Are we on target with Irvine Renter's forecast?

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PANDA_IHB

PANDA_IHB

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As we are headed towards end of this year, Irvine Renter's chart shows between October 2008 and January 2009, the median home prices in Irvine should be between $582,100 - Oct 2008 and $555,900 - Jan 2009. Since the www.housingtracker.net has stopped updating its site I am not really sure exactly where we are as far as year to date decline. Irvine Renter's prediction was 12% decine in 2008 for Irvine. I am assuming we are down about 20% for year for Orange County as a whole, but does anyone know exactly how much we are down for the year for Irvine specific?
 
the recent CA cities dqnews shows $578K, so yes. it seems to have fared better than 90% of other CA cities with equivalent population levels.
 
[quote author="IrvineRenter" date=1227534393]If anyone has the July and October #s for Irvine, I can update the chart.</blockquote>


<a href="http://dqnews.com/Charts/Monthly-Charts/CA-City-Charts/ZIPCAR.aspx">Irvine's October number was $578k</a>. I will see if I can dig up the July numbers for Irvine. I can get the zip code break down for sure, but just the city of Irvine may not be as easy. Does anyone know if the OCR reports the monthly number for just Irvine, and if so which section it would be in?
 
[quote author="graphrix" date=1227537788][quote author="IrvineRenter" date=1227534393]If anyone has the July and October #s for Irvine, I can update the chart.</blockquote>


<a href="http://dqnews.com/Charts/Monthly-Charts/CA-City-Charts/ZIPCAR.aspx">Irvine's October number was $578k</a>. I will see if I can dig up the July numbers for Irvine. I can get the zip code break down for sure, but just the city of Irvine may not be as easy. Does anyone know if the OCR reports the monthly number for just Irvine, and if so which section it would be in?</blockquote>


I think for 2008 so far we are down 7-9% for Irvine. Might be able to hit 10% for the year by year-end.
 
Orange County as a whole is down 29% YTD and Irvine is only down 7%? O my Gosh? Wow! that is pretty impressive. It seems that the demand side is still very strong for Irvine with inventory being still very low. Whoever is buying them (Asian or non-Asian, knifer catcher or not), they are continuing to buy the Irvine homes, and the BUYERS are THERE! If we end the year with a 10% decline in Irvine, Irvine Renter's forecast for 2008 is not off by much at 12% decline.



Irvine Renter,



With all the bad economic news that you know now with the bailouts, 700 point DOW one day drop, and unemployment on the rise... Are you readjusting your forecast for 2009 for 16% decline? or keeping it the same? Where is your best estimate where the Irvine median home prices will be by Dec 31, 2009?



Is there the slightest chance that the mortgage rates may fall below 6% in 2009 to revive the real estate market. I know Awgee has told me many times that the FEDs do not have control over the mortgage rates, but is there ANY CHANCE???? It seems like reviving the U.S. real estate market may be Obama's top priority. Any thoughts?
 
"Orange County 2,645 $415,000 $585,000 -29.06%

IRVINE 179 $578,000 $622,000 -7.07%"



This looks like cooked numbers. Irvine was only $37 k or 6% higher than OC average in Oct 2007?
 
[quote author="PANDA" date=1227592554]Orange County as a whole is down 29% YTD and Irvine is only down 7%? O my Gosh? Wow! that is pretty impressive. It seems that the demand side is still very strong for Irvine with inventory being still very low. Whoever is buying them (Asian or non-Asian, knifer catcher or not), they are continuing to buy the Irvine homes, and the BUYERS are THERE! If we end the year with a 10% decline in Irvine, Irvine Renter's forecast for 2008 is not off by much at 12% decline.



Irvine Renter,



With all the bad economic news that you know now with the bailouts, 700 point DOW one day drop, and unemployment on the rise... Are you readjusting your forecast for 2009 for 16% decline? or keeping it the same? Where is your best estimate where the Irvine median home prices will be by Dec 31, 2009?



Is there the slightest chance that the mortgage rates may fall below 6% in 2009 to revive the real estate market. I know Awgee has told me many times that the FEDs do not have control over the mortgage rates, but is there ANY CHANCE???? It seems like reviving the U.S. real estate market may be Obama's top priority. Any thoughts?</blockquote>


There are three factors that will work strongly against the Irvine market next year:



1. The recession is going to hurt wages, and it will make people more hesitant to buy.

2. The ARM resets will start in earnest, and the Option ARMs will be particularly toxic.

3. The psychology will start to change due to a combination of the recession and the fact that prices have been continually falling for a long time.



I will stick with my forecast. If the drop is less than I projected, it will be because of a delay in the ARM resets leading to foreclosure. If the foreclosures are delayed, it may take longer for prices to drop.
 
[quote author="octuc" date=1227603172]

This looks like cooked numbers. Irvine was only $37 k or 6% higher than OC average in Oct 2007?</blockquote>


No, it makes sense. All of the REOs in Santa Ana, Anaheim, etc, are dragging down the county median. The same is true everywhere in CA, with twice the normal volume at the bottom of the market and half of it at the top.
 
