Collusion among homeowners in Tustin Ranch?

O

oc_35_IHB

New member
Real interesting times in the exclusive neighborhood of Emerson in Tustin Ranch. The last 2 sales were as follows:



1/30/09 - 2430 Payatte Place / 4200 sq ft / $1,500,000 (appears to be a normal sale)

2/13/09 - 2484 White River Way / 4100 sq ft / $1,255,000 (REO)



Well after the REO closed all listings were pulled and there was no action for 2 weeks. In the last 2 weeks, 4 houses have hit the market all with peak pricing:



<a href="http://www.redfin.com/CA/Tustin/2357-Lassen-Way-92782/home/5769100">2357 Lassen Way</a> - 3600 sq ft / $1,625,000

<a href="http://www.redfin.com/CA/Tustin/2459-White-River-Way-92782/home/5769261">2459 White River Way</a> - 3,600 sq ft / $1,649,880 (same street a the REO)

<a href="http://www.redfin.com/CA/Tustin/10635-Sumter-Way-92782/home/5769232 ">10635 Sumter Way</a>- 3,300 sq ft / $1,789,000 (this genius thinks he made $189k on his 2005 purchase)

<a href="http://www.redfin.com/CA/Tustin/10627-Sumter-Way-92782/home/5769227">10627 Sumter Way</a> - 3,526 sq ft / $1,675,000



I realize that this isn't collusion in the literal sense as no one was defrauded/mislead but I would bet a shiny silver dollar that these jokers (err homeowners) got together and the conversation was a long the lines of "Ok, so this REO is going to crush the comps but if we all price our homes at peak, then buyers will have no choice". 2 of the homes are underwater while the other 2 were purchased from the builder so most likely there is quite a bit of equity. Once one of the distressed guys starts to lower it will be a race to the bottom.



I really like this neighborhood due to the large lots, proximity to freeways (5, 241, 55) and Peters Canyon so I was happy to see the REO close and set a new bar (at least I thought so). I would like to see these homes get back to 2001 pricing which would put them around $1M. This is not too far from the REO close in Feb.
 
[quote author="oc_35" date=1237182114]Real interesting times in the exclusive neighborhood of Emerson in Tustin Ranch. The last 2 sales were as follows:



1/30/09 - 2430 Payatte Place / 4200 sq ft / $1,500,000 (appears to be a normal sale)

2/13/09 - 2484 White River Way / 4100 sq ft / $1,255,000 (REO)



Well after the REO closed all listings were pulled and there was no action for 2 weeks. In the last 2 weeks, 4 houses have hit the market all with peak pricing:



<a href="http://www.redfin.com/CA/Tustin/2357-Lassen-Way-92782/home/5769100">2357 Lassen Way</a> - 3600 sq ft / $1,625,000

<a href="http://www.redfin.com/CA/Tustin/2459-White-River-Way-92782/home/5769261">2459 White River Way</a> - 3,600 sq ft / $1,649,880 (same street a the REO)

<a href="http://www.redfin.com/CA/Tustin/10635-Sumter-Way-92782/home/5769232 ">10635 Sumter Way</a>- 3,300 sq ft / $1,789,000 (this genius thinks he made $189k on his 2005 purchase)

<a href="http://www.redfin.com/CA/Tustin/10627-Sumter-Way-92782/home/5769227">10627 Sumter Way</a> - 3,526 sq ft / $1,675,000



I realize that this isn't collusion in the literal sense as no one was defrauded/mislead but I would bet a shiny silver dollar that these jokers (err homeowners) got together and the conversation was a long the lines of "Ok, so this REO is going to crush the comps but if we all price our homes at peak, then buyers will have no choice". 2 of the homes are underwater while the other 2 were purchased from the builder so most likely there is quite a bit of equity. Once one of the distressed guys starts to lower it will be a race to the bottom.



I really like this neighborhood due to the large lots, proximity to freeways (5, 241, 55) and Peters Canyon so I was happy to see the REO close and set a new bar (at least I thought so). I would like to see these homes get back to 2001 pricing which would put them around $1M. This is not too far from the REO close in Feb.</blockquote>
Their strategy won't work, sooner or later the weakest links will be exposed and further REOs will drive the prices of these homes down. They can list their homes for whatever they want, but what they actually sell for is a whole different story.
 
[quote author="oc_35" date=1237182114] I would like to see these homes get back to 2001 pricing which would put them around $1M. This is not too far from the REO close in Feb.</blockquote>


Dream on. . .
 
