Global Recession?

[paydawg]

Google buses are back on the road and the freeways are packed up here - strong message among the larger companies of get back to the office or roll the dice on your future

I doubt 'full time in the office' is in our future.  I work for a large old-school, but very prominent Fortune 500 company that never wanted to adopt WFH, but now they're starting to assess their workforce's preferences and will most likely adopt a hybrid model. 

 

[OCtoSV]

hybrid for sure but even hybrid makes it tough to get to the office in the Bay area when you moved to Irvine.

 

[zubs]

My large customer keeps pushing back their return to office date.
Last week I went to their office to drop off samples, and there were only 10 cars in the parking lot built for 300.

I ask them when they are going back, and it's always next month!

 

[momopi]

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.

Back then there were many Taiwanese buyers in Irvine, with the father returning to TW to work & leaving wife and kids here.  Many did not qualify for a loan in the US, so they took out loans on properties back in TW and used the cash to buy in US.  So even if the property was purchased with cash here, it doesn't mean there isn't a loan elsewhere.

 

[sleepy5136]

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.

Back then there were many Taiwanese buyers in Irvine, with the father returning to TW to work & leaving wife and kids here.  Many did not qualify for a loan in the US, so they took out loans on properties back in TW and used the cash to buy in US.  So even if the property was purchased with cash here, it doesn't mean there isn't a loan elsewhere.

Interesting. I know Hong Kong loans do not have a concept of 30 yr fixed interest rate. It's actually adjustable. I would think Taiwan and Mainland China are the same. In which case, that's quite concerning. But who knows? They might just have a boat load of cash and decided to take a loan to leverage.

 

[morekaos]

I re-iterate...

As I have noted before...China is going through something similar to Japans collapse in the 90's. 

Meanwhile In China, All Hell Is Breaking Loose

1.  China on brink of biggest Covid-19 crisis since Wuhan as cases surge
2. Chinese stocks are crashing
3. Chinese bonds are crashing
4. China's property sector is (still) crashing
5. China Credit Collapses
6. Didi crashes
7. ESG blues
8. China Doubles Yuan Trading Band for Ruble
9. Foreigners dump Chinese bonds in record amounts
10. GDP on verge of contraction
https://www.zerohedge.com/markets/meanwhile-china-all-hell-breaking-loose
https://youtu.be/Om3C1EpHLGs

 

[Ready2Downsize]

What if they HAD a mortgage but paid it off in full and have no new mortgage?

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...

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.

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.

You're over here asking for a second point of view but you keep rejecting it. So idk what you want.

I'm asking why Liar Loan thinks things are on the edge of a cliff in Irvine.

You are thinking FCB will all be facing foreclosure as rates rise and I'm asking how u know they have those loans still because you are basing the crash on FCB causing it. But you don't know they have those loans still and Martin says they have been paying them down substantially. That is exactly how I paid off my house after such a short period of time, except my money came from real jobs, and stock options in the U.S.

It seems like I still have nothing to show me there is a reason to think things are about to turn out badly.

Maybe in a few months there will be a massive increase in listings and days on market but there sure isn't right now and it isn't likely to come from builders because there just isn't enough building going on right now in Irvine. Resales mean people must be going elsewhere or selling second homes/rentals but where are they going? Out of state maybe.

Imo, there is going to be a real issue with trying to get people out of their low interest homes in the coming years, similar to trying to get old people to move out of their houses to increase supply. Of course that has not worked out all that well because where are they going to go with higher rates? They could move to a smaller house but most don't really seem to want to do that. There are some who move out of state but that isn't going to be nearly enough supply for those who want to buy.

I might look like I'm stuck on my opinion but far from it. I think California is going in the wrong direction but I don't see housing going down in Irvine in the near term.

 

[Liar Loan]

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.

Back then there were many Taiwanese buyers in Irvine, with the father returning to TW to work & leaving wife and kids here.  Many did not qualify for a loan in the US, so they took out loans on properties back in TW and used the cash to buy in US.  So even if the property was purchased with cash here, it doesn't mean there isn't a loan elsewhere.