Hormiguero,

I was not talking about what happened in 2008. I was talking about the numbers for Oct 2007.

$585,000 for OC.

$622,000 for Irvine.
 
[quote author="octuc" date=1227608905]Hormiguero,

I was not talking about what happened in 2008. I was talking about the numbers for Oct 2007.

$585,000 for OC.

$622,000 for Irvine.</blockquote>


I think that was his point. The product mix for Irvine sales has remained consistent, whereas for the rest of OC the mix has changed. This is why the median price can be skewed either up or down by the product mix. The price per sqft. proves this. Irvine is down only 9%, whereas OC is down about 25% on a sqft. basis. This why the median price difference between OC and Irvine has become greater.
 
[quote author="IrvineRenter" date=1227607737]There are three factors that will work strongly against the Irvine market next year:



1. The recession is going to hurt wages, and it will make people more hesitant to buy.

2. The ARM resets will start in earnest, and the Option ARMs will be particularly toxic.

3. The psychology will start to change due to a combination of the recession and the fact that prices have been continually falling for a long time.



I will stick with my forecast. If the drop is less than I projected, it will be because of a delay in the ARM resets leading to foreclosure. If the foreclosures are delayed, it may take longer for prices to drop.</blockquote>


Resets... What resets? Our glorious governmnet is going to force feed an epic number of workouts, loan mods, principal reductions, etc. for anyone that says boo. They'll stem the tide of foreclosures at least until they can beat down the recession. Rat bastard socialist scum...
 
[quote author="IrvineRenter" date=1227607737]...



There are three factors that will work strongly against the Irvine market next year:



1. The recession is going to hurt wages, and it will make people more hesitant to buy.

2. The ARM resets will start in earnest, and the Option ARMs will be particularly toxic.

3. The psychology will start to change due to a combination of the recession and the fact that prices have been continually falling for a long time.

...</blockquote>


Make it four:



4. The substitution effect of other good communities and schools being drastically more affordable will wreck havoc.
 
Irvine Renter,



It seems that most of us here on the IHB believe that 2010 is the ideal time to buy because that is when the renting will be about the same as owning. Your chart also shows us that 2009 will be the biggest declining year, and I am of the opinion, that most of here believe that your forecast will play out exactly like it shows.



What happens in a situation if rental rates in Irvine drops 25 - 30%? We experience a temporary inflation, and then into a severe deflation where everything goes down including precious metals, commercial real estate, oil prices, etc. I know this may sound crazy, but is there a chance that between 2011 and 2013 is where we will see the biggest drop in real estate prices ever? Is your chart prediction solely based on rent vs own parity? I am just afraid that most of us here will buy in 2010 thinking it is the bottom and all of us will be in for a big surprise. If the Japanese Real Estate market went through this from early 1990s to early 2000s, what makes our Real Estate any different? Average home prices fell 40% in Japan from 1992 to 2004.



your chart shows:

2007 - -8%

2008 - -12%

2009 - 16%

2010 - - 8%

2011 - -4%

2012 - -4%



What if the reality looked something like this?



2008 - - 8%

2009 - - 8%

2010 - -12%

2011 - - 16%

2012 - - 20%
 
[quote author="ipoplaya" date=1227612430][quote author="IrvineRenter" date=1227607737]There are three factors that will work strongly against the Irvine market next year:



1. The recession is going to hurt wages, and it will make people more hesitant to buy.

2. The ARM resets will start in earnest, and the Option ARMs will be particularly toxic.

3. The psychology will start to change due to a combination of the recession and the fact that prices have been continually falling for a long time.



I will stick with my forecast. If the drop is less than I projected, it will be because of a delay in the ARM resets leading to foreclosure. If the foreclosures are delayed, it may take longer for prices to drop.</blockquote>


Resets... What resets? Our glorious governmnet is going to force feed an epic number of workouts, loan mods, principal reductions, etc. for anyone that says boo. They'll stem the tide of foreclosures at least until they can beat down the recession. Rat bastard socialist scum...</blockquote>
So far, the default rate on reworked loans is 40%. And that is only so far.
 
[quote author="octuc" date=1227610796]graphrix,

Thanks. Do you have sources for per sqft data?</blockquote>


<a href="http://dqnews.com/Charts/Monthly-Charts/LA-Times-Charts/ZIPLAT.aspx">I got the current Oct. data over at DQnews</a>. I have a few scattered spreadsheets of theirs from the past. Including a few from 2006, and adding in what % it was down from that year and this year, then Irvine is down over 25% on a sqft. basis.
 
[quote author="awgee" date=1227619977][quote author="ipoplaya" date=1227612430][quote author="IrvineRenter" date=1227607737]There are three factors that will work strongly against the Irvine market next year:



1. The recession is going to hurt wages, and it will make people more hesitant to buy.

2. The ARM resets will start in earnest, and the Option ARMs will be particularly toxic.

3. The psychology will start to change due to a combination of the recession and the fact that prices have been continually falling for a long time.



