: Single Family Residence
Style: Brown Shingle
Stories: 1 Level
Lot size: 5,000 sq ft
From listing: A single family home located in a great neighborhood of sycamore creek community.Spacious living room and large kitchen with high vaulted ceiling. 3 bedrooms plus den/office.New steel shake roof.low tax,no mello roos.Enjoy nature bike trails, park and hill view.

Customized financial info:
Minimum Income Requirement (using 30Y Fixed): $96,000 , assumes no other debt/obligations.
Downpayment needed: $11,400
Monthly Payment on 30Y Fixed at 6.375% with property taxes and mortgage insurance estimated: $2,949.58
Minimum Income Requirement (using 5Y fixed): $91,200, assumes no other debt/obligations.
Monthly Payment on 5Y fixed at 5.75% with property taxes and mortgage insurance estimated: $2,801.05
Disclosure: All rates offered to the client with 1 point cost. Rate quotes assume a purchase transaction with the required minimum down payment, 720 credit score, full income qualification and required reserves. Rates are subject to fluctuation. Custom rate quotes and rate lock advice are available by visiting www.thegreatloan.com.

This current owner purchased this property using 98% financing (a $496,000 first and a $113,000 second). In 2007 Bear Sterns gave her financing totaling $622,250, which effectively liberated her downpayment.

The house is now up for sale with one small accompanying photo. Assuming a sale is allowed to go through for the current asking price, it would be $240,000 or 39% off the previous price, not including any sales costs.

Rollback days

We're in the dog days of summer, and Labor Day is in sight. The real estate market seems to be in a bit of a sluggish mode as well. Sales are up - but are still significantly below average levels. Prices are still falling, but in many instances aren't coming down nearly as fast as they were a number of months ago. "Demand" for homes is much higher than last year, but it still appears it is concentrated in the lower-priced segments, where 66% of homes are either REO or short sales.

Here's a property in Lake Forest that's feeling the heat.

26871 Apache Trail Dr, 92630
Asking price: $380,000
Asking price/ sq ft: $271
Purchase price: $620,000
Purchase date: 12/8/05
Size: 3 beds, 2 baths, 1,400 sq ft (built in 1979)
MLS: P651323 (12 days on Redfin)
Zillow Zestimate: $459,000
Type: Single Family Residence
Style: Brown Shingle
Stories: 1 Level
Lot size: 5,000 sq ft
From listing: A single family home located in a great neighborhood of sycamore creek community.Spacious living room and large kitchen with high vaulted ceiling. 3 bedrooms plus den/office.New steel shake roof.low tax,no mello roos.Enjoy nature bike trails, park and hill view.

Customized financial info:
Minimum Income Requirement (using 30Y Fixed): $96,000, assumes no other debt/obligations.
Downpayment needed: $11,400
Monthly Payment on 30Y Fixed at 6.375% with property taxes and mortgage insurance estimated: $2,949.58
Minimum Income Requirement (using 5Y fixed): $91,200, assumes no other debt/obligations.
Monthly Payment on 5Y fixed at 5.75% with property taxes and mortgage insurance estimated: $2,801.05
Disclosure: All rates offered to the client with 1 point cost. Rate quotes assume a purchase transaction with the required minimum down payment, 720 credit score, full income qualification and required reserves. Rates are subject to fluctuation. Custom rate quotes and rate lock advice are available by visiting www.thegreatloan.com.

The owner purchased the home during the bubble in 2005 using 98% financing. But, she soon liberated her $11,000 downpayment by refinancing two years later for $622,250 with Bear Sterns whomever they are now. The home slipped into default in December 2007, and it is scheduled for auction in October.

This appears to be one of the many sad stories of the real estate bubble. Yes, this owner financed a lot of money, but she did make a downpayment and didn't tap the home for too much money while she could. This makes her conservative compared to many of the others we've profiled before.

Assuming the home can be successfully sold for the current asking price, it would mean a loss of $262,800 off the previous purchase price, including 6% sales costs. Not including transaction costs, it would mean a depreciation of 39%.

