There has been an empirical increase the the number of NODs up at Incline Village and around the lake. 5 of the 9 resales last month were REOs or short sales (2 of the organic sales were over $4M – wow). Maybe it’s not so different up there after all.
I don’t know or track the real estate market up there like some of you readers do, but 889 Tyner caught my eye when the NOD was filed. I look forward to comments from you folks who live up there and have probably toured this listing and can put it into market context. The loan history is what is what piqued my interest, especially in light of Diane’s video post on Option ARM loans.
889 Tyner is a 2088 SF 3 bedroom 2 bath home built in 1980. The current owner purchased the property in 1993 for $310,000. There looks to have been a couple of refinancing before I can start tracking the transactions, then:
10/01 Refi $458,000
12/01 HELOC $100,000
8/03 Refi $745,000 125% Option Arm (OA)
12/03 $50,000 Second
3/04 HELOC $100,000
9/05 Refi $900,000 115% OA
12/05 HELOC $120,000 (doesn’t look like it was all tapped)
9/06 Refi $932,000 115% OA 40 year (initial payment $2468.36)
12/08 NOD
The house is currently listed "as-is" at $889,000 with 303 days on market (I am obviously barred for life from joining any local MLS, so I don’t know the original listing price or reduction history). Permits were pulled in 2004 for a major remodel, and the listing pictures show a pretty well upgraded Pergraniteel property. 609 Dorothy also just NODd, but that looks like an entirely different story. So did 420 First Green.
So we have an "early and often" adopter of the Option Arm loan in distress. As a general rule, a 30 year OA loan can go neg-an about 5% a year with minimum payments. This is the first 40 year OA I have run into, but I assume it would go negative at a faster rate (and assume if there is one, there are a lot of them).
Is this Incline indecline?
(Note: No Realtors were harmed in the production of this post. In situations that could have put the participants in peril, professional stunt loans were employed)
Marla
Now don’t anybody say anything bad about the serial refiancer here, ok? All comments must be sterile, and unrelated to this particular person. You all can talk about a hypothetical person is all. And don’t say anything mean about this house either. You can talk about generic Incline houses is all.
Paul
I remember looking at that house last summer, it was listed north of 1.2 Million
Imagine, just for a second, that they got a 15-year loan on the property when they bought in 1993. It would be paid off by now. Am I living in the stone age or what?
Cooler
Yes, Paul, that is true. However, if the hypothetical owner of a hypothetical house under hypothetical circumstances as described by Mike in this thread, were to have simply financed with a 15 year loan 15 years ago, and just paid it off, they would not have been able to buy boats and cars and vacations and snotty cocktails at Garwoods for 15 years. Hypothetically speaking, of course.
Paul
That wasn’t a bad plan either. Buy for 310k, enjoy 15 years of new cars, boats, vacations, cocktails at Garwoods, then “sell” the house to the bank for 932k plus deferred interest.
smarten
How timely Mike.
Today my favorite Incline agent [Don Kanare] posted his 2008 Year in Review [ http://www.insideincline.com/Incline-Village-RE-News-Dec-2008.php ]. It’s actually kind of comical.
Don asserts Incline Village real estate is bucking the national trend because: of “the minor 7% decline in the median price of a single family residence in Incline is about as good as it gets;” and, “most owners [although apparently not this one] have tremendous staying power. What [he] mean[s] by this is, most of the purchases and sales…are discretionary and not the result of a job transfer or some other need to relocate. When sellers have the option of holding onto their property for their own personal enjoyment or they can rent it out to earn additional income it alleviates the pressure to sell at any price. So, although we may be in a period of relatively low unit sales for another year or two, it does not look like there is any danger of a wholesale price collapse in the Incline Village real estate market.”
The Incline Village SFR median sales price is remaining steady because virtually no SFRs are selling [80 YTD, 1 in November and 2 so far in December]. When unit sales drop as they’ve dropped in Incline Village, the median sales price becomes irrelevant.
Also, although the median sales price has remained constant, the type of property that can be purchased for that median, is heads and shoulders over what could be purchased as recently as a year ago.
Although there may not be a price collapse, there sure are a lot of distress sales insofar as a community where its property owners are allegedly under no pressure to sell at any price.
SmartMoney
Haha, yeah I was reading the commentary by Don Kanare and couldn’t stop laughing. What a goof. He needs to get a clue. Oh no, am I aloud to say that on here?
BanteringBear
Thanks for the link, Smarten. I enjoyed laughing out loud. I would recommend Don take a course in economics, but that’s so clearly beyond him that I’ll refrain from any suggestions other than he stay from controlled substances.
BanteringBear
…stay AWAY from…
Reno Ignoramus
It was April 24, 2007, that Diane put up her first link to Mr. Kanare. Back then, he said that because there were no subprime borrowers in IV, that price declines were impossible in IV. Both BB and I responded to Mr. Kanare that IV was not immune to the financial forces of the world.
You can look it up in the archives. Some things never change.
