Housing Analysis

[irvinehomeowner]

You actually came very clear and civilized this time and I appreciate your post. Other times you seemed rather making fun of some other posters, but I think I now get your style a little better. So I know you didn?t mean to attack on anyone.

I only do that when they don't answer my questions or they continue to ignore my points. If that's considered "attacking", then an Internet discussion forum isn't a place they should be.

Here is a thing you should also take into consideration though. You are concerned that eyephone or mecco?s prediction for the drop would confuse the buyers. But at the same time what if your suggestion to buy now would result so many buyers into reget if there does come 20% or significant amount of drop in Irvine? As much as others? posts might carry mis-guidances so could yours.

This is a valid point, however, you missed the part where I said you should be able to stay in your home long term. Why? Because a 20% drop should be erased in 5-10 years, just like it was in the 90s bubble and the 05/06 bubble. As others have posted, Irvine is a low volatility product that doesn't drop as fast but rises faster than surrounding cities so if you can ride the wave, you should be fine. And again, if you're buying your house to live in for a long period of time at a price you can afford, whatever value it drops to in the middle of your stay has less meaning because the main purpose of the home is for you to live in.

Look at my "advice" posts, I temper each one with the caveat of affordability and long-term residency. Now look at the initial ones that say "wait", no other caveat than saving money, no mention of timing or how much and they don't even take into regards the pitfalls waiting can bring. It isn't until later that a few on that side admitted that there could be some downside to waiting and light commentary on how much the savings could be but is speculative, which is where I was trying to get

I do not wish for the crash or anything since that could potentially hurt the economy or even the country nation wide so bad,  but I think taking others? opinions should be taken with more respect even if one can disagree so hard.

But this is a forum where there could be arguments and disagreements all over so I guess we will carry on.

That is the purpose of a forum, to discuss, argue and disagree. Is it not?

 

[Kenkoko]

Irvine is a low volatility product that doesn't drop as fast but rises faster than surrounding cities so if you can ride the wave, you should be fine. And again, if you're buying your house to live in for a long period of time at a price you can afford, whatever value it drops to in the middle of your stay has less meaning because the main purpose of the home is for you to live in.

That is not completely true. If you are talking about Santa Ana or Anaheim then yes you?re correct.
But if you are talking about Aliso Viejo or Baker Ranch, you are dead wrong.
I keep using Alsio as an example because I own properties there and keep my ears to the ground. In 2011, Irvine used to command 30-40% price premium over Aliso. Now it?s down to 10%.

I agree that Irvine is a low volatility product, but I disagree that you should always buy in Irvine.
Buy your primary home in Irvine to limit downside risk, but buy your investments in areas that crash hard for maximum gain on the rebound.I believe Liar Loan mentioned this couple years ago to take maximum advantage of market cycles.

IHO, when I read your post I feel like your intended audience is far from an average person/family in Irvine.
1) You keep talking about long term residency but the fact is that newer studies show people change homes every 5 years.

2) Look at Irvine?s current home prices and current average household income. A lot of first time buyers or first time trade up home buyers will be stretching financially. This makes their primary home both a personal need and an investment. You seem to play up the personal need part and downplay the investment part.

3) What exactly are the pitfalls for waiting couple of years? Irvine?s rent vs buy is so skewed. You can rent the same house you want to buy and save up, increasing your future purchasing power. You can put your down payment into a short term CD. 18-23 months CD now yields 2.75%. We can just look at your poll. Less than 10% of people are expecting price to even go up. Inventories are increasing, waiting allows you to choose better. The only pitfall I see is rates potentially going up way higher. But even USC said he expects to see 4% before we see 5%.

 

[Mety]

Here is a thing you should also take into consideration though. You are concerned that eyephone or mecco?s prediction for the drop would confuse the buyers. But at the same time what if your suggestion to buy now would result so many buyers into reget if there does come 20% or significant amount of drop in Irvine? As much as others? posts might carry mis-guidances so could yours.

This is a valid point, however, you missed the part where I said you should be able to stay in your home long term. Why? Because a 20% drop should be erased in 5-10 years, just like it was in the 90s bubble and the 05/06 bubble. As others have posted, Irvine is a low volatility product that doesn't drop as fast but rises faster than surrounding cities so if you can ride the wave, you should be fine. And again, if you're buying your house to live in for a long period of time at a price you can afford, whatever value it drops to in the middle of your stay has less meaning because the main purpose of the home is for you to live in.