This is an astute observation.  Many "cash" buyers are simply borrowing from other sources.  I have done this myself when buying investment properties.

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.

These are all run-of-the-mill stats that any realtor can dig up for you, or you can find on Redfin/Zillow probably.  I'm more interested in the macro picture.  The rapid inflation in asset prices since March 2020 is a nationwide / worldwide phenomenon, affecting every asset class you can think of with wildly out of whack valuation measures, so I'm expecting hard times all around.  There won't be many safe havens, but there will be some.

Traditional diversification and geographic diversification will not be enough to protect people.  Irvine is not bullet proof like many on this forum believed it was prior to 2018 when I helped cure them of that illusory thinking, and buying at the peak of both a real estate cycle and an interest rate cycle seems doubly unwise and incredibly suicidal, but I get owning a dream home is a highly emotional thing.  Some people will lose boatloads of money and rationalize after the fact, as some on this thread have already started doing.

I've admitted being wrong in the past, such as buying in 2006, but it's hard for this crowd because I've been more correct about Irvine than they have.

BTW, Arizona is an even worse bubble market than Irvine.  It's the archetypal sunbelt boom/bust market and it will crash at a higher multiple to whatever percent Irvine crashes at.  I would not want to own two homes there.

 

[usctrojancpa]

LL, I respect your opinions and analysis and for going against the majority.  I've told you this before....I WANT MORE INVENTORY!  My buyers still keep getting outbid on their offers.  We currently have about 150 active listings in Irvine which is about 1/2 month of inventory which is a super strong seller market.  Has the market slowed down?  Yes, I'm seeing 1/2 of much open house traffic and offers on my listings but they are still going way over list and over closed comps.  To get back to a more balanced market we need around 3 months of inventory which means about 800-900 homes which is a 5-6 fold increase in inventory.  You either have to have way more listings come onto the market or buyers have to pull back in a massive way.  I'm just not seeing it.

 

[zubs]

LL is saying when the bottom comes, it comes quickly.
Your 150 available Irvine homes jumps to 1,000 available Irvine homes in 1 month.

As a real estate board, we should discuss how this can happen.  Black Swan event.

 

[usctrojancpa]

LL is saying when the bottom comes, it comes quickly.
Your 150 available Irvine homes jumps to 1,000 available Irvine homes in 1 month.

As a real estate board, we should discuss how this can happen.  Black Swan event.

Keep in mind 3 months of inventory is a neutral market, not one that has declining prices. We'd need 1,500+ homes on the market for prices to meaningfully decrease.

 

[morekaos]

LL is saying when the bottom comes, it comes quickly.
Your 150 available Irvine homes jumps to 1,000 available Irvine homes in 1 month.

As a real estate board, we should discuss how this can happen.  Black Swan event.

China collapses. Like Japan did in the '90s then limps along for a decade. ;D ;D >

 

[momopi]

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.

Back then there were many Taiwanese buyers in Irvine, with the father returning to TW to work & leaving wife and kids here.  Many did not qualify for a loan in the US, so they took out loans on properties back in TW and used the cash to buy in US.  So even if the property was purchased with cash here, it doesn't mean there isn't a loan elsewhere.

Interesting. I know Hong Kong loans do not have a concept of 30 yr fixed interest rate. It's actually adjustable. I would think Taiwan and Mainland China are the same. In which case, that's quite concerning. But who knows? They might just have a boat load of cash and decided to take a loan to leverage.

The mortgage interest rate in TW is low (1.31-1.4%) so I think most banks would rather offer adjustable rate loans.  I have not looked at real estate in TW since 2007 so someone else with more updated knowledge can probably comment better.
https://mortgage.591.com.tw/

 

[irvinehomeowner]

LL is saying when the bottom comes, it comes quickly.
Your 150 available Irvine homes jumps to 1,000 available Irvine homes in 1 month.

As a real estate board, we should discuss how this can happen.  Black Swan event.