Paul
Thanks for the entertainment Smarten. The commentary of Don Kanare is truly ridiculous. He is the Baghdad Bob of Tahoe real estate.
“Staying power” btw is a side effect of SSRI type anti-depressants. I dont think it applies to any of the 149 NOD/NOS/REO properties listed on Realty Trac in the Incline zip code.
The collapse in volume of the last few months (following a steady and substantial decline over the last few years) presages lower prices. I cant think of any assett class where it doesn’t work that way.
I’m really amazed that there are still so many agents that think happy talk and parrotting the NAR “its always a great time to buy” line will give them business credibility. Many Incline buyers are financially sophisticated people with advanced degrees, etc. They read, they know whats going on in the macro economy, they know that resort property everywhere is slow. Does this bs really work?
Paul
The discretionary nature of Tahoe real estate that Don Kanare raises is a double-edged sword. Job transfers, etc create a need to sell buy also create demand to buy at the other end. Resort real estate is a luxury that no one NEEDS to buy. There’s plenty for rent, both short and long term. That’s why volume can (and nearly has) gone to zero.
inclinejj
Well, being in Incline for the last 20 years..I have a little better grip on what has gone on..Most of the agents in Incline jumped into the market w/i the last 5 years and have not gone thru a down cycle
I know Don, pretty well, and he has a better idea what goes on in the local market then most local agents..
Realty Track has some properties on there listed back 2 years ago as NOD’s.
889 Tyner is way up at the very top of Incline..then again your higher up then Donner Summit..You better love the snow..cause you will get twice the snow as Lakeshore Drive..
RI I have pulled the loan records for Incline Village there are not that many subprime loans..Some where used to buy “low end” condo’s back during the boom..
What concerns me is the large amount of Adjustable rate mortgages used in Incline..
Even during the boom days the Days On Market in Incline has always been longer then say the Bay Area..
I have not read Don’s comments yet and will go over the read them
smarten
Well what makes this Don issue more amusing to me is that our friend is now in the midst of his first short sale – he’s representing a buyer for 1005 Apollo Way [Joe Francis’ (Girls Gone Wild) former home]. There’s a first and second against the home that total about $2.1M. The listing agent didn’t even realize her former asking price [$2M] was insufficient to pay the liens and costs of sale against the property until she received an offer that fell apart for this very reason.
Now Don comes along with an offer which requires bank approval and he’s keeping we readers informed of his progress. Well in this instance no one has even asked the bank so I think he’s got a good three month wait on his hands – most of us on this blog have seen the movie.
About 8 months ago Don touted another property on his web site [a Third Creek (condo) foreclosure] he opined was ripe for a short sale [this was a “buzz” word being used at the time by many agents who really knew nothing about the process but wanted to be viewed by the public as if they were market savvy]. At that time he and I communicated on the subject and I asked him outright if he had ever been involved in a short sale [and if he knew what had to take place]? His answer was “no” and after I shared some of the facts of life with him, he agreed the property was not a good short sale prospect. It was quietly removed from his web site.
My prediction is Don’s short sale will fall apart for predictable reasons. Even if it doesn’t, why is he now touting how Incline Village is immune from these types of sales when he is personally involved in one of them? To me Don would be scoring a whole lot more points if he simply called a spade a spade and touted how knowledgeable he was in the distress sale segment of the market. Oh well…
billddrummer
I haven’t read Don’s column, but I’ve got some data on Option ARMs.
Not only does the negam accrue at 5% annually, but all the ones I’ve seen have a maximum cap of either 115% or 120%. In other words, once the deferred interest makes the loan balance 115% of the original balance, the loan resets at the run rate, and is amortized over the REMAINING TERM.
In the Tyner Lane loan, the run rate is 3.45% over the 12-month Treasury constant maturity index
http://www.federalreserve.gov/releases/h15/data/Annual/H15_TCMNOM_Y1.txt
If my calculations are right, the monthly payment jumps from $2468.36 to $7,492.24. Two things happpened–the loan reached its cap of $1,071,800, and the term was cut from 40 to 38 years.
This is the Option ARM tsunami that pundits are referring to. The catch now is that homes have fallen in value, not appreciated, yet I’m guessing most borrowers paid the teaser rate (1.25% here), not expecting to reach the cap before they could refinance to a fixed rate.
Now they can’t refinance or sell.
CommercialLender
BillD,
Your 12 TCM rate of 4.53% was 2007’s. Current 12 TCM, I show, is only 50 bps:
http://www.bankrate.com/brm/ratewatch/1yr-treasury.asp
Making the new payment “only” $4,543. Still, its over $2,000 more per month, nearly double. And this example is a rarity of a 40 year deal: many many many more are 30’s that now reset to 25 and 28’s.
This is WHY in my opinion, the Fed is doing anything they can to get rates low. Otherwise, you are exactly right – the OA rate-reset tsunami will put the deflationary nail in the US economy coffin by further decimating housing values in many markets.
billddrummer
To CommercialLender,
Thanks for correcting me. From my review of the loan documents, it was hard for me to tell which index would be in effect.
