Have Irvine real estate values peaked?

[irvinebullhousing]

Question is hard to answer unless we specify a specific time frame...I think Irvine prices have peaked for the next 3-5 years but I suspect prices will continue to raise in Irvine for many years to come.

As evidenced, if you hold on to your home long enough even buying at the peak you will come out ahead.

USC, although I value your opinions on most matter, I completely disagree with you here.  Sure in absolute dollars you may have come out slightly ahead.  However if you factor inflation, opportunity costs, etc, etc, etc and look at the real costs then versus now, buying at the peak was one of the worst ideas ever and most who did ended up paying for it.

I think you didn't understand what he was trying to say.  You buy.. hold long term.. it's still a good investment for you.  I think you are alluding to more of timing. 

Bingo...trying to timing the real estate market is like trying to time the stock market and no one can do it perfectly.  A lot of people think of a home as an investment...the fact of the matter is that it is a commodity (aka a place to live) first and foremost.  I know everyone wants to buy at the lows and sell at the highs, but you still need a place to live.  I don't know about other people, but I got tired of renting fast and wanted my own home where I could do as I please with it.  Depending on timing, your home may not have the highest return but in my opinion it should not be viewed as an investment.  If it does go up in value, that's just the whipped cream and cherry on top of the sundae.

When you say that one will come out "ahead" regardless of buying at the peak, it suggested to me that you were looking at a house purchase in regards to an investment.  I agree with you that  primary housing is a commodity and not an investment.  Regardless, overpaying for something is still overpaying for something.  I can now assume that you meant someone is "ahead' because they can enjoy being an owner rather than a renter.  I cannot argue that since it is purely an emotional value, however in financial terms, I cannot see how someone could "ahead".

Contrary to USC, Jmoney seems to think it actually was a "good investment".  Buying at the peak and holding was NOT a good investment.  In fact it was a horrible investment.  Also I understand timing the market is difficult to do.  However if one is to suggest that an asset purchase is a good investment, then timing has to be taken into consideration.  I am not saying people should have been able to time the market.  However looking back to the peak price days and now say that buying a house then was a "good investment" does not make any sense.

Sounds to me that you are a serial renter, or living at home or living with someone or living under your parent roof.

Just sit back and rent and co-ops. Opportunity will comes knocking on your door when you ready. Maybe when the next disaster hit California....earth quake in the 12.0 magnitude > then all homes will be level to the ground. Or perhaps when pigs have wings and flies.

 

[hello]

Question is hard to answer unless we specify a specific time frame...I think Irvine prices have peaked for the next 3-5 years but I suspect prices will continue to raise in Irvine for many years to come.

As evidenced, if you hold on to your home long enough even buying at the peak you will come out ahead.

USC, although I value your opinions on most matter, I completely disagree with you here.  Sure in absolute dollars you may have come out slightly ahead.  However if you factor inflation, opportunity costs, etc, etc, etc and look at the real costs then versus now, buying at the peak was one of the worst ideas ever and most who did ended up paying for it.

I think you didn't understand what he was trying to say.  You buy.. hold long term.. it's still a good investment for you.  I think you are alluding to more of timing. 

Bingo...trying to timing the real estate market is like trying to time the stock market and no one can do it perfectly.  A lot of people think of a home as an investment...the fact of the matter is that it is a commodity (aka a place to live) first and foremost.  I know everyone wants to buy at the lows and sell at the highs, but you still need a place to live.  I don't know about other people, but I got tired of renting fast and wanted my own home where I could do as I please with it.  Depending on timing, your home may not have the highest return but in my opinion it should not be viewed as an investment.  If it does go up in value, that's just the whipped cream and cherry on top of the sundae.

When you say that one will come out "ahead" regardless of buying at the peak, it suggested to me that you were looking at a house purchase in regards to an investment.  I agree with you that  primary housing is a commodity and not an investment.  Regardless, overpaying for something is still overpaying for something.  I can now assume that you meant someone is "ahead' because they can enjoy being an owner rather than a renter.  I cannot argue that since it is purely an emotional value, however in financial terms, I cannot see how someone could "ahead".

Contrary to USC, Jmoney seems to think it actually was a "good investment".  Buying at the peak and holding was NOT a good investment.  In fact it was a horrible investment.  Also I understand timing the market is difficult to do.  However if one is to suggest that an asset purchase is a good investment, then timing has to be taken into consideration.  I am not saying people should have been able to time the market.  However looking back to the peak price days and now say that buying a house then was a "good investment" does not make any sense.

Sounds to me that you are a serial renter, or living at home or living with someone or living under your parent roof.

Just sit back and rent and co-ops. Opportunity will comes knocking on your door when you ready. Maybe when the next disaster hit California....earth quake in the 12.0 magnitude > then all homes will be level to the ground. Or perhaps when pigs have wings and flies.

LOL Im not sure why you resort to attacks.  Your efforts to belittle are wasted.  I know my situation and could care less of yours.  You insinuate that I am advising renting versus buying?  In reality, my only contention here was that buying at the previous peak (which we all knew was a horrible bubble) was not a good investment.  I am not speaking of our current situation here. 
I assume you bought at the last peak and may have taken some offense?  If so I apologize, but its not an investment so dont worry.

