Global Recession?
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That's quite possible, but only because Irvine has gone up more slowly than those other areas since bottoming out in 2010. On the other hand, subprime / alt-A / excessive home ATM withdrawal will not be the catalysts this time, so it's perhaps not wise to assume things will behave just as they did 15 years ago.
The current conditions have similarities to both the 1980's downturn (out of control inflation and drastic Fed action) and the 1990's downturn (large supply of new homes in the pipeline, spike in oil prices, and reduced Congressional spending on the horizon).
The last time interest rates spiked this rapidly, Orange County went bankrupt (1994). What unforeseen blow-ups await us this time?
That could happen, but when the OC went BK, Greenie promptly lowered rates and housing went up up up. The OC didn't follow for some time, even dropping in 1994 because of the BK but went up as things improved.
If it were me and I was looking for a house to buy, I would prefer Irvine over outlying cities and I'm sure others would too. I'm not looking to buy in California though so there's that.
Liar Loan, you could be right but for now I just don't see the inventory build up in Irvine. When a small build up happens (maybe a dozen houses which is really very small) it quickly moves back down with houses being bought up.
I don't really see days on market rising either.
Housing demand for the most part is really a local event. What exactly is it you see in Irvine to cause you to think it's going to roll over soon?
He hasn't seen anything. He just refuses to admit he's wrong. Simple as that.
But he keeps posting so he must think there is something to back this up.
I like to see opposing views so I don't end up keep drinking kool aid and become too steadfast in my own views. I did that in 2000 and regretted it bigly.
But I have to have something to back those views up to make me see there is something there. Right now, I don't see it at all.
Mortgage rates going up is not enough of an issue for me. We had that in the 70s and housing just went up with rates. We had higher rates in the 80s and housing went up. We just got adjustable rate loans. We had rising rates in the 90s too and again we just got adjustable loans.
There should be SOMETHING that we can put a finger on like rising inventories, increasing days on market, comparable homes selling for lower price per square foot, builders not raising prices or throwing in upgrades on spec homes. SOMETHING. I just don't see anything myself, so Liar Loan, point it out if you have something specific to this area please.
How do you know they still have those adjustable loans?
Maybe they used the money for something (like a margin loan) and then paid it off.
What are the odds they all have adjustable rate mortgages and weren't smart enough to see rates going up and do something about those mortgages?
I'm buying two houses in AZ for cash (one is supposed to sit in while the other is being built to make sure the market doesn't turn here in California leaving me stuck with a house I don't want. I'm not worried about selling it because it's gone up alot while it's being built). Realtor says do you want to put a mortgage on it after it closes? I can give u the names of some lenders. I say what? I haven't had a mortgage in 15 years. Why would I want a mortgage now? She says well money is so cheap (before rates were going up), lots of cash buyers do that and then pay it off after a while and use it to buy stocks, another house or other "stuff".
Maybe they sold whatever they bought and paid off that mortgage and now own the place free and clear with their profits from whatever they used the money for.
I keep telling everyone, watch inventory levels as the tell of where pricing is going. Even with these higher rates, inventory levels are still very low (about 1/2 month of inventory in Irvine). A neutral market is where we have around 3 months of inventory so inventory levels would have to increase 5-6x of where inventory is today for that to happen. It's all a supply/demand issue but the fact is that demand is still outpacing supply. I have seen lower open house traffic and less # of offers on my listings but pricing is still strong because the top buyers are strong and motivated.
Those buyers bring over big chunks of cash over each month under the limit that China has imposed, I've seen plenty of their bank statements to know the drill. They'll move all the month over in time and then use them to pay off the asset based loan (usually 50% LTV). There's basically zero risk of those properties being foreclosed or become a forced sale.
Irvine would practically have to turn on a dime to do that. IMO, it isn't going to happen because where are the people selling going to go? We'd have to get second homes being sold because if it is primary residences those people must be going somewhere else which means they are buying another property. They could be like me and going out of state but there aren't enough of us to make a tiny dent in Irvine's market.
Exactly, most of my Irvine sellers are move-up Irvine buyers. Of all my listings in 2020 through today, I can count the number of buyers relocating out of the area but I've had more move-up buyers who came into Irvine from other cities of the homes (including homes that I've listed for sale).