Look at my "advice" posts, I temper each one with the caveat of affordability and long-term residency. Now look at the initial ones that say "wait", no other caveat than saving money, no mention of timing or how much and they don't even take into regards the pitfalls waiting can bring. It isn't until later that a few on that side admitted that there could be some downside to waiting and light commentary on how much the savings could be but is speculative, which is where I was trying to get

Your caveats are:
1. The buyer will live a long time at a home they buy.
2. Even after a drop, it should recover back in 5-10 years.

May I say many Irvine home buyers tend to move in less than 5-10 year? Sure, if the price is still lower than what you bought, then you should not sell it, but what if the person needs to sell it for whatever reason they can't predict now?

And as for Irvine homes, many homes are pretty much the same throughout especially if you are into newer ones. The home you just missed now will pop up again in a different or even a better location. I don't see the need to rush to buy now, but if you must buy and think you just found the perfect home, then sure go for it if the lender approves. Heck, even that Delano above garages condo is at $788k. Buy now or get priced out, right? Just know that even most Irvine home owners in this forum are predicting a flat or a drop in a near future.

 

[zubs]

See my 2013 post from this thread?https://www.talkirvine.com/index.php/topic,3641.15.html

I remember in 2002 when people thought houses were too high already.  So things tend to last a little bit longer than one thinks. 

If you use a 5 ~ 6 year rule for every cycle, then it would work ok.  Say 2006 was the peak of realestate, then 2012 would be the low.  So 2018 will be the high again.  But it's all just speculation...because 1997 was the low and 2006 was the peak....that one lasted 9 years.

A non scientific chart.
1990 ~ peak
1997 ~ low
2006 ~ peak
2012 ~ low ~ is this really a low? not sure.

I'm a goddam miss cleo!

 

[Mety]

See my 2013 post from this thread?https://www.talkirvine.com/index.php/topic,3641.15.html

I remember in 2002 when people thought houses were too high already.  So things tend to last a little bit longer than one thinks. 

If you use a 5 ~ 6 year rule for every cycle, then it would work ok.  Say 2006 was the peak of realestate, then 2012 would be the low.  So 2018 will be the high again.  But it's all just speculation...because 1997 was the low and 2006 was the peak....that one lasted 9 years.

A non scientific chart.
1990 ~ peak
1997 ~ low
2006 ~ peak
2012 ~ low ~ is this really a low? not sure.

I'm a goddam miss cleo!

So what is your prediction now, miss cleo?

 

[zubs]

Seriously I just make a bunch of forecasts and some times one of them is right.
and I giggle like a little girl as I show TI how awesome I am.

 

[irvinehomeowner]

Both Mety and Kenkoko are asking me similar questions, am I being attacked?

So, like a good forum member, instead of ignoring you, I will answer each of you although the answers are similar:

Irvine is a low volatility product that doesn't drop as fast but rises faster than surrounding cities so if you can ride the wave, you should be fine. And again, if you're buying your house to live in for a long period of time at a price you can afford, whatever value it drops to in the middle of your stay has less meaning because the main purpose of the home is for you to live in.

That is not completely true. If you are talking about Santa Ana or Anaheim then yes you?re correct.

Considering these are the close neighboring cities, yes... but you yourself will even prove why it's true for South County cities:

But if you are talking about Aliso Viejo or Baker Ranch, you are dead wrong.
I keep using Alsio as an example because I own properties there and keep my ears to the ground. In 2011, Irvine used to command 30-40% price premium over Aliso. Now it?s down to 10%.

How am I "dead wrong"? What I said is that Irvine drops slower and rises faster. The fact that in 2011, Irvine was 30-40% over Aliso means just that, Irvine dropped slower. And now that Aliso is 10% off, that also showed that Irvine rose faster and Aliso is just now catching up.

Since you are new, if you look back at my older posts, you will see I also shopped Aliso as an alternative to Irvine so I am familiar with that product too.

I agree that Irvine is a low volatility product, but I disagree that you should always buy in Irvine.

Not sure where I said that. I obv prefer Irvine over most cities in the OC and if you are like me and prefer central location, safety, schools etc, but I would buy in Newport Beach or South County if my situation was different.

Buy your primary home in Irvine to limit downside risk, but buy your investments in areas that crash hard for maximum gain on the rebound.I believe Liar Loan mentioned this couple years ago to take maximum advantage of market cycles.

Maybe you missed that but I was only referring to the home you are planning to live in. Investments have much more wider range of variables you have to consider.