'03 rollback action in Lake Forest

The price of this Lake Forest foreclosure property has been set lower than the price paid in 2003. No small condo here - we're talking about a single family house.

The rollbacks continue...

22991 Vesper Rd, 92630
Asking price: $389,900
Asking price/ sq ft: $253
Income requirement: $97,475
Purchase price: $415,000
Purchase date: 10/16/03
Size: 4 beds, 2 baths, 1,540 sq ft (built in 1974)
MLS: S541597 (4 days on Redfin)
Zillow Zestimate: $638,002
Type: Single Family Residence
Style: Traditional
Stories: 2 Levels
Lot size: 4,472 sq ft
From listing: Great Opportunity to own a 4 bedroom home in Lake Forest. Private feel with no one behind you, this home is light and bright and close to everything; shopping, freeway and centers of business! Spacious floorplan with large living room, gracious dining area and open kitchen allows for plenty of entertaining possibilities. 2 bedrooms downstairs, and 2 bedrooms upstairs provides privacy and convenience. This is a great property at a great price!

As usual, we have our doubts on what the inside looks like since there are no interior photos.

The latest owner bought the property in 2003 using 100% financing. In early 2006, she refinanced into $555,000 worth of debt - a $480,000 first loan from No Red Tape Mortgage, and a $75,000 second from WaMu.

The first loan went into default in February, and the notice of trustee sale came in June. The NTS amount was $543,931, which is $63,931 higher than the original loan amount. Assuming the property is sold for the current asking price, it would mean a depreciation of $25,100 or 6% after nearly five years.

And, since the homedebtor pulled cash out, the loss to the lender is even more significant than it appears on the surface.

Does this get your heart racing?

Check out the listing description of this Laguna Hills home on Clarington Drive and let us know what you think of the agent's "personals ad" approach...

Description: LONELY SINGLE, LOOKING FOR LOVE. I am a single family, single level home dreaming of a full time committed relationship with a loving, dedicated, generous owner! Yes, I'm a bit older, but I have great bones and a lot of upgrades: all my floors are high quality laminate, my kitchen has been completely redone and the master bathroom tub/shower is gorgeous. I have a lovely, flowing floor plan and a beautiful pool& spa & gazebo in my back yard. I'm located across the street from a wonderful neighborhood park and am an easy walk to all sorts of shops, transportation and medical offices. I do have a few problems, (don't we all have a few problems as we age?) but will be a faithful adoring companion, sheltering and comforting you for a long time. Just a bit of an investment in some cosmetic surgery and I can be a trophy home.

Hey, apparently it did the trick (or, more likely, the price was right), because this home has now moved into the "backup offers accepted" phase. Will this spark a new trend? Hope not.

$234/sq ft in Lake Forest

We've appreciated the updates from one of our readers about Lake Forest, which continues to experience price declines even though sales volume has recently picked up.

(By the way, everyone is always welcome to send tips, thoughts or local market observations either to the comments section beneath each post or to our e-mail)

Today's property is one of those that continue to apply downward pressure on prices in the area. At first we noticed this phenomenon primarily in small condos, but now it appears to be spreading into larger single family homes as well.

24256 Larkwood Ln, 92630
Asking price: $390,000
Asking price/ sq ft: $234
Income requirement: $97,500
Purchase price: $630,000
Purchase date: 5/2/05
Size: 3 beds, 2 baths, 1,670 sq ft (built in 1964)
MLS: S534907 (3 days on Redfin)
Zillow Zestimate: $463,500
Property tax: $6,746
Type: Single Family Residence
Style: Contemporary
Stories: 1 Level
Lot size: 7,363 sq ft
From listing: (No description)

View Larger Map

Assuming this one can rent for $2,300 per month, the target break-even price for an owner-occupant would be around $368,000, using a GRM of 160. Not quite there, but, like yesterday's property it is at least in the ballpark.

We mentioned downward pressure on prices, so here is an indicator of what is going on in the immediate area around this property - on the same street:

• 24276 Larkwood received its notice of trustee sale in late April. That owner bought with $0-down financing in 2005 and paid $575,000. This property is a bit smaller than our subject. It's for sale for $449,000.
  