I guess the owner didn’t have an extra $2000 in his budget.
Diane Cohn
Paul said: “The collapse in volume of the last few months (following a steady and substantial decline over the last few years) presages lower prices. I cant think of any assett class where it doesn’t work that way.”
I absolutely agree. That’s exactly the pattern we saw down here in Reno-Sparks… fewer units, lower volume, and declining prices reluctantly following. Prices will go lower in Incline Village, it’s just a matter of time. Which means Smarten’s decision to continue renting was particularly prudent.
smarten
Okay, I’m going on a tangent but still in Incline.
I check craigslist daily for new listings in Incline, and this one at 346 Winding Way [ http://reno.craigslist.org/reb/961770488.html ] was placed again, today, by a Chase agent. If Mike does the history on this one, I’m sure he’ll find out that the owner is a local mortgage broker who got hung up in the kinds of garbage loans he was pushing off on his clients several years ago. I think it’s an Option/ARM first with a big HELOC second [if memory serves me correctly, I think both with WAMU (but I could be wrong)]. My guess [because of negative amortization] is the seller owes a good $1.6M+. And BTW, this home is nice but it’s adjacent to Highway 28 [very noisy] in a lousy neighborhood with no views [but for the highway].
Well the delusional seller started out 8 or more months ago trying to get $1.8M for the home. No takers. Then about 3 months ago he dropped his sales price to $1.6M. Again no takers. My wife and I looked at the home back then, did some research and clued in the listing agent there was more owed against it than her asking price.
Well another 2 months went by and then all of a sudden the listing gets modified to state “short sale opportunity.” When I see the modification I think to myself, DUH!
Well several weeks ago the listing agent e-mails me to say she’s getting an offer she’s going to present to the Bank and do I want to go into a bidding war? I respond no because I already know the Bank will eventually set the sales price and when it does, the buyer who submitted the offer will have no advantage because the Bank will reserve the ability to field higher offers [from people like me, assuming I’m so inclined].
I was perplexed to see the new craigslist listing – because I thought the property was already under contract. So I e-mailed the agent to find out what’s up. I’m told the seller received multiple low ball offers but he had refused to accept any and the property was still available. And because no offers were accepted, nothing has been presented to the Bank so no one knows what it will ultimately agree to sell the property for.
Well I was and am pissed and I felt like telling the agent why. I thought the reasons might make interesting reading so here they are [and I don’t give a damn what the agent thinks about my comments because they’re factually correct].
HOW DARE the seller be so arrogant to reject ANY offer now that he’s resigned to a short sale. Since he’s no longer got skin in the game and he has pillaged whatever equity there once was in the home, what standing does he have to pick and choose what gets presented to the Bank for its eventual approval/disapproval?
But more importantly, why would an agent ever, ever keep a listing like this when the seller is an impediment to the agent’s ability to bring about a sale and earn a commission?
IMO the problem out there in the higher price segment of the marketplace isn’t really the delusional seller as so many of us complain. It’s really the “yes mentality” agent [and here we’re talking Chase]. If no agent would take on a listing like this [and IMO NONE should], maybe the delusional seller would see reality and actually do something to actually sell his property. And maybe if he did, not only would the agent earn a commission but maybe the home would actually sell. And if the home actually sold, maybe we’d start working ourselves out of the mess we’re in. And maybe then the economy would start to stabilize.
But no; it’s really the delusional agent that’s dragging this market down. If you the agent were an attorney, we’d say that if you can’t control you’re delusional seller-client, you have no business calling yourself a professional because you’re an impediment to dispute resolution. Well the same concept applies here in the local real estate kingdom. I only wish there were a way to put pressure on the delusional and ineffective agents out there!
Paul
Skimming through the craigslist ads for Incline, I still see agents touting access to the “private beaches”. This amazes me given the fact that IVGID has removed the “private beach” signs from its properties and has admitted in a hearing before Judge Reed in Federal Court that IVGID is, and owns the own beach properties as a governmental agency. At least one brokerage that I’m aware of has crafted a mandatory disclosure regarding the beach issue to prevent its agents from making representations or warranties regarding beach access.
inclinejj
420 First Green goes to Trustee sale on 3-25-2009
inclinejj
609 Dorothy IV goes to sale 6-23-2009
billddrummer
To Inclinejj,
FWIW, on 609 Dorothy there’s a $385,000 second behind the $1.1 million 1st. The 1st is in default.
No indication from the Assessor’s website. Owners of record are still shown as owners, and the last recorded docuent referenced was their $1.6 million purchase in April 2006.
inclinejj
889 Tyner IV foreclosure sale scheduled for 8-12-2009 cancelled which means one of two things:
1. Loan modifcation
2. Sale date will be republished and the property reposted for future sale date.
I do not remember if the property has closed escrow..Smarten??