Housing Analysis

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Being dependent on one country for 80% of sales is a big con. If any event causes Chinese buyers to head for the exits, Irvine is completely screwed. When a market does not follow the norm and its inventory is artificially lower and prices are artificially inflated, it’s not a good sign.

It’s all great when nothing happens. But once something does happen we will see how bad it is.
 
Well, I personally don't think it's against capitalism to limit the number of homes investors can buy. Unlike securities and bonds and other good stuff, I don't view homes as an investment tool. A home is a physical property for people to live in.
 
sleepy5136 said:
Being dependent on one country for 80% of sales is a big con. If any event causes Chinese buyers to head for the exits, Irvine is completely screwed.
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People have been saying this for 15 years.

There will not be a mass exodus.

And I don't think it's 80%... there is larger mix when you factor in resales and not just new homes.
 
irvinehomeowner said:
People have been saying this for 15 years.

There will not be a mass exodus.

And I don't think it's 80%... there is larger mix when you factor in resales and not just new homes.
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I analyzed the last 3 months of sales. It includes areas that aren't new like Northwood and Turtle.

You're making a very strong assumption there especially when US/China ties are getting worse each year. I wouldn't ever say never. No one would have ever thought interest rates would have gone down to 2-3% but it did. No one ever thought the pandemic would have caused housing prices to soar 30%+ each year between 2020-2022. But it did.

Black swan events happen when people least expect it, not when it's crystal clear and obvious. Anyone saying they knew any of those events are full of crap and would not be here if that is really the case.
 
We shall see…

The Great Reset of Property Prices Is Underway. Brace for More Carnage.

The global financial crisis that began in 2007 reshaped the real estate market. Today, commercial real estate is facing a similar “Great Reset.” Property valuations are resetting, capital availability is restricted, and investment activity is curtailed.

One critical aspect of this reset is the recalibration of values across property types. It’s essential to recognize that not all asset types are affected equally. Assets trading at lower capitalization rates and higher multiples of cash flows—again, multifamily—are more susceptible to the impact of rising interest rates.

Office is resetting too, driven also by work-from-home and other similar trends playing out across the U.S. and the globe.

The Great Reset may bring challenges but also presents opportunities for investors who adapt and innovate. Investors who understand the evolving dynamics can navigate this transformative period successfully.

https://www.barrons.com/articles/americans-cut-savings-4efc0ee1?siteid=yhoof2
 
sleepy5136 said:
I analyzed the last 3 months of sales. It includes areas that aren't new like Northwood and Turtle.

You're making a very strong assumption there especially when US/China ties are getting worse each year. I wouldn't ever say never. No one would have ever thought interest rates would have gone down to 2-3% but it did. No one ever thought the pandemic would have caused housing prices to soar 30%+ each year between 2020-2022. But it did.

Black swan events happen when people least expect it, not when it's crystal clear and obvious. Anyone saying they knew any of those events are full of crap and would not be here if that is really the case.
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So you have to say that when you make blanket statements....it's 80% of the houses you looked at (sound familiar LL?).

This is the assumption that everyone make about some Chinese exodus and no can really guarantee... why do you think that selling their Irvine house will be the FIRST thing they do? Their assets are protected in real estate... the need to sell is not critical, more so if they are renting it out.

And those events happen both ways... the 2000s drop was predicted to be gigantic, but kick the can and super low interest rates prevented that. Covid was going to destroy real estate... as you said it went the opposite.

Rates have been rising for a while and yet prices are still high. Chinese exodus has been predicted for 15 years or more and has still not materialized.

My response is the same as yours... anything can happen... but a lot more has to happen for your scenario of a mass Chinese exodus to come to fruition. And that doesn't take into account whoever will fill that void because FCB means Foreign Cash Buyers.... not Fabulous Chinese Buyers.

I predict zombies will happen before The Great Fall of China.
 
irvinehomeowner said:
So you have to say that when you make blanket statements....it's 80% of the houses you looked at (sound familiar LL?).

This is the assumption that everyone make about some Chinese exodus and no can really guarantee... why do you think that selling their Irvine house will be the FIRST thing they do? Their assets are protected in real estate... the need to sell is not critical, more so if they are renting it out.

And those events happen both ways... the 2000s drop was predicted to be gigantic, but kick the can and super low interest rates prevented that. Covid was going to destroy real estate... as you said it went the opposite.

Rates have been rising for a while and yet prices are still high. Chinese exodus has been predicted for 15 years or more and has still not materialized.

My response is the same as yours... anything can happen... but a lot more has to happen for your scenario of a mass Chinese exodus to come to fruition. And that doesn't take into account whoever will fill that void because FCB means Foreign Cash Buyers.... not Fabulous Chinese Buyers.

I predict zombies will happen before The Great Fall of China.
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lol I normally don’t see responses from you that make me confused. It’s like you’re saying I’m right but also saying I’m wrong. I’m honestly confused what you are trying to get at tbh. But it’s all good.
 
Florida banning Chinese and a couple other countries from buying RE. Who would have seen that happen in the US? I know ppl will say it’s Florida as an argument.
 
sleepy5136 said:
lol I normally don’t see responses from you that make me confused. It’s like you’re saying I’m right but also saying I’m wrong. I’m honestly confused what you are trying to get at tbh. But it’s all good.
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Yeah... that's about it. :)

I guess what I'm saying is that everyone keeps saying things that make sense based on what normally should happen... but as much as people like to tout following the fundamentals in housing, it has been very non-fundamental.

Basically, all predictions will never have certainty.

Saying a high percentage of Chinese will sell their Irvine homes in some Black Swan event is like saying most of the world will not have their stuff made in China anymore... or that zombies will rise.
 