• 24191 Larkwood is for sale and is asking $470,000. It's even smaller than the other two properties we just mentioned. The owner paid $593,000 in 2005 but only had to put $400 down. If the property sells for the asking price, the loss would be $151,200, including 6% sales costs. We should probably also mention that the property has begun the foreclosure process.
  

As you can see, things aren't looking too good for this neighborhood, since these properties are likely to determine near-term pricing if and when they change hands. Things really aren't looking good for either of these other two sellers, because our comp-killer subject property is blowing them out of the water in terms of price.

Our featured property is asking $234 per sq ft. The other two are asking $372 and $410. Sorry, but this is far from 2005, so they might need to re-adjust their expectations. However, considering how much debt is on those properties the wiggle room likely is nothing or next to nothing.

If our subject property is able to sell for the full asking price (we would guess the lender(s) involved would play a big part in this), it would be $240,000 off the 2005 price and $145,000 off the 2004 price. It would also mean a depreciation of 38% off the 2005 sale and 27% off the 2004 price - leading us to believe this would likely be a 2003 rollback. None of these calculations include sales costs.

Portola Hills REO

We haven't been spending nearly enough time following what is going on in some of the more inland areas of South Orange County...so here we go with today's subject property in Lake Forest (Portola Hills).

As you can see, we have yet another property purchased during the bubble with virtually no risk to the borrower. Not a happy ending, and now after the foreclosure process this home is bank owned and looking for a new owner to step in.

28651 Pendleton Rd, 92679
Asking price: $469,900
Asking price/ sq ft: $301
Income requirement: $117,475
Peak purchase price: $600,000
Peak purchase date: 8/18/05
Size: 3 beds, 3 baths, 1,561 sq ft (built in 1994)
MLS: S534628 ( 3 days on Redfin)
Zillow Zestimate: $788,500
2007 property tax: $7,534
HOA dues: $117
Type: Single Family Residence
Style: Contemporary
Stories: 2 Levels
Lot size: 7,087 sq ft
From listing: Honey Stop The Car!!! Great location and ready for a new owner. Secondary bedrooms have a jack and jill bath and did I mention that the rooms are a nice size? Master is on the other side of the hall. Master bath is just waiting for your decorative touches to make it your very own relaxing bath. It has serious potential. The high ceilings add to the already nice floor plan. Needs a little TLC but bring your creative eye and save!!

No kidding the place is ready for a new owner. Let's look at how things went with the previous one:

• 8/18/05: Purchased for $600,000 in August 2005. Financing was in the form of a $479,900 first loan and a $119,950 second. Buyer put down a whopping $150; First Franklin financed the rest.
  
• 11/1/07: Notice of default in the amount of $14,157.
• 2/6/08: Notice of trustee sale posted, $508,829.
• 3/13/08: Property goes back to the bank (Deutsche Bank) at auction for $417,084 (discount off NTS amount did not attract any action).
• 5/31/08: Listed on Redfin as an REO.
  

And, to top it off, the former owner apparently messed up the house enough so that it is now a fixer-upper property. Way to go, buddy.

Judging by nearby rentals, this one could probably rent for around $2,500-$2,600 per month considering larger, 2,100-sq ft models seem to be going for about $2,800 per month. So, if we aim low and assume this rents for "only" $2,500, our target breakeven price for an owner-occupant would be about $400,000, using a GRM of 160 (160 x rental rate of $2,500/month).

If we assumed a rental rate of $2,600, then we as an owner-occupant would want to aim to stay at or below $416,000. This one is still priced high by this logic, but is at least in the rental parity ballpark.

Assuming this property can be sold for the full asking price, it would represent a depreciation of $130,100, or 22% off the peak purchase price in 2005.

Below $400k in Lake Forest

A reader gave us a heads up that a fixer-upper, single family home in Lake Forest is leading the pricing curve and has now fallen below the $400,000 asking price mark. "Sheesh, seems like just a few months ago we broke $450k," she wrote.