IHO, when I read your post I feel like your intended audience is far from an average person/family in Irvine.

My caveats outline who my posts are intended for. I never said that represents the averagy person/family in Irvine.

1) You keep talking about long term residency but the fact is that newer studies show people change homes every 5 years.

As I said above, my opinion may not apply to these people. I've never been in one home more than 5 years, but by luck, timing and finance worked out for me. But, I do know there are many people in Irvine who actually do stay in their home for more than 5 years. The street where we all bought new at the same time, 5 of the 9 are still there... and that's been over 10 years. So regardless of studies, there are still long term buyers in Irvine.

2) Look at Irvine?s current home prices and current average household income. A lot of first time buyers or first time trade up home buyers will be stretching financially. This makes their primary home both a personal need and an investment. You seem to play up the personal need part and downplay the investment part.

So what was my other caveat? Affordability. If you are stretching, my opinion may not apply. And I don't think I'm downplaying the investment part, like my stocks strategy, I'm a long term hold person... because that has a better chance of higher returns.

3) What exactly are the pitfalls for waiting couple of years? Irvine?s rent vs buy is so skewed. You can rent the same house you want to buy and save up, increasing your future purchasing power. You can put your down payment into a short term CD. 18-23 months CD now yields 2.75%. We can just look at your poll. Less than 10% of people are expecting price to even go up. Inventories are increasing, waiting allows you to choose better. The only pitfall I see is rates potentially going up way higher. But even USC said he expects to see 4% before we see 5%.

So I'm going to pull an eyephone here and say I don't have to tell you.

I'm kidding... I've covered this in numerous posts above and so did other members. I even detailed my journey of what happened to us while waiting. Long story short, you risk the chance of not getting the house/florrplan/layout/location you want. One aside to renting, you move your kids around too much if you don't rent in the same hoods or end up buying somewhere else. I didn't used to think that was a big deal but it is a factor.

But we disagree here, you see no harm in waiting... but let's take perspective, are you in a home now? I believe eyephone isn't looking to buy. Do you remember what it was like to be on the sidelines not sure of where prices/rates will go and seeing homes you like sold and wondering if you should have pulled the trigger? There are 3 homes that I think we should have bought while we were waiting... we probably would have made more in equity and could have bought the home we are in now with less of our own cash. But that's the game, and if you don't think there are any pitfalls, then we just don't align.

Opinions are neither wrong or right, so that's fine.

Now for Mety:

Your caveats are:
1. The buyer will live a long time at a home they buy.
2. Even after a drop, it should recover back in 5-10 years.

May I say many Irvine home buyers tend to move in less than 5-10 year?

Asked and answered above for kenkoko. I don't think it's fair to throw out my caveat as a response.

Sure, if the price is still lower than what you bought, then you should not sell it, but what if the person needs to sell it for whatever reason they can't predict now?

This risk will happen whether you wait or not. And this is not any different than trying to predict how much and when will it drop. Since you don't know 100% what the future will hold, you make your decision on what you know now.

And as for Irvine homes, many homes are pretty much the same throughout especially if you are into newer ones. The home you just missed now will pop up again in a different or even a better location.

I don't agree with this. It could be a worse location. People who bought in Stonegate, probably wished they bought the same floorplan in Laguna Altura. People who waited on Quail Hill probably wish they didn't (like me).

I don't see the need to rush to buy now, but if you must buy and think you just found the perfect home, then sure go for it if the lender approves.

See, that wasn't so hard to say.

Heck, even that Delano above garages condo is at $788k. Buy now or get priced out, right?

No way. Not Delano. Ever.

Just know that even most Irvine home owners in this forum are predicting a flat or a drop in a near future.

So is flat or 5% worth waiting? It all depends on your situation right? That's my point.

 

[fortune11]

That level of multi quoting is epic ? we should hand IHO some award right away !

 

[irvinehomeowner]

That level of multi quoting is epic ? we should hand IHO some award right away !

Only if I did it on my phone.

Had to dust off my old Win7 PC for that.

 

[eyephone]

This is what I?m talking about.

The thing with PE managers is they have to justify their decisions to investors.  Once the public believes the market is in a downturn, it becomes very difficult to convince jittery investors about the wisdom of catching a falling knife.

If you look at the last round of PE buying, it didn't really start until 2012.  I worked for one of the earliest funds in the REO-to-Rental space and even they were too late to the game.  All of the best deals got scooped up between 2009-2011 and it wasn't until after 2012 that PE started investing billions in the space.  By then, prices were already in a solid uptrend.