He's actually just trolling because he's still hurt from his improper analysis of the 2006 drop in regards to what fared better than Irvine.
He claimed that the beach cities were the safe havens but then when we looked at the numbers, Newport Beach and the like all dropped lower and faster and recovered slower than Irvine.
So he keeps saying Irvine is due for a drop hoping it will come true but mostly because he just likes to poke the Irvine owners because he's jelly.
He thought he had us with this latest "drop/pain/slump" in 2018 but that was nothing compared to what prices are at now (which he did not predict). So all he can say is, "Well... OC performed better".
But despite our disagreements, I highly respect his opinions, he just can't admit when some are wrong... but I get it... most people are like that. I thought back in 2008, prices were going to drop more, but they didn't (at least for 3CWG homes I was looking at). Oh well.
You're over here asking for a second point of view but you keep rejecting it. So idk what you want.
I'm not saying there's no risk but I think the risk fairly minimal. The big risk in my mind is if most all employers mandate that their workers come back into the office full time...will that lead to an exodus of LA/Bay Area buyers who will look to cash in their gains because they need to move back closer to their offices?
Liar Loan
Well-known member
USCTrojanCPA said:
That's quite possible, but only because Irvine has gone up more slowly than those other areas since bottoming out in 2010. On the other hand, subprime / alt-A / excessive home ATM withdrawal will not be the catalysts this time, so it's perhaps not wise to assume things will behave just as they did 15 years ago.
The current conditions have similarities to both the 1980's downturn (out of control inflation and drastic Fed action) and the 1990's downturn (large supply of new homes in the pipeline, spike in oil prices, and reduced Congressional spending on the horizon).
The last time interest rates spiked this rapidly, Orange County went bankrupt (1994). What unforeseen blow-ups await us this time?
sleepy5136
Well-known member
Even if it's a 30% correction, it's only wiping out the gains we've seen in the last 1 yr? Maybe 1.5-2 yrs? NBD honestly. Only people that will be impacted are ones that bought recently or have adjustable rate mortgages which is a significant amount of FCB with those no income checked loans in Irvine.
Ready2Downsize
Well-known member
Liar Loan said:
That could happen, but when the OC went BK, Greenie promptly lowered rates and housing went up up up. The OC didn't follow for some time, even dropping in 1994 because of the BK but went up as things improved.
If it were me and I was looking for a house to buy, I would prefer Irvine over outlying cities and I'm sure others would too. I'm not looking to buy in California though so there's that.
Liar Loan, you could be right but for now I just don't see the inventory build up in Irvine. When a small build up happens (maybe a dozen houses which is really very small) it quickly moves back down with houses being bought up.
I don't really see days on market rising either.
Housing demand for the most part is really a local event. What exactly is it you see in Irvine to cause you to think it's going to roll over soon?
CalBears96
Well-known member
Ready2Downsize said:
He hasn't seen anything. He just refuses to admit he's wrong. Simple as that.
Ready2Downsize
Well-known member
CalBears96 said:
But he keeps posting so he must think there is something to back this up.
I like to see opposing views so I don't end up keep drinking kool aid and become too steadfast in my own views. I did that in 2000 and regretted it bigly.
But I have to have something to back those views up to make me see there is something there. Right now, I don't see it at all.
Mortgage rates going up is not enough of an issue for me. We had that in the 70s and housing just went up with rates. We had higher rates in the 80s and housing went up. We just got adjustable rate loans. We had rising rates in the 90s too and again we just got adjustable loans.
There should be SOMETHING that we can put a finger on like rising inventories, increasing days on market, comparable homes selling for lower price per square foot, builders not raising prices or throwing in upgrades on spec homes. SOMETHING. I just don't see anything myself, so Liar Loan, point it out if you have something specific to this area please.
sleepy5136
Well-known member
I'm not sure how FCB was back in the 80s and 90s in Irvine. But I would think that it's now significantly higher and a bunch of them have adjustable loans. If interest rates hit 6-7%, that will definitely test the limits of these adjustable loan owners and what they will do to keep their house.Ready2Downsize said:
Ready2Downsize
Well-known member
sleepy5136 said:
How do you know they still have those adjustable loans?
sleepy5136
Well-known member
I have access to check the owner & loan info. So you'll see the loan details and when the mortgage is expected to be fully paid off. Most are expected to be paid off at year 2040+.Ready2Downsize said:
Ready2Downsize
Well-known member
What if they HAD a mortgage but paid it off in full and have no new mortgage?
sleepy5136
Well-known member
That's a possibility. But what are the odds that all the FCBs with adjustable rate loans are all able to pay off their mortgages? I mean, they got a mortgage for a reason...Ready2Downsize said:
Ready2Downsize
Well-known member
sleepy5136 said:
Maybe they used the money for something (like a margin loan) and then paid it off.
