Article: Possible home-price surge eyed for '11

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irvinehomeowner

irvinehomeowner

Well-known member
I was reading the Irvine World News and I found this interview with Dan Young (I can't find the online link, there is the online Irvine World News where I got the copy fromhttp://epaper.ocregister.com/Olive/ODE/OCWIrvineWorldNews/):
IrvineWorldNewsJan1 said:
Possible home-price surge eyed for ?1 1

    Dan Young, president of Irvine Co.?s Irvine Community Development Co. homebuilding business  , talks about his take on the real estate market in 2011.

  Us: What?s  your Orange County outlook for 20 1 1 ?

  Dan: 2011 will be significantly better than 2010 was, and 2010 has been very good for us.

  Us: What will be the 20 1 1 drivers of real estate change for condos, good or bad? Why?

  Dan: Slow but steady job growth, the beginning of the final clearing of the distressed housing market and the public?s recognition of a housing shortage due to a dearth of new home building the last  four years. Other drivers include continued low interest rates, very attractive new home pricing and new home design.

  Us: OK. We love numbers. How much ? in percentage points ? will the median selling price of an Orange County home change in the coming year. What?s one thing that might alter that prediction ? up or down?

  Dan: Really do not have a prediction numbers-wise, but because resales have been strong and the distressed housing inventory has about cleared the market, we expect the median selling price to rise, and rise significantly if the public comes to realize that there is a looming housing shortage because new home development has not kept pace with population  growth.

  Us: What?s your top worry about the real estate climate for 20 1 1? Why?

  Dan: Banks getting back to lending to small businesses, financial issues both at home and abroad and jobs, jobs, jobs.

  Us: What will be the real estate surprise we?ll be talking about a year from now? Why?

  Dan: The full emergence of the Gen Y buyer, who currently makes up 85% of our new home buyers. The other surprise is that boomers will get back onto the playing field and begin looking for homes again.
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The thing that stuck out to me:

Dan: 2011 will be significantly better than 2010 was, and 2010 has been very good for us.

How can that be? For 2010, they had previewed most of the homes by December 2009. We are already in January and other than the 4-5 new 'hoods in Portola Springs and the 2 in Stonegate East, how do they expect to outpace the 2010 New Home Collection "significantly better"?

Does that mean that we are going to see Laguna Crossings Altura this year? Orchard Hills? Or Stonegate proper? And what about Cypress Village.

I'm not sure they can outdo 2010, but I was skeptical about that too.

Interesting.
 
I'm confident that 2011 will be even better than 2010 for new homes.  First of all, the economy is continuing to get better and more imporantly, the developers have had the benefit of studying bk's blog posts for the past year so they have a much more accurate understanding of the market.
 
This is like a reporter from Used Cars World News asking a used car lot owner how he feels about the used cars he is selling.

I have problems with all of the following:

"Slow but steady job growth."
"Final clearing of the distressed housing market."
"Housing shortage."
"Low interest rates."
"Very attractive new home pricing."
"Gen Y buyers."

From what I've read we've pretty much achieved structurally high unemployment and we're just going to mire around between 9 and 10 percent for eternity (which for someone like me is 5 years... ;)), any RealtyTrac search is going to show waves of distressed properties which of course means no housing shortage (not to mention the shadow inventory), interest rates are already rising despite the Feds best misguided efforts, pricing still looks too high to me and I thought Gen Y were most of the unemployed.

I don't know what to think of that article.

Most people concede weaknesses in one or more or several of those areas, at least, but according to this guy, 2011 is the light and we are all saved. When I read such a completely one-sided argument I start to wonder if it's actually based on any data (which he cites none of) or just one big marketing piece to pump sales.

Lastly, if I've learned anything, it's to never believe anyone who has skin in the game, just like the used car lot owner. I remember reading Greenspan in the WSJ about how the economy was doing just fine, right before its nuclear meltdown, and a Realtor telling someone during a model home tour in Irvine that the "next phase will only cost more, so you better hurry" closely followed by Kensington homeowners trying to sue the developer for the morbid price declines they just got hammered with only months after they bought, and the NAR calling the "bottom" 24 hours after the bubble burst.
 
In other news, Lawrence Yun expects home prices to surge in the first quarter of 2011 due to pent up demand, and rising interest rates.
 
I do think 2011 will be better than 2010, but most of that will come in the later half as the foreclosure moritorium is lifted in the first half.  Plus jobs growth will be gradual and weighted to the second half of the year.
 
IndieDev said:
In other news, Lawrence Yun expects home prices to surge in the first quarter of 2011 due to pent up demand, and rising interest rates.
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Reminds me of David Lereah....hmmm...

And who was that other guy that was in the OC Register all the time holding a crystal ball as the "housing prophet" that the OCR kept bowing down to as the last word on house price predictions, right before his prediction and reality parted ways...
 
Starlight East said:
"the beginning of the final clearing of the distressed housing market and the public?s recognition of a housing shortage due to a dearth of new home building the last four years."
A housing shortage? That is really hard to believe with all the new homes built in 2010.
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Yeah there's a "housing shortage" when you consider that the banks have held back so much inventory so they can hold off their losses. It's also why houses seem to be in short supply in Ladera Ranch despite the significant rate of delinquencies there.
 
irvinehomeowner said:
The thing that stuck out to me:

Dan: 2011 will be significantly better than 2010 was, and 2010 has been very good for us.