The moral of the story is PE didn't create the trend, but latched on to the already existing trend.  That's what will dictate their buy/sell actions this time around as well.

 

[fortune11]

This is what I?m talking about.

The thing with PE managers is they have to justify their decisions to investors.  Once the public believes the market is in a downturn, it becomes very difficult to convince jittery investors about the wisdom of catching a falling knife.

If you look at the last round of PE buying, it didn't really start until 2012.  I worked for one of the earliest funds in the REO-to-Rental space and even they were too late to the game.  All of the best deals got scooped up between 2009-2011 and it wasn't until after 2012 that PE started investing billions in the space.  By then, prices were already in a solid uptrend.

The moral of the story is PE didn't create the trend, but latched on to the already existing trend.  That's what will dictate their buy/sell actions this time around as well.

Sorry eyephone I have to disagree w you here . PE guys are sitting on 400-500 bn of uninvested capital as we speak and this not retail money , rather from LPs like large endowments , pension funds , etc and is locked up money . Any sign of minor distress and they will latch onto it in the sense that they will want to buy. 

I am also sitting on cash myself now but I am not hoping for any good deals anytime soon . Not while unemployment is below 4 percent and inflation is holding steady at 2 percent ...

My focus for now is safer income generating assets . Happy to stay on sidelines as the market will offer another opportunity like feb this year to allow me to get back in . It happens like clockwork every year , just have to be patient. Real estate ? Not so much ? as the high transaction cost and lack of liquidity makes it super sticky for a ?beta? investor like myself .  I am sure there are people out there finding good single asset deals all the time .

 

[eyephone]

This is what I?m talking about.

The thing with PE managers is they have to justify their decisions to investors.  Once the public believes the market is in a downturn, it becomes very difficult to convince jittery investors about the wisdom of catching a falling knife.

If you look at the last round of PE buying, it didn't really start until 2012.  I worked for one of the earliest funds in the REO-to-Rental space and even they were too late to the game.  All of the best deals got scooped up between 2009-2011 and it wasn't until after 2012 that PE started investing billions in the space.  By then, prices were already in a solid uptrend.

The moral of the story is PE didn't create the trend, but latched on to the already existing trend.  That's what will dictate their buy/sell actions this time around as well.

Sorry eyephone I have to disagree w you here . PE guys are sitting on 400-500 bn of uninvested capital as we speak and this not retail money , rather from LPs like large endowments , pension funds , etc and is locked up money . Any sign of minor distress and they will latch onto it in the sense that they will want to buy. 

I am also sitting on cash myself now but I am not hoping for any good deals anytime soon . Not while unemployment is below 4 percent and inflation is holding steady at 2 percent ...

My focus for now is safer income generating assets . Happy to stay on sidelines as the market will offer another opportunity like feb this year to allow me to get back in . It happens like clockwork every year , just have to be patient. Real estate ? Not so much ? as the high transaction cost and lack of liquidity makes it super sticky for a ?beta? investor like myself .  I am sure there are people out there finding good single asset deals all the time .

Oil time? Wink

 

[irvinebullhousing]

This is what I?m talking about.

The thing with PE managers is they have to justify their decisions to investors.  Once the public believes the market is in a downturn, it becomes very difficult to convince jittery investors about the wisdom of catching a falling knife.

If you look at the last round of PE buying, it didn't really start until 2012.  I worked for one of the earliest funds in the REO-to-Rental space and even they were too late to the game.  All of the best deals got scooped up between 2009-2011 and it wasn't until after 2012 that PE started investing billions in the space.  By then, prices were already in a solid uptrend.

The moral of the story is PE didn't create the trend, but latched on to the already existing trend.  That's what will dictate their buy/sell actions this time around as well.

Sorry eyephone I have to disagree w you here . PE guys are sitting on 400-500 bn of uninvested capital as we speak and this not retail money , rather from LPs like large endowments , pension funds , etc and is locked up money . Any sign of minor distress and they will latch onto it in the sense that they will want to buy. 

I am also sitting on cash myself now but I am not hoping for any good deals anytime soon . Not while unemployment is below 4 percent and inflation is holding steady at 2 percent ...

My focus for now is safer income generating assets . Happy to stay on sidelines as the market will offer another opportunity like feb this year to allow me to get back in . It happens like clockwork every year , just have to be patient. Real estate ? Not so much ? as the high transaction cost and lack of liquidity makes it super sticky for a ?beta? investor like myself .  I am sure there are people out there finding good single asset deals all the time .