What are the odds they all have adjustable rate mortgages and weren't smart enough to see rates going up and do something about those mortgages?
I'm buying two houses in AZ for cash (one is supposed to sit in while the other is being built to make sure the market doesn't turn here in California leaving me stuck with a house I don't want. I'm not worried about selling it because it's gone up alot while it's being built). Realtor says do you want to put a mortgage on it after it closes? I can give u the names of some lenders. I say what? I haven't had a mortgage in 15 years. Why would I want a mortgage now? She says well money is so cheap (before rates were going up), lots of cash buyers do that and then pay it off after a while and use it to buy stocks, another house or other "stuff".
Maybe they sold whatever they bought and paid off that mortgage and now own the place free and clear with their profits from whatever they used the money for.
usctrojancpa
Well-known member
Ready2Downsize said:
I keep telling everyone, watch inventory levels as the tell of where pricing is going. Even with these higher rates, inventory levels are still very low (about 1/2 month of inventory in Irvine). A neutral market is where we have around 3 months of inventory so inventory levels would have to increase 5-6x of where inventory is today for that to happen. It's all a supply/demand issue but the fact is that demand is still outpacing supply. I have seen lower open house traffic and less # of offers on my listings but pricing is still strong because the top buyers are strong and motivated.
usctrojancpa
Well-known member
sleepy5136 said:
Those buyers bring over big chunks of cash over each month under the limit that China has imposed, I've seen plenty of their bank statements to know the drill. They'll move all the month over in time and then use them to pay off the asset based loan (usually 50% LTV). There's basically zero risk of those properties being foreclosed or become a forced sale.
Ready2Downsize
Well-known member
USCTrojanCPA said:
Irvine would practically have to turn on a dime to do that. IMO, it isn't going to happen because where are the people selling going to go? We'd have to get second homes being sold because if it is primary residences those people must be going somewhere else which means they are buying another property. They could be like me and going out of state but there aren't enough of us to make a tiny dent in Irvine's market.
usctrojancpa
Well-known member
Ready2Downsize said:
Exactly, most of my Irvine sellers are move-up Irvine buyers. Of all my listings in 2020 through today, I can count the number of buyers relocating out of the area but I've had more move-up buyers who came into Irvine from other cities of the homes (including homes that I've listed for sale).
irvinehomeowner
Well-known member
Ready2Downsize said:
He's actually just trolling because he's still hurt from his improper analysis of the 2006 drop in regards to what fared better than Irvine.
He claimed that the beach cities were the safe havens but then when we looked at the numbers, Newport Beach and the like all dropped lower and faster and recovered slower than Irvine.
So he keeps saying Irvine is due for a drop hoping it will come true but mostly because he just likes to poke the Irvine owners because he's jelly.
He thought he had us with this latest "drop/pain/slump" in 2018 but that was nothing compared to what prices are at now (which he did not predict). So all he can say is, "Well... OC performed better".
But despite our disagreements, I highly respect his opinions, he just can't admit when some are wrong... but I get it... most people are like that. I thought back in 2008, prices were going to drop more, but they didn't (at least for 3CWG homes I was looking at). Oh well.
sleepy5136
Well-known member
A lot of FCB do not report their income here so they cannot get mortgage rates to their favor. Like USC said, they probably bring in enough each month from their country that is below the limit. Again, I am not saying it will lead it a crash. However, I do think it's a risk. How much risk, I don't know.Ready2Downsize said:
You're over here asking for a second point of view but you keep rejecting it. So idk what you want.
usctrojancpa
Well-known member
sleepy5136 said:
I'm not saying there's no risk but I think the risk fairly minimal. The big risk in my mind is if most all employers mandate that their workers come back into the office full time...will that lead to an exodus of LA/Bay Area buyers who will look to cash in their gains because they need to move back closer to their offices?