How can that be? For 2010, they had previewed most of the homes by December 2009. We are already in January and other than the 4-5 new 'hoods in Portola Springs and the 2 in Stonegate East, how do they expect to outpace the 2010 New Home Collection "significantly better"?

Does that mean that we are going to see Laguna Crossings Altura this year? Orchard Hills? Or Stonegate proper? And what about Cypress Village.

I'm not sure they can outdo 2010, but I was skeptical about that too.

Interesting.
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It's important to remember that this is from TIC's own point of view. They've had an incredible year so they have good reason to be upbeat this year. We were surprised last year with the sales, so let's see what'll happen in 2011...

Lots of grading happening in Stonegate the past few months.
 
The land was purchased for 153M, divide that by 5,000 housing units and the land cost per unit is a mere 30,600. Im sure a lot of other costs will get incurred but that seems like a great price on a per unit basis at least.
 
Wouldn't the unit cost be higher once the streets, parks, easements, etc are factored in? That's raw land out there without improvements.

Some resale agents are believing a 7% price rise is coming in 2011 - although that's clearly on the sunny side of things. Was at a Realtor meeting today where an Irvine heavy selling agent believes 3-4% appreciation will hit in 2011. Perhaps that's just New Years optimism overhang. We'll know in December won't we?

PS - that Irvine area Realtor used the phrase "Orange County if Different" as one basis for his conclusions. Ugh..

My .02c

Soylent Green Is People.

 
iphb said:
Lots of grading happening in Stonegate the past few months.
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I rent in Woodbury and I've noticed several earth movers just recently parked down by the farm fields on the side of Sand Canyon at the 5 Freeway. Makes me wonder if all of that land is about to be graded as well.
 
sgip said:
Wouldn't the unit cost be higher once the streets, parks, easements, etc are factored in? That's raw land out there without improvements.
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Im sure it will be. I was just referring to the price of the raw land like you said. Although the way they do it now wont they try to issue mello-roos bonds and have the homeowner pay for that as well? that is pretty spiffy how lennar set up a new company to buy back back land for 153M that it had previously paid 775M for. you gotta love capitalism.
 
Nothing is free. The homeowners will pay for improvements.

Not to threadjack this too far, but as for Lennar buying the land back in that manner reminds me of the recent BofA / FNMA buy back. BofA paid .02c on the dollar for their bad loans sold to FNMA. Perhaps some enterprising attorney could find one of their clients loans in that mess and push forward a question along the lines of : If you say my $100,000 first mortgage is only worth $2,000, then shouldn't you reduce the existing principal balance by the amount it's currently valued at? I'd love to re-purchase bad debt at .02c on the dollar, and I'm also certain Lennar is quite fat and happy with the deal they made re-purchasing all that Irvine Great Park land. 

My .02c

Soylent Green Is People.
 
Yeah that BofA  settlement was garbage.  So much for looking out for the taxpayer. I guess they are, by settling for 2c on the dollar, they wont have to cripple BofA and avoid another financial crisis.
 
sgip said:
Wouldn't the unit cost be higher once the streets, parks, easements, etc are factored in? That's raw land out there without improvements.

Some resale agents are believing a 7% price rise is coming in 2011 - although that's clearly on the sunny side of things. Was at a Realtor meeting today where an Irvine heavy selling agent believes 3-4% appreciation will hit in 2011. Perhaps that's just New Years optimism overhang. We'll know in December won't we?

PS - that Irvine area Realtor used the phrase "Orange County if Different" as one basis for his conclusions. Ugh..

My .02c

Soylent Green Is People.
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WTF! 7% Appreciation?!?! 3-4% in Irvine? I think those RE agents have been smoking too much of their New Years Crack.

We have all this shadow inventory out there, high unemployment, Scrooge lenders, ARM resets with new amortization schedules, and of course they still never caught that icicle gun murderer (sorry had to throw that one in)--Irvine prices are going to hell in a handbasket in 2011  ;)
 
No way. Fundamentals be damned. Irvine has great schools. We have a guppy house, and a 99 Ranch. Did you here about the Great Park project? Only 5 miles from the beach!

$550,000 for a 1,600 sqft home, 2,000 sqft lot, no driveway, and 14 inches of clearance from your neighbors wall is a bargain. If you don't buy it, some foreign cash" Chindian" will.
 
My guess is that prices will be down slightly in 2011 versus 2010 mainly due to rising interest rates and the continued slow recovery plus all the demand they pulled forward by those damn tax credits (we aren't done working off that sugar high just yet). 
 
I've noticed that many of the new homes are starting to offer broker co-ops... this was unheard of in the 2010 Collection... is that an indicator of slowed demand?
 
irvinehomeowner said:
I've noticed that many of the new homes are starting to offer broker co-ops... this was unheard of in the 2010 Collection... is that an indicator of slowed demand?
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Naturally. Why would a builder want to give away profit if demand was still going strong?

Santa Barbara in WB was thought to have surely sold out by the end of last October. Still selling as of today and according to another TI post is now offering broker co-ops.
 
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