There is some optimism to be had, though, since Lake Forest (along with another of its areas, Foothill Ranch) were the only two South County ZIPs to post positive year-over-year sales totals in the latest DataQuick report.

24032 Sutton Dr, 92630
Asking price: $399,900
Asking price/ sq ft: $262
Income requirement: $99,975
Purchase price: $540,000
Purchase date: 10/9/07
Size: 3 beds, 2 baths, 1,527 sq ft (built in 1974)
MLS: U8000457 (113 days on Redfin)
ZipRealty price tracker: Price Reduced: 2/08/08 -- $459,900 to $449,900
Price Reduced: 2/19/08 -- $449,900 to $439,900
Price Reduced: 4/03/08 -- $439,900 to $414,900
Price Reduced: 5/08/08 -- $414,900 to $399,900
Zillow Zestimate: $608,500
2007 property tax: $3,547
Type: Single Family Residence
Style: Ranch
Stories: 2 Levels
From listing: OUTSTANDING VALUE IN THE CITY OF LAKE FOREST. THIS IS A THREE BEDROOM TWO BATHROOM HOME IN ONE OF THE SOUGHT AFTER AREAS OF THIS CITY. THE HOME FEATURES A PRIVATE POOL, SPA, AND A BACKYARD JUST MADE FOR THE 'POOL PARTY' OF YOUR DREAMS. LOCATED CLOSE TO ALL THE GOOD THINGS IN ORANGE COUNTY, PARKS, SCHOOLS, SHOPPING AND ENTERTAINMENT. COME HOME TO SUTTON DRIVE,AND START ENJOYING THE ORANGE COUNTY LIFE STYLE TODAY...


View Larger Map

As Irvine Renter of the Irvine Housing Blog has pointed out, this isn't the first time we've been told we can "start enjoying the Orange County life style (sic) today." What do you know: Same RE agent! Perhaps this is their calling card.

This property could probably rent for around $2,300 per month, so that means this property could roughly be valued at about $368,000 for an owner-occupant, assuming a target GRM of 160. Close to our goal, but, since this home needs some work we're not quite sure how much money would be needed to bring this property up to par.

Another interesting note: Based on the 2001 sales price of $310,500, if the property were to be sold for full asking price, it would mean appreciation of only a little more than 3% per year since then. But our caveat remains: We don't know how much work this property needs.

Assuming a buyer is found who will pay full asking price and put this market-chaser out of its misery, the loss would be $164,094, including 6% sales costs, or a value drop of 26%, not including sales costs, in a little more than 7 months.

Pair 'o REOs in Lake Forest

These two properties in Lake Forest have essentially the same story to tell, so we're going to feature them together. Both were purchased during the bubble years with...let's call it a "limited" amount of downpayment money needed.

Now, they've gone through foreclosure and are back up for sale as bank-owned properties.

22981 Ditz Lane, 92630
Asking price: $239,900
Asking price/ sq ft: $202
Bank purchase price: $256,500
Bank purchase date: 4/4/08
Size: 2 beds, 2 baths, 1,189 sq ft (built in 1972)
MLS: S517362 (114 days on Redfin)
ZipRealty price tracker: Price Reduced: 2/01/08 -- $324,900 to $299,900
Price Reduced: 2/14/08 -- $299,900 to $289,900
Price Reduced: 3/02/08 -- $289,900 to $279,900
Price Reduced: 3/06/08 -- $279,900 to $269,900
Price Reduced: 3/07/08 -- $269,900 to $259,900
Price Reduced: 3/15/08 -- $259,900 to $258,800
Price Reduced: 4/19/08 -- $258,800 to $239,900
From listing: Large 2 story townhome!!!! Great area, quiet and secluded street!!! Large bedrooms!!! Lots of storage!!! Large family kitchen!! Nice yard!!!! This property comes with 2 car garage!!! Great school system!! Wonderful area! Community assoc. Offers great entertaining and recreation!!! Must see!!!