[quote author="usctrojanman29" date=1237182514][quote author="oc_35" date=1237182114]Real interesting times in the exclusive neighborhood of Emerson in Tustin Ranch. The last 2 sales were as follows:



1/30/09 - 2430 Payatte Place / 4200 sq ft / $1,500,000 (appears to be a normal sale)

2/13/09 - 2484 White River Way / 4100 sq ft / $1,255,000 (REO)



Well after the REO closed all listings were pulled and there was no action for 2 weeks. In the last 2 weeks, 4 houses have hit the market all with peak pricing:



<a href="http://www.redfin.com/CA/Tustin/2357-Lassen-Way-92782/home/5769100">2357 Lassen Way</a> - 3600 sq ft / $1,625,000

<a href="http://www.redfin.com/CA/Tustin/2459-White-River-Way-92782/home/5769261">2459 White River Way</a> - 3,600 sq ft / $1,649,880 (same street a the REO)

<a href="http://www.redfin.com/CA/Tustin/10635-Sumter-Way-92782/home/5769232 ">10635 Sumter Way</a>- 3,300 sq ft / $1,789,000 (this genius thinks he made $189k on his 2005 purchase)

<a href="http://www.redfin.com/CA/Tustin/10627-Sumter-Way-92782/home/5769227">10627 Sumter Way</a> - 3,526 sq ft / $1,675,000



I realize that this isn't collusion in the literal sense as no one was defrauded/mislead but I would bet a shiny silver dollar that these jokers (err homeowners) got together and the conversation was a long the lines of "Ok, so this REO is going to crush the comps but if we all price our homes at peak, then buyers will have no choice". 2 of the homes are underwater while the other 2 were purchased from the builder so most likely there is quite a bit of equity. Once one of the distressed guys starts to lower it will be a race to the bottom.



I really like this neighborhood due to the large lots, proximity to freeways (5, 241, 55) and Peters Canyon so I was happy to see the REO close and set a new bar (at least I thought so). I would like to see these homes get back to 2001 pricing which would put them around $1M. This is not too far from the REO close in Feb.</blockquote>
Their strategy won't work, sooner or later the weakest links will be exposed and further REOs will drive the prices of these homes down. They can list their homes for whatever they want, but what they actually sell for is a whole different story.</blockquote>


Right, its a free country and you can list for whatever price you like. I just thought it was funny that 4 houses hit the market in 2 weeks all ignoring the REO that just closed. There is probably a psychology lesson in there somewhere.
 
[quote author="ABC123" date=1237182887][quote author="oc_35" date=1237182114] I would like to see these homes get back to 2001 pricing which would put them around $1M. This is not too far from the REO close in Feb.</blockquote>


Dream on. . .</blockquote>


Do you live in Emerson?
 
[quote author="ABC123" date=1237182887]



Dream on. . .</blockquote>


The last laugh on this subject is going to be a bitter one...



Nobody in Orange County is going to maintain values over $350 sq/ft in a 3000 sqft place without a view of the water.



Basically, every house over 417K needs to cut the gap between their bubble peak value and the 417K mark by two thirds.
 
[quote author="Hormiguero" date=1237188864][quote author="ABC123" date=1237182887]



Dream on. . .</blockquote>


The last laugh on this subject is going to be a bitter one...



Nobody in Orange County is going to maintain values over $350 sq/ft in a 3000 sqft place without a view of the water.



Basically, every house over 417K needs to cut the gap between their bubble peak value and the 417K mark by two thirds.</blockquote>


Beleive it or not, not everyone wants to live near the beach or have a view of the water. Some people value space and privacy over the prestige of certain trendy locations.



I don't think the prices on those particular Tustin Ranch homes will go back to 2001 prices. In 2001, 2357 LASSEN Way sold for $751,500. At $350 sq/ft, that would still be $1,260,000 - a far cry from 2001.
 
I will wait anxiously to see this thread one year from now. We'll see, but I think most will be in for a surprise (probably not many IHB'ers). Some understand that the bubble has burst and some actually still live in a bubble that has yet to burst and think it won't.
 
These are nice homes, but they are certainly not spectacular. They appear to have few custom or unique features. The pictures of the Lassen house in particular show just a series of basic rooms with a strip of crown molding and the predictable white plantation shutters on the windows. There is nothing here that seems to justify the 1.6 Million price tags. Even the '02 prices paid are looking a bit robust. These will sit there for three months and then someone is going to crack and start chasing the market. But they are so overpriced I don't think they can run fast enough at this point.



What an odd quartet of sellers they've got there in Tustin Ranch. Totally and utterly delusional.
 
I'm curious if you had looked at the REO as well as the other properties that are currently for sale? I have no idea what those homes should be worth, nor do know where the bottom will be, but I don't think an REO defines the new bar for the other homes. Not only are the foreclosed properties often neglected or even abused, but you also have to deal with the as is terms. A seller has to disclose everything that they are aware of, but a bank that is the seller doesn't know anything, so you really don't get much in the way of disclosure. Sure, you'll get a termite report, but if you really want to know about the condition of the house you have to pay an inspector on your own dime and even the best ones can't see everything.
 