I will stick with my forecast. If the drop is less than I projected, it will be because of a delay in the ARM resets leading to foreclosure. If the foreclosures are delayed, it may take longer for prices to drop.</blockquote>


Resets... What resets? Our glorious governmnet is going to force feed an epic number of workouts, loan mods, principal reductions, etc. for anyone that says boo. They'll stem the tide of foreclosures at least until they can beat down the recession. Rat bastard socialist scum...</blockquote>
So far, the default rate on reworked loans is 40%. And that is only so far.</blockquote>


I'm not suggesting that most won't end up as defaults eventually. Just suggesting that the mods will extend the pain/pleasure of price declines. Without all the handouts, we are all buying below rental parity in 2010, heck maybe 2009. Not going happen that quickly now...
 
[quote author="ipoplaya" date=1227621130][quote author="awgee" date=1227619977][quote author="ipoplaya" date=1227612430][quote author="IrvineRenter" date=1227607737]There are three factors that will work strongly against the Irvine market next year:



1. The recession is going to hurt wages, and it will make people more hesitant to buy.

2. The ARM resets will start in earnest, and the Option ARMs will be particularly toxic.

3. The psychology will start to change due to a combination of the recession and the fact that prices have been continually falling for a long time.



I will stick with my forecast. If the drop is less than I projected, it will be because of a delay in the ARM resets leading to foreclosure. If the foreclosures are delayed, it may take longer for prices to drop.</blockquote>


Resets... What resets? Our glorious governmnet is going to force feed an epic number of workouts, loan mods, principal reductions, etc. for anyone that says boo. They'll stem the tide of foreclosures at least until they can beat down the recession. Rat bastard socialist scum...</blockquote>
So far, the default rate on reworked loans is 40%. And that is only so far.</blockquote>


I'm not suggesting that most won't end up as defaults eventually. Just suggesting that the mods will extend the pain/pleasure of price declines. Without all the handouts, we are all buying below rental parity in 2010, heck maybe 2009. Not going happen that quickly now...</blockquote>


What i have seen from our government is they will continue to bail out the unresponsible and the responsible will end up holding the bad end of the stick.



Here is scenario i see playing out in 2009.



Mr. Kim and Mr. Wu both bought a SFR in Quail Hill in 2004. Irresponsible Mr. Kim put 3% down on a million dollar home for $30,000 and have a mortgage of $970,000 on a 5 year ARM of 4.25%. Responsible Mr. Wu puts 50% down and has a mortgage of $500,000 on a 30 year fixed at 5.75%.



In June of 2009, Mr. Kim is supposed to foreclose on his QH SFR, but the government will bail him out. The goverment will see that Mr. Kim can only afford to make payments on a $500,000 loan and we will allow a refinance of 4.25% on a new mortgage of $500,000 from $970,000. Mr. Kim gets down on his knees and kisses the governments' butt and ends up keeping his house, while responsible Mr. Wu is still making his higher mortgage payments than Mr. Kim.



I think that Irvine Renter's forecast assumes that the government does not intervene with foreclosure. I am 100% sure that the government will intervene bail out the NODs and foreclosures in 2009. This will only delay the decline of the housing market in OC. When Awgee made a bold statement that he thinks OC real estate prices can decline down to 1998 - 2000 levels, I thought that he was a little nutty, but I am now starting to agree with what Awgee is saying. I don't see most of the decline occurring in 2009 where 2010 will be optimal time to buy, the biggest housing declines i see occurring from 2011 - 2013.



Panda



Bailout may lessen the pain now, but will make the pain much much worse in the future.
 
Bailouts, loan mods, moratoriums on foreclosures, none of it will have any measurable impact on the inevitable. Except perhaps to draw things out a bit longer than is "healthy". Heck, I think it's actually criminal that the government is trying to prop up prices artificially, but then it's the same government that allowed our financial system to leverage itself to the maximum while capitalizing itself to a minimum. While churning some big bucks for a select few of course.



Anyway, F.U.N.D.A.M.E.N.T.A.L.S. - a return to fundamentals is and will happen. Rent Vs. Buy, months of inventory, avg. DOM, etc. are all metrics that are useful, but I'm particularly fond of median price / median income - I think the the "typical" potential buyer tends to simply rationalize any unfavorable difference in the rent / buy calculation using the "intangibles" of home ownership. But they still have to be able to <em>afford</em> to buy. I haven't yet tried to look at "affordability" (compared with the historical norms for a given area) for an area as small as a single town. I'm not even sure that it makes sense to try and break it down to such a micro level, but I suppose I could try. Oh, and IrvineRenter didn't specifically mention deflation as a factor (although he seemed to be alluding to it), or the fact that wages have been taking a beating for some years now. Or even the fact that historically, every time we've ever had "large scale" job losses residential property prices have fallen. Or that every time we've ever had "small scale" job losses, in conjunction with a bubbly RE market property prices have fallen. We can play games with the numbers all day, but at the end of the day, there's nothing "flat" about the slope that we're on.



OK, enough doom & gloom, I'm sure you've all discussed it to death already. I have to go find us a place to live in Irvine. ;-D
 
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