Exclamation point abuse is alive and well here. The former owner "paid" $439,000 in July 2006 (essentially the peak of the market) with $0-down financing - a $351,200 first loan and a $87,800 second (80/20) from Peoples Choice Home Loan in Irvine. Surprise, surprise: This company was a lender for people "with credit problems." It also is no more as it filed for bankruptcy in 2007.

This condo went back to the bank (HSBC) for $256,500 - well below the notice of trustee sale amount of $371,548. Assuming a sale for the full asking price, it would be a decline of 45% off the peak price, not including any sales costs.

23004 Ditz Lane, 92630
Asking price: $269,900
Asking price/ sq ft: $296
Bank purchase price: $248,940
Bank purchase date: 3/6/08
Size: 2 beds, 1 bath, 912 sq ft (built in 1972)
MLS: U8001820 (15 days on Redfin)
From listing: Single-story ground level end unit in nice neighborhood. Enclosed patio, two-car garage and lots of windows --- shows light and bright.

Notice the "vintage" kitchen on the right. The image at the top of this post is the exterior shot of this property.

Not to sound like a broken record, but here we go: This property was purchased by the doomed borrower for $430,000 in December 2006 (again, either right at the peak of the market or just after) using 100% financing from JPMorgan Chase. There was a $344,000 first loan and an $86,000 second (80/20).

The NTS (notice of trustee sale) amount was $365,964, but it went back to the bank in March for $248,940. Assuming a sale for the full asking price, the depreciation then would be 37%, not including any sales costs.

This is what the street looks like:

View Larger Map
There is also a preforeclosure on the same street - 23011 Ditz Lane. This condo is the same size as 23004 Ditz Lane.

The loan in default was made in May 2007 and is for $345,000 from WaMu. Do you think it would be wise for the borrower to struggle to keep the property with this much debt, considering banks can't unload homes here when they are asking in the low to mid $200,000s?

And, just for kicks: 23008 Ditz Lane has a "make me move" price on Zillow of $425,000. LOL.

"Super" reduction not cutting it in Lake Forest

This Lake Forest REO has been sitting on the market for a few months now, and has not found its next owner.

25872 Wicklow Lane, 92630

Asking price: $519,900

Asking price/ sq ft: $323
Income requirement: $129,975
Peak purchase price: $693,000
Peak purchase date: 12/9/2005
Size: 3 beds, 2.5 baths, 1,609 sq ft (built in 1987)

MLS: S500509 (184 days on Redfin)

ZipRealty price tracker: Price Reduced: 10/10/07 -- $610,000 to $597,000
Price Reduced: 12/4/07 -- $597,000 to $555,000
Price Reduced: 12/11/07 -- $555,000 to $550,000
Price Reduced: 1/30/08 -- $550,000 to $519,900
2006 property tax: $7,309
HOA dues: $60
Type: Single Family Residence

Style: Contemporary

Stories: Two Levels
Lot size: 5,000 sq ft
From listing: SUPER PRICE REDUCTION! 3 bedroom 2.5 bath home in excellent area of Sterling Heights. French Doors in formal dining room lead out to patio with views of the city and mountains. Walk to parks and schools. Large rear yard great for entertaining and very private. Brand New Fence installed on side of home.

It appears the lender is motivated to get this one sold judging by the frequency of the price reductions alone...but if it was significantly overpriced to begin with, doesn't that change everything?

Nice to see how many photos there are of this place, considering more than a few REOs tend to have one grainy photo of the exterior. I chose the image on the left because it appears to show the "brand new fence installed on side of home."

This property went back to the bank for $601,111 in mid-July, and has been for sale since early August. The six-month anniversary was a few days ago.

Garage appears to need a bit of cleanup work. Is the ceiling on the left side of this photo supposed to be exposed like that?

The location might also be an issue. It essentially backs up to Lake Forest Drive, though there is a bit of green space separating the house from the street. That may or may not provide adequate insulation from traffic noise.

School wise, it's very close to an elementary school and El Toro High.