[quote author="stepping_up" date=1237240297]I'm curious if you had looked at the REO as well as the other properties that are currently for sale? I have no idea what those homes should be worth, nor do know where the bottom will be, but I don't think an REO defines the new bar for the other homes. Not only are the foreclosed properties often neglected or even abused, but you also have to deal with the as is terms. A seller has to disclose everything that they are aware of, but a bank that is the seller doesn't know anything, so you really don't get much in the way of disclosure. Sure, you'll get a termite report, but if you really want to know about the condition of the house you have to pay an inspector on your own dime and even the best ones can't see everything.</blockquote>


I did. It had about 20 pics on the MLS and it looked to be pretty close to the other houses. The one negative is that it bordered to Pioneer which is a fairly busy street. The fact that it is 700 sq ft larger than the homes for sale will offset the undesireable location to a certain extent. I agree that the homes listed should sell for more than the REO but not 400k more.
 
Never underestimate how much parents are willing to overspend to send their children to the highest scoring elementary and high schools.
 
2459 White River Way will be the first to blink.

They bought in ?06 at 1.8M.

They?ll be plenty motivated.

Once that baby adjusts and their monthly payment skyrockets.

The others bought in '01-'02 at a much lower price point.

They'll continue to hold out still hoping to get top $$$.
 
[quote author="tenmagnet" date=1237246956]2459 White River Way will be the first to blink.

They bought in ?06 at 1.8M.

They?ll be plenty motivated.

Once that baby adjusts and their monthly payment skyrockets.

The others bought in '01-'02 at a much lower price point.

They'll continue to hold out still hoping to get top $$$.</blockquote>
Agreed. However, we can't just look at the properties that are listed for sale to see the upcoming pain. I'm sure there are folks in that tract who don't have a home for sale who are at-risk. We'd have to go home-by-home to see when the purchase was made and what the total debt per property is to see that.
 
Looking at the <a href="http://www.redfin.com/search#lat=33.76493138949815&long;=-117.76227951049805&market=socal&sold_within_months=1200&status=1&v=4&zoomLevel=17">redfin map</a>, it seems like there are a lot of original owners who purchased around the $850,000 range in 2001.
 
The second wave of foreclosures is coming, and it will be larger than the first wave. It will consist of the upper range of mortgages; $500,000 to $2,000,000. These are the Alt-A and prime borrowers who entered fixed for five year, and adjustable after five years mortgages. Prices will go way below 2001 prices for upper end properties, but very few folks will be able to afford them.





Most of the foreclosures in the upper end market are not trashed and are in move-in or close to move-in condition.
 
[quote author="ABC123" date=1237248369]Looking at the <a href="http://www.redfin.com/search#lat=33.76493138949815&long;=-117.76227951049805&market=socal&sold_within_months=1200&status=1&v=4&zoomLevel=17">redfin map</a>, it seems like there are a lot of original owners who purchased around the $850,000 range in 2001.</blockquote>
So if that's the case... wouldn't that be more cause to believe that the prices will come down?



If the basis is $850k in '01, isn't $1mil reasonable? That $1.2m REO looks a bit high now.



My point is, for places that start high... I can see why there will be tons of resistance to go lower... but for a home that was bought at $850k... to think you can still sell it now for double is true Kool-Aid intoxication... regardless of school scores.
 
[quote author="awgee" date=1237249254]The second wave of foreclosures is coming, and it will be larger than the first wave. It will consist of the upper range of mortgages; $500,000 to $2,000,000. These are the Alt-A and prime borrowers who entered fixed for five year, and adjustable after five years mortgages. Prices will go way below 2001 prices for upper end properties, but very few folks will be able to afford them.





Most of the foreclosures in the upper end market are not trashed and are in move-in or close to move-in condition.</blockquote>


1 Million dollar mortgage balance

30 Years

5 percent (which is low)

$5,368 per month mortgage only no upkeep taxes etc.

$64,416 yearly mortgage only no upkeep taxes etc.

Income needed for a 33% DTI $193,248



1.5 Million dollar mortgage balance

30 Years

5 percent (which is low)

$8,052 per month mortgage only no upkeep taxes etc.

$96,624 yearly mortgage only no upkeep taxes etc.

Income needed for a 33% DTI $289,872



2 Million dollar mortgage balance

30 Years

5 percent (which is low)

$10,736 per month mortgage only no upkeep taxes etc.

$128,832 yearly mortgage only no upkeep taxes etc.

Income needed for a 33% DTI $386,496



From what I understand from a little bit of reading the economy is in tough shape. Incomes are not going up and this may effect the top end. All of the real estate agents and contractors and mortgage brokers are gone from the economy.



<a href="http://zipskinny.com/index.php?zip=92782&x=27&y=19">Tustin Demographics</a>
 
And in order to help the economy and the housing market, President Obama is planning on decreasing the mortgage interest deduction on higher income taxpayers. :cheese:
 
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