 

[lnc]

I think we all use the term investment too loosely here.  Perspective had a good comment from another thread.

I think people confuse the questioning of whether a house is an investment, with whether buying a house is a wise financial decision. It certainly is one of the best financial decisions you'll make, when you're financially prepared, over a long holding period. 

Buying a home at peak price = bad investment decision. 
Buying a home at peak price with historically low interest rate = good financial decision (If you hold it long enough. You got a good place to live, build equality and eventually the price will go up)

My comment above only apply to real estate market here in Irvine.  Some real estate market like Detroit, even if you bought at bottom, the price will stay at bottom forever.

 

[usctrojancpa]

There are plenty of investments that will yield higher rates of return on an asset value basis, but with real estate you use leverage when you borrow so cash-on-cash returns can be juiced up.  The reality is that life dictates for many people when they buy a home i.e. getting married, having kids, downsizing, etc).  We are not in any kind of bubble like we were in 2005-2006, the lending landscape is much different and I'd bet that the buyers in the past 5 years are financially stronger than buyers in 2003-2006 on average.  Barring anything big happening (China imploding or interest rates skyrocket), my guess is that home prices will be flattish for a few years (~5%+ to 5%-). 

 

[qwerty]

Barring anything big happening (China imploding or interest rates skyrocket), my guess is that home prices will be flattish for a few years (~5%+ to 5%-). 

Well that is the thing right, it is always an some unforeseen disaster that ruins wealth and causes the downward spiral. Then all of a sudden the buyers and selllers aren't as financially strong, etc.

 

[Changer]

Have is now Has. Didn't know my grammar was being graded. I will work on my Engrish

 

[Oncdoc]

the value of irvine has peaked due to increase supply!! too many new developments driving up supply... they need to slow down new development in order to maintain the value of the homes in irvine

 

[usctrojancpa]

Barring anything big happening (China imploding or interest rates skyrocket), my guess is that home prices will be flattish for a few years (~5%+ to 5%-). 

Well that is the thing right, it is always an some unforeseen disaster that ruins wealth and causes the downward spiral. Then all of a sudden the buyers and selllers aren't as financially strong, etc.

Agreed, but waiting for an unforeseen disaster to happen in order to buy is kind of the same reason why a lot of people don't buy at the V-bottom of the stock market (aka the fear of catching the falling knife).  That being said, when the next disaster does come I'll be on the look-out to buy more rental properties. 

 

[Perspective]

There are plenty of investments that will yield higher rates of return on an asset value basis, but with real estate you use leverage when you borrow so cash-on-cash returns can be juiced up.  The reality is that life dictates for many people when they buy a home i.e. getting married, having kids, downsizing, etc).  We are not in any kind of bubble like we were in 2005-2006, the lending landscape is much different and I'd bet that the buyers in the past 5 years are financially stronger than buyers in 2003-2006 on average.  Barring anything big happening (China imploding or interest rates skyrocket), my guess is that home prices will be flattish for a few years (~5%+ to 5%-).

Very reasonable and accurate assessment. However, we don't have to speculate that buyers are stronger today than they were in 2005-2007. We know they are. Mortgage lending standards appropriately whipsawed back to traditional standards in 2008 in reaction to the downturn.

Beginning in 2014, federal law (Ability to Repay rule) requires creditors qualify borrowers based on their real proven income using the real fully-amortized fully-indexed payment. If a creditor doesn't verify the borrower's real income/assets and/or uses any of the following features to qualify the borrower (due to the reduced payment), the borrower can personally sue within three years of consummation or at default: interest only, teaser payment, or negative amortization.

Long story short, if you bought a new house around 2007, you could be reasonably certain most of your neighbors buying couldn't afford their house. If you bought a new house since ~2009, you can be absolutely certain every neighbor can afford their house.

 

[irvinehomeowner]

You can't really time when you have to buy.

Sure, you can try to wait and rent but then your life becomes less stable. We've bought at the peak and at the bottom... and in retrospect, if we kept the home we bought at the peak, it would have worked out okay. We were lucky that we had a cheaper home to fall back on so the money saved in the difference between the two mortgages we used for private school and savings, but if we kept the peak home, we still would have been fine considering that the loss we took when we sold would have not occurred and had we sold later, we probably could have made up that money we saved in the mortgage difference.

So seeing both sides, as USC says, holding after buying at peak is okay if most of what you're thinking about is affordability and owning a home.

Using the hot tub time machine, would I buy at peak again? Yes... but I would have chosen a better location/floorplan. It would have cost us probably $50-100k more but that would have been worth it compared to the headache we've had worrying about timing the next purchase.

When it comes to Irvine, buying at peak or not isn't really that big a deal if you can afford it and hold it. I know the math may not agree, but a home is more than just numbers.