Keep in mind 3 months of inventory is a neutral market, not one that has declining prices. We'd need 1,500+ homes on the market for prices to meaningfully decrease.

Scale in Irvine has changed.

I remember when it was 700 listings that was considered troublesome... there is a post somewhere here in the IHB archives or TI about that.

I predict the black swan event will be everyone follows morekaos to Texas,

 

[zovall]

I'm more interested in the macro picture.

What would you recommend the play is over the next few years? For those that have levered up, for those that haven't, for those own assets, for those that don't?

I've enjoyed some of these videos from Ray Dalio. Curious to get your thoughts..https://www.youtube.com/watch?v=PHe0bXAIuk0https://www.youtube.com/watch?v=xguam0TKMw8

 

[usctrojancpa]

I'm more interested in the macro picture.

What would you recommend the play is over the next few years? For those that have levered up, for those that haven't, for those own assets, for those that don't?

I've enjoyed some of these videos from Ray Dalio. Curious to get your thoughts..https://www.youtube.com/watch?v=PHe0bXAIuk0https://www.youtube.com/watch?v=xguam0TKMw8

Pretty simple, in an inflationary environment you want to own real assets and real estate falls into that category.

 

[irvinebullhousing]

LL is saying when the bottom comes, it comes quickly.
Your 150 available Irvine homes jumps to 1,000 available Irvine homes in 1 month.

As a real estate board, we should discuss how this can happen. Black Swan event.

At this point, its no longer Black Swan, its escalation upon escalation on both side. The West and NATO and United State vs Russia. Both are ramping up their rhetoric. Peace is no longer in the discussion. This will lead to a dark, dark chapter in history if we survive.

Please watch and share. We are on a very fragil path. Can you imagine if earth have no human life? Standing here and I've been following very closely with what's going on in Ukrain, Putin will not stand down, and if he goes down, he will take as many citizens, people, man, women and children with him.


We are a pale blue dot.
https://www.youtube.com/watch?v=RESsY2y8G2s

 

[Liar Loan]

I'm more interested in the macro picture.

What would you recommend the play is over the next few years? For those that have levered up, for those that haven't, for those own assets, for those that don't?

I've enjoyed some of these videos from Ray Dalio. Curious to get your thoughts..

Pretty simple, in an inflationary environment you want to own real assets and real estate falls into that category.

Anything requiring leverage would not be my asset of choice right now.  Real estate has tanked in the face of aggressive rate increases by the Fed historically, with the only recent exception being 1994 when RE prices were already depressed.

I'm heavy on gold, something I haven't owned at all since 2012 when awgee reamed me on this board by telling me how sorry I'd be that I'd sold.  (I wonder what institution he's living in these days?)  Even though higher rates tend to hurt gold, it's also resilient in the face of uncertainty, which I view as a positive when both stocks and bonds are taking hits during a time of potential war.  If downward pressure really takes hold in stocks, I may switch to aggressively shorting the stock indexes.  A lot of people are also looking at TIPS (Treasury Inflation-Protected Securities) for preservation of capital.  But whatever course you choose, playing defense would be my advice.

 

[Ready2Downsize]

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.

Back then there were many Taiwanese buyers in Irvine, with the father returning to TW to work & leaving wife and kids here.  Many did not qualify for a loan in the US, so they took out loans on properties back in TW and used the cash to buy in US.  So even if the property was purchased with cash here, it doesn't mean there isn't a loan elsewhere.

This is an astute observation.  Many "cash" buyers are simply borrowing from other sources.  I have done this myself when buying investment properties.

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.

These are all run-of-the-mill stats that any realtor can dig up for you, or you can find on Redfin/Zillow probably.  I'm more interested in the macro picture.  The rapid inflation in asset prices since March 2020 is a nationwide / worldwide phenomenon, affecting every asset class you can think of with wildly out of whack valuation measures, so I'm expecting hard times all around.  There won't be many safe havens, but there will be some.

