Vintage Wine

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Vintage Wine -- Moody Blues

Isn't real estate supposed to be like vintage wines that get better with age? Rare vintage wines can get very expensive, and unless they turn to vinegar, their prices do always go up. Well it appears the 2006 vintage homes are all turning to vinegar now because they certainly are not appreciating in value.

Today I want to relay a story to you that was told to me by a real estate developer currently buying property in one of our most blighted California bubble markets. His company is purchasing this particular property from the bank for far less than the original loan amount. Do you remember the residual land value calculations from Land Value 101? This particular property was ready for the construction and sale of houses in 2003. The original prices were $400,000 in this particular market. By 2006, houses were selling for $700,000. When sales volumes plummeted, the builder gave up and let the property go back to the bank. The developer ran a proforma using a $275,000 house price. As you can imagine, this did not leave a large residual land value. The bank took the offer. This developer knows he can build and sell houses profitably for $275,000 in this particular market. If prices increase, he stands to reap a windfall. His only real concern is the competition from the REOs, particularly all the previously built homes in this subdivision he is undercutting by over 50%. He knows he is probably going to cause more walkaways, but prices are what they are, and as long as he can build and sell $275,000 houses, it isn't his problem.

Fortunately, for those living in Irvine, the developer is financially stable, and it is concerned about long-term house prices and probably will not cut prices over 50% to move homes. As we noted with the problems in Columbus Grove, those who are off the Ranch are not so lucky. Today's featured property is another of the bad 2006 vintage properties in Woodbury. This seller is really being hosed by his competition as he owes $184,000 more on his property than his comparable neighbor is asking for sale.

Asking Price: $489,000

Income Requirement: $122,250

Downpayment Needed: $97,800

Monthly Equity Burn: $4,075

Purchase Price: $554,500

Purchase Date: 10/12/2005

Address: 142 Vintage, Irvine, CA 92620

Beds:3Baths:3Sq. Ft.:1,526$/Sq. Ft.:$321Lot Size:-Property Type:CondominiumStyle:MediterraneanYear Built:2005Stories:3+ LevelsFloor:1View:Hills, MountainArea:WoodburyCounty:OrangeMLS#:S529072Source:SoCalMLSStatus:ActiveOn Redfin:133 days Unsold in 90+ days

Beautiful living space in the heart of Woodbury. Enter the outdoorliving area down a walkway that opens into a private courtyard withoutside fireplace where neighbors gather around patio table &chairs. Ground floor entry with bedroom converted into a home officewith built-in. Go upstairs to main level with spacious living room withfireplace & custom built media center. Open plan gourmet kitchenwith granite countertops & island, maple cabinets & stainlesssteel appliances. Top level features the master suite with walk-incloset. The master bath has dual sinks with marble countertops, tubsurround and separate shower enclosure. Community amenities include 5pools, basketball, tennis and volleyball courts. Wonderful, newshopping centers with restaurants. Convenient to 5 freeway and 241 tollroad.

That is a well written description. It is so rare, I thought it necessary to comment on it.

This property was purchased on 10/12/2005 for $554,000. The owners used a $443,000 first mortgage, a $110,700 second mortgage and put $300 down. On 3/21/2007 they refinanced their second for $141,000 pulling out a quick $30,000. Now that prices are dropping and they got all they could out of the property, they see no need to keep paying the big debt, so they are walking away. Does anyone blame them? Does anyone think we won't be seeing a lot more of this?

.

I remember the taste of the vintage wine
From '63 through to '69
And I'm proud of the things we believed in then
If I had the chance I'd go around again

Oh I tell you
We were young and free
Oh I'll tell you
'Cause I was there you see

And I look to the future with open arms
And the songs that flow from my old guitar
And I want to be there when the music plays
And the lights go up on the empty stage

Oh I tell you
Music set me free
Oh I tell you
It sounds so good to me

Vintage Wine -- Moody Blue

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