Oil time? Wink

When Trump resolve to war on Iran to solve economic downturn in 2020, oil will spike to an unprecedented level.

 

[fortune11]

This is what I?m talking about.

The thing with PE managers is they have to justify their decisions to investors.  Once the public believes the market is in a downturn, it becomes very difficult to convince jittery investors about the wisdom of catching a falling knife.

If you look at the last round of PE buying, it didn't really start until 2012.  I worked for one of the earliest funds in the REO-to-Rental space and even they were too late to the game.  All of the best deals got scooped up between 2009-2011 and it wasn't until after 2012 that PE started investing billions in the space.  By then, prices were already in a solid uptrend.

The moral of the story is PE didn't create the trend, but latched on to the already existing trend.  That's what will dictate their buy/sell actions this time around as well.

Sorry eyephone I have to disagree w you here . PE guys are sitting on 400-500 bn of uninvested capital as we speak and this not retail money , rather from LPs like large endowments , pension funds , etc and is locked up money . Any sign of minor distress and they will latch onto it in the sense that they will want to buy. 

I am also sitting on cash myself now but I am not hoping for any good deals anytime soon . Not while unemployment is below 4 percent and inflation is holding steady at 2 percent ...

My focus for now is safer income generating assets . Happy to stay on sidelines as the market will offer another opportunity like feb this year to allow me to get back in . It happens like clockwork every year , just have to be patient. Real estate ? Not so much ? as the high transaction cost and lack of liquidity makes it super sticky for a ?beta? investor like myself .  I am sure there are people out there finding good single asset deals all the time .

Oil time? Wink

When Trump resolve to war on Iran to solve economic downturn in 2020, oil will spike to an unprecedented level.

Ha , actually there is some truth to this , even if said in jest

Why do I like oil related equities now ? Two words

Sheldon Adelson

He has Republicans by the balls right now given how heavily he is spending on the midterms . And he is getting our foreign policy dictated by him

Meaning Israel and Saudi will never ever let the US loosen the grip on Iran sanctions . And there is your lost oil supply right there .

Now who knows if rouhani  finds a way to suck up to trump and play to his ego , but I really really doubt it . Oil will remain tight for some time .

 

[meccos12]

That level of multi quoting is epic ? we should hand IHO some award right away !

Wow I cant believe you actually read all that.  How many of us simply scroll past posts like that?  Im guilty.

 

[irvinehomeowner]

That level of multi quoting is epic ? we should hand IHO some award right away !

Wow I cant believe you actually read all that.  How many of us simply scroll past posts like that?  Im guilty.

But isn't that what leads to misunderstandings? Because members reply to some posts without reading others?

 

[meccos12]

That level of multi quoting is epic ? we should hand IHO some award right away !

Wow I cant believe you actually read all that.  How many of us simply scroll past posts like that?  Im guilty.

But isn't that what leads to misunderstandings? Because members reply to some posts without reading others?

You imply i reply to post without reading them.  In this situation, I just see a verbose post and I just pass. 

 

[irvinehomeowner]

That level of multi quoting is epic ? we should hand IHO some award right away !

Wow I cant believe you actually read all that.  How many of us simply scroll past posts like that?  Im guilty.

But isn't that what leads to misunderstandings? Because members reply to some posts without reading others?

You imply i reply to post without reading them.  In this situation, I just see a verbose post and I just pass. 

Actually, your post asked how many members scroll past posts like that... and my response was that's how some misunderstandings happen.

I wasn't trying to single you out, just making an observation of your observation.

 

[meccos12]

That level of multi quoting is epic ? we should hand IHO some award right away !

Wow I cant believe you actually read all that.  How many of us simply scroll past posts like that?  Im guilty.

But isn't that what leads to misunderstandings? Because members reply to some posts without reading others?

You imply i reply to post without reading them.  In this situation, I just see a verbose post and I just pass. 

Actually, your post asked how many members scroll past posts like that... and my response was that's how some misunderstandings happen.

I wasn't trying to single you out, just making an observation of your observation.

ok

 

[Kenkoko]

IHO, I definitely appreciate a genuine discussion even if we disagree.
I am in a home already therefore my perspective is different. My take on "missing out" on a Irvine homes is similar to Mety. Irvine is such a cookie cutter city. People can name their favorites by village/track/model. By waiting (while inventory level is increasing) you can almost be certain that the one you like will pop up on resale eventually.