US population is projected to grow by only 1 million/yr for the next 20 years. If you assume 2.4 people per household that's only 420,000 new households per year. Currently, there are about 1.7 million homes under construction and the long term average is about 1 million per year.

At this rate, there is not going to be a supply shortage for very long -- maybe a few more years -- but eventually there will be overcapacity in the building industry, and not enough buyers/renters for all the new units being built.

Calculated Risk: New Census Long-Term Population Projections Are MASSIVELY Lower Than Previous Projections​

1700004183408.jpeg

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The huge differences in the latest population projections from those in 2017 reflect (1) much lower projections for births; (2) higher projections for deaths; and (3) significantly lower projections for net international migration.

calculatedrisk.substack.com

Lawler: New Census Long-Term Population Projections Are MASSIVELY Lower Than Previous Projections

From housing economist Tom Lawler:
calculatedrisk.substack.com calculatedrisk.substack.com
 
LL, that national data is fine to consider but the only area of any significant new home construction going on now in Orange County is Rancho Mission Viejo as Irvine and Great Park new home construction should be wrapped by in the next 4-5 years. So there will be a lack of new construction which will result in prices in Orange County, especially in Irvine, to continue to increase over the longer term. Btw, I posted the Irvine data through Oct 2023 in the Irvine section and the data shows that the Irvine market has outperformed Orange County in general the past 18 months since we hit peak pricing in April/May 2022.
 
Liar Loan said:
US population is projected to grow by only 1 million/yr for the next 20 years. If you assume 2.4 people per household that's only 420,000 new households per year. Currently, there are about 1.7 million homes under construction and the long term average is about 1 million per year.

At this rate, there is not going to be a supply shortage for very long -- maybe a few more years -- but eventually there will be overcapacity in the building industry, and not enough buyers/renters for all the new units being built.

Calculated Risk: New Census Long-Term Population Projections Are MASSIVELY Lower Than Previous Projections​

View attachment 9315

View attachment 9316

The huge differences in the latest population projections from those in 2017 reflect (1) much lower projections for births; (2) higher projections for deaths; and (3) significantly lower projections for net international migration.

calculatedrisk.substack.com

Lawler: New Census Long-Term Population Projections Are MASSIVELY Lower Than Previous Projections

From housing economist Tom Lawler:
calculatedrisk.substack.com calculatedrisk.substack.com
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But you fail to factor in the amount of new land to build on.......... which the last time I checked God isn't making any more in Irvine.
 
usctrojancpa said:
LL, that national data is fine to consider but the only area of any significant new home construction going on now in Orange County is Rancho Mission Viejo as Irvine and Great Park new home construction should be wrapped by in the next 4-5 years. So there will be a lack of new construction which will result in prices in Orange County, especially in Irvine, to continue to increase over the longer term. Btw, I posted the Irvine data through Oct 2023 in the Irvine section and the data shows that the Irvine market has outperformed Orange County in general the past 18 months since we hit peak pricing in April/May 2022.
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It will be very difficult for price gains to exceed the rate of inflation without population growth in California. This is a massive paradigm change that native Californians have never experienced. We are used to the fresh flow of new arrivals driving price increases above the rate of inflation, but that's just not going to be the case moving forward. By the 2030's, it will be a struggle for home prices just to keep pace with inflation as Boomers check out in larger numbers and a much smaller post-2008 generation reaches home buying age.
 
Liar Loan said:
It will be very difficult for price gains to exceed the rate of inflation without population growth in California. This is a massive paradigm change that native Californians have never experienced. We are used to the fresh flow of new arrivals driving price increases above the rate of inflation, but that's just not going to be the case moving forward. By the 2030's, it will be a struggle for home prices just to keep pace with inflation as Boomers check out in larger numbers and a much smaller post-2008 generation reaches home buying age.
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For California, maybe but not for Orange County as most parts of Orange County are very desirable to live even especially Irvine. Yeah boomers will be selling their homes but you have Gen Z and Millennials looking to purchase as we speak as they begin settling down. Desirable areas with good schools (and no more new home construction) will always have home prices that will outpace the rate of inflation over the longer term. The reality is that if Irvine was not selling new homes (aka shadow inventory) prices would probably be 5-10% higher today.
 
Liar Loan said:
It will be very difficult for price gains to exceed the rate of inflation without population growth in California. This is a massive paradigm change that native Californians have never experienced. We are used to the fresh flow of new arrivals driving price increases above the rate of inflation, but that's just not going to be the case moving forward. By the 2030's, it will be a struggle for home prices just to keep pace with inflation as Boomers check out in larger numbers and a much smaller post-2008 generation reaches home buying age.
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oceanfront or ocean view properties will always hold their value…
 
usctrojancpa said:
For California, maybe but not for Orange County as most parts of Orange County are very desirable to live even especially Irvine. Yeah boomers will be selling their homes but you have Gen Z and Millennials looking to purchase as we speak as they begin settling down. Desirable areas with good schools (and no more new home construction) will always have home prices that will outpace the rate of inflation over the longer term. The reality is that if Irvine was not selling new homes (aka shadow inventory) prices would probably be 5-10% higher today.
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Most of coastal California is considered very desirable, but it's not going to lead to outsize growth when you have a shrinking population.

Categorizing new homes as "shadow inventory" is a bizarre choice. It's just new home inventory. Once they are all sold, Irvine will be just like any other city in Orange County -- a city full of old homes.
 
Liar Loan said:
Most of coastal California is considered very desirable, but it's not going to lead to outsize growth when you have a shrinking population.

Categorizing new homes as "shadow inventory" is a bizarre choice. It's just new home inventory. Once they are all sold, Irvine will be just like any other city in Orange County -- a city full of old homes.
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It's shadow inventory as it is inventory that is typically not visible on MLS as it is not listed and does not factor into the data that I pull from MLS.
 
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