Traditional diversification and geographic diversification will not be enough to protect people.  Irvine is not bullet proof like many on this forum believed it was prior to 2018 when I helped cure them of that illusory thinking, and buying at the peak of both a real estate cycle and an interest rate cycle seems doubly unwise and incredibly suicidal, but I get owning a dream home is a highly emotional thing.  Some people will lose boatloads of money and rationalize after the fact, as some on this thread have already started doing.

I've admitted being wrong in the past, such as buying in 2006, but it's hard for this crowd because I've been more correct about Irvine than they have.

BTW, Arizona is an even worse bubble market than Irvine.  It's the archetypal sunbelt boom/bust market and it will crash at a higher multiple to whatever percent Irvine crashes at.  I would not want to own two homes there.

Ok, so you are looking at what should rationally happen then and I am looking at what I see right now. I look at redfin and the listings in Irvine area (and the area I am moving to in AZ and other areas around there) are stable. It "looks" balanced to me but imo the only reason for that is the inventory of available homes for sale is too low. There are more buyers than that low inventory. If we saw twice as many homes (or the builders were building more homes especially in the lower price ranges, maybe we would see a leveling off or even prices dropping but how is that going to happen without many more houses? If a doubling in inventory is enough to cause prices to stabilize, then having a "normal sized inventory according to Martin) is going to really be a problem for Irvine prices, imo but we cannot know that till we have more inventory.

We could get more inventory if there were less buyers or more sellers. Higher rates will encourage those who might have wanted to move local to just keep what they have, reducing the available inventory. It could lead to a bad enough recession that jobs would be lost reducing demand (and perhaps prying second homes out of people's hands) but then the FED is going to quit raising rates, imo. You could see people moving back to their old hoods if they have to return to work, but they'll have to buy more expensive with higher rates and maybe they will just find another job local.

There are just so many moving parts here that it's really impossible to tell what will happen because things have gone up and that is why I just look at what is happening right now.

As for AZ, that is another ball game out there and housing demand/pricing is local. How else can you explain the prices in Scottsdale and Paradise Valley have been so high for so many years while other areas have been so cheap? You can say well Scottsdale should never have been that high but it was. Everything has gone up, like here. People have moved from pricier areas to cheaper areas, like here, driving up the cheaper areas too. But AZ population is rising. There are plenty of old people there but plenty retire there from other states to replace the ones who die and there is household formation going on in AZ from all the young people who have moved there for J O B S. LOTS and lots of jobs. Sure housing has gone up alot. The area where I am moving now has base pricing for new SINGLE story homes about where I bought my TWO story Legacy home 6+ years ago but if you want a two story home you can get a brand new 3300 sq foot 4 bedroom, 3 car garage on a pool sized lot for under $600K, $115 HOA, $3600 per year property tax and low home insurance and you can do even better with resales. You should see the building going on there! It looks like it did when I moved to the OC, before the 405 and 55 were around, before South Coast Plaza, before UC Irvine opened. It's not just houses, it's retail, factories, offices. My parents moved to FV then from Santa Barbara where my dad lost his job because the one place that employed an engineer closed and my mom cried for days about how there was NOTHING here but stupid strawberry fields.

I do think there is going to come a time when it's going to be a good time to buy a house because prices will be lower but from where? Will it be here or higher than here and what interest rate will non cash buyers have to pay? I don't know but I do think we're in for 10-20 years of real pain down the road.

 

[Liar Loan]

This tidbit caught my eye this morning:

In Phoenix, 32% of single-family purchases in January were by investors with fewer than 10 properties, up from 28% a year earlier, according to data from John Burns Real Estate Consulting. By comparison, large investor purchases accounted for 12% of transactions.
https://www.bloomberg.com/news/arti...-homeowners-use-cash-out-refis-to-buy-rentals

So 44% of all single-family homes in Phoenix are purchased by investors.  A lot of this is funded by cheap cash-out refi's on other properties they own in other parts of the country (the point of the article).  If investor demand dries up due to a combination of higher mortgage costs and renters missing payments due to nationwide job losses, it's going to have an outsized effect on the Phoenix market.  This cycle has played out repeatedly, which is why Phoenix is more of a boom/bust market.