 

[AW]

Agree with IHO, seen people bought at that 2005-2006 peak, those who kept are in ok condition, they're still keeping it, but could sell at break even.  Those who fled are wishing they didn't bail, some did short sale and ding on their credit. 
The sit and wait method may not work for a lot folks, some have young kids and want them grow up in a house with great memories instead of renting and waiting for market conditions to be ideal, kids may have grown and gone to college by then, empty nest, then what's really the point. 

 

[paperboyNC]

Agree with IHO, seen people bought at that 2005-2006 peak, those who kept are in ok condition, they're still keeping it, but could sell at break even.  Those who fled are wishing they didn't bail, some did short sale and ding on their credit. 
The sit and wait method may not work for a lot folks, some have young kids and want them grow up in a house with great memories instead of renting and waiting for market conditions to be ideal, kids may have grown and gone to college by then, empty nest, then what's really the point.

Have a couple friends that sold short and bought another home at the bottom. Benefits:

- Bank ate the loss on the first home, they keep the profit on the 2nd home
- Property tax rates stay low (they go back up on the first home)

By now, the 5-7yr short sale credit ding is almost gone.

Of course the more you put down on that first home, the harder it was to do that. Knew someone that had put over $200k down on his $780k home:https://www.redfin.com/CA/San-Diego/11738-Windcrest-Ln-92128/home/6399585

Value dropped to $550k:https://www.redfin.com/CA/San-Diego/11749-Windcrest-Ln-92128/home/4679076

Now back to $750k for a similar home:https://www.redfin.com/CA/San-Diego/11629-Windcrest-Ln-92128/home/4679353

He didn't want to short sell because even though the value dropped to $550k, between his downpayment and monthly payments he actually owed less than $550k on the home.

 

[riznick]

That's why lending companies should require at least 20% downpayments. 

 

[AW]

Have a couple friends that sold short and bought another home at the bottom. Benefits:

- Bank ate the loss on the first home, they keep the profit on the 2nd home
- Property tax rates stay low (they go back up on the first home)

By now, the 5-7yr short sale credit ding is almost gone.

Great timing on their part, depending on when the credit ding happened, loans would suck and couldn't get another good house otherwise and waited longer

 

[paperboyNC]

Have a couple friends that sold short and bought another home at the bottom. Benefits:

- Bank ate the loss on the first home, they keep the profit on the 2nd home
- Property tax rates stay low (they go back up on the first home)

By now, the 5-7yr short sale credit ding is almost gone.

Great timing on their part, depending on when the credit ding happened, loans would suck and couldn't get another good house otherwise and waited longer

One bought the new home before they short sold the old home. The other sucked it up with the sucky loan.

 

[AW]

Bought a new home and have an existing mortgage liability?
What bank allowed this short sale...

 

[irvinehomeowner]

@paperboyNC:

We are talking Irvine here and you are posting a San Diego example.

Do you have any Irvine examples?

Unlike your friends, we couldn't short sale because we put 20% down. We lost a chunk of that because we sold for less than we bought and had put money into small renos.

Like AW, there are many that bought in 05/06, kept, refi'd into lower rates (much lower than the prevailing 7-8% back then) and are actually paying a lower mortgage.

Use a real world example, for $a 1m home sold in 2005, what would that have gone for in 2010 (when some people consider the bottom)? I don't think it's that much lower so not sure how much timing saves you.

 

[paperboyNC]

@paperboyNC:

Do you have any Irvine examples?

Harder to find because I don't know of streets where every home is basically identical. You'd have to drill down further to only Plan 3s or something.

 

[Irvinecommuter]

Have a couple friends that sold short and bought another home at the bottom. Benefits:

- Bank ate the loss on the first home, they keep the profit on the 2nd home
- Property tax rates stay low (they go back up on the first home)

By now, the 5-7yr short sale credit ding is almost gone.

Great timing on their part, depending on when the credit ding happened, loans would suck and couldn't get another good house otherwise and waited longer

One bought the new home before they short sold the old home. The other sucked it up with the sucky loan.

I have a lot of experience with short sale and how banks settle them...that's an extremely rare case. 

Also, banks and lending institutions keep two sets of books, one is the credit report...the other is an internal file.  Short sales and foreclosures last a lot longer in the internal file than the credit report.

 

[bones]

Have a couple friends that sold short and bought another home at the bottom. Benefits:

- Bank ate the loss on the first home, they keep the profit on the 2nd home
- Property tax rates stay low (they go back up on the first home)

By now, the 5-7yr short sale credit ding is almost gone.

Great timing on their part, depending on when the credit ding happened, loans would suck and couldn't get another good house otherwise and waited longer

One bought the new home before they short sold the old home. The other sucked it up with the sucky loan.

I have a lot of experience with short sale and how banks settle them...that's an extremely rare case. 

Also, banks and lending institutions keep two sets of books, one is the credit report...the other is an internal file.  Short sales and foreclosures last a lot longer in the internal file than the credit report.

I actually know someone that did that too: short sold a home after buying another one.  I was pretty surprised they were able to do it too.  Worked out really well for them.  Old house never rebounded to the price they initially paid for it & they were able to get their current house for a good price.  This was up north.