The owner of a 4 bedroom, 3 bath, 2136 sq. foot home at 22931 Hazelwood in Lake Forest is in pre-foreclosure.
The home's sales history includes:
February 3, 2005 $ 607,000
July 21, 2005 $ 775,000
One and a half year later, the owner defaulted on a $620,000 loan, having already put $155,000 down initially, but failing to keep up with home payments. Ultimately, the owner's overdue payments piled up to $23,300, forcing the funniest of mortgage lenders, Washington Mutual, to foreclose.
Now the house is again up for sale.
The loan default and the foreclosure are sad occurences for the owner and family and represent one problem.
The second problem is the new sale price.
The realtor is creatively positioning the home at around $750,000 "as is", despite the fact that most comparable homes next to this one are now hovering precariously around or below the $650,000 mark. The annual trend for this area of Lake Forest is definitely going south. The realtor may himself be mesmerized by the Zillow Zestimate for this home at $794, 238 as justification for his so called "aggressive, $50K markdown".
The home itself is pretty and good-sized, but it will need considerable repair work inside and out, since a large family with children was living in it.
Lake Forest is a great place to live. No question. Probably among the best communities in Orange County and the entire state of California. It lies at the feet of the gorgeous Saddleback mountain range. The neighborhood is beautiful with nearby parks and walking trails. Crime is low. Streets are clean and meticulously maintained. Plus, Saddleback district schools are among the state's best.
But let's set that aside for one moment and consider the following:
- The Orange Country home market is entering a dire state. Even realtors acknowledge this fact. Home values remain clearly overstated following 3 to 5 years of unjustified price pumping by the local real estate and mortgage industry leaders, and through high sales of unsecuritized, high-risk mortgage loans, which made buying such expensive homes easier for those who, under better loan regulation, would likely not be given the time of day by a Washington Mutual.
- The median income for a Lake Forest family is $75,000. I repeat. That is the median income. If one earns this amount or less than this, I'm sorry to say, but you have absolutely no business trying to "purchase" a home here.
- Assuming zero down, the new 22931 Hazelwood home sales price would demand a typical family in Lake Forest to purchase a mortgage loan of 10 times the median income, most likely 2 deeds of trust and formed as either an option ARM or interest only mortgage loan. This is textbook financial suicide for any family when the housing market is already considered dangerously unstable.
Whether or not 22931 Hazelwood is worth every penny of $750,000, I will let other debate.
Lake Forest area home values are on a slow, gradual decline. One home, also on Hazelwood has already has lost $25,000 in estimated value since January 1, 2007.
And for sale signs are NOT coming down.
The for sale sign is still up at 22931 Hazelwood. There may be bites, but if prospects continue to show patience and fear for area declining home values, then the realtors/lenders sale price must be brought down.
As for the owner, he or she just wanted to own a home and likely did not realize the massive amount of money needed on a monthly basis to keep head above water.
He or she likely was caught up in the 2005 euphoria of pseudo-homeownership in Orange County pumped up by area realtors with the slam-dunk sales pitch that "OC real estate value never go down". Who knows what qualification process used by Washington Mutual entailed in order to substantiate a massive $620,000 loan.
But the home buyer clearly couldn't keep up.
It must be a hard lesson for one to learn, as a person's credit score and ability to buy another home someday will be forever affected in an market economy now destined for more restrictive lending practices going forward.