Assuming a sale at the current asking price, the decline from the peak in late 2005 would be $173,100 or 25%, not including any sales costs.

Lake Forest comp killer

A reader alerted us to this Lake Forest home that is threatening to help re-write the comps in the immediate area. It still seems a bit pricey at $371 per square foot, but it's certainly lower than the competition, which we will also review.

24242 Palmek Circle, 92630 (easy address number to remember)

Asking price: $424,500

Asking price/ sq ft: $371
Income requirement: $106,125
Size: 3 beds, 2 baths, 1,144 sq ft (built in 1965)

MLS: Y800298 (21 days on Redfin)

ZipRealty price tracker: Price Reduced: 1/24/08 -- $462,000 to $424,500
Type: Single Family Residence

Style: Contemporary

Stories: One Level
Lot size: 7,434 sq ft
From listing: Single story home in a safe and quiet neighborhood features 3-bedroom, 2-bath, spacious backyard with raised patio area, trees and flowers that provide a cozy space to make the perfect place to end your day. Property is sold in 'AS IS' condition with no warranties. Bring your best offer.

We don't have any sales history for the property, but from the description it's a pretty safe bet that this is either a short sale or a full-blown foreclosure situation. It's also apparent from the price slash on Jan. 24 that the seller/bank is anxious to get out of this place.

How does this compare to what the neighboring properties are asking? Glad you asked. While we obviously can't compare the exact condition of the properties (in fact, we guess our subject property is likely the worst of the bunch), it gives us a general indication of the direction of the market, with our property as the low-priced leader.

All of these comps have the same number of bedrooms and bathrooms, and are roughly the same size as the subject property.

24221 Ankerton is slightly smaller. Asking price: $589,900. Days on Redfin: 29. Zillow says the owners paid $648,000 in 2006, so it looks like they're desperately trying to cling to as high a price as possible.

24276 Larkwood is a bit larger. High asking price: $550,000. Days on Redfin: 26. Sellers paid $575,000 in 2005.

24191 Larkwood is virtually the same size as the subject and is a fixer. This is probably the closest match to our original property. Asking price: $470,000. Days on Redfin: 17. Last sale was for $593,000 in 2005.

23911 Landisview is somewhat larger than the subject and has a nicely remodeled kitchen. It's being marketed as a move-in-ready property, so we can expect a small premium on this over the project that is our original property. Asking price: $549,900. Days on Redfin: 30. Last sale was back in 2001 for $269,500. The question is how much money was spent remodeling. Theoretically, the sellers will realize a good profit when they find a buyer.

It's clear that, compared to our subject property, all of these competitors now look very overpriced. We can also conservatively estimate that property values in this immediate area have probably fallen anywhere from about 20-30% from the peak, based on past sales and current asking prices.

The race to the bottom has begun.

Lake Forest 2003 rollback

This Lake Forest condo is on the market for $160,000 less than it sold for in 2006, according to Zillow. The asking price also happens to be the same amount the property fetched in 2003.

Asking price: $280,000

Asking price/ sq ft: $258
Income requirement: $70,000
Purchase price: $440,000
Purchase date: 4/21/2006
Size: 3 beds, 1.5 baths, 1,085 sq ft (built in 1974)

MLS: P608426 (61 days on Redfin)

2006 property tax: $3,137
HOA dues: $215
Type: Condominium

Style: Colonial

Stories: Two Levels
From listing: GREAT OPPORTUNITY FOR THIS 3 BEDROOM, 1.5 BATHROOM, TWO LEVELS, WITH COUNTERTOP GRANITE, TRAVERTINE FLOORS.

How would you like to have to share one full bathroom among three bedrooms? Whomever took the photos also forgot to throw in a pic of the granite counters. Shame.

As we mentioned above, this property is asking significantly less than the 2006 price. Assuming a sale, the total loss would be $176,800, including 6% sales costs. The nominal depreciation would be 36% (not including transaction costs).

But it's also interesting to note that coincidentally (or not) the price being offered is the same one the property sold for in June 2003 - erasing four and a half years worth of phantom equity.