Housing Analysis

[Kings]

The issue with buying in Irvine vs future mobility is the risk that, your Irvine home may be cash flow negative as a rental.  You can mitigate this somewhat by carefully choosing homes with low HOA and mello roose, such as West Irvine (by Jamboree near Tustin Marketplace) built 20 years ago ($60/month HOA).  I think it's in Tustin school district, but still pretty nice and not too old.

If you're willing to buy south of Irvine, it's much easier to find SFR's during market lows that will cash flow as a rental.  Again you have to be careful with HOA fees, age, condition of the property and school district.  The quality of schools in South OC can vary greatly, for example in Saddleback Valley Union district you have elementary schools rated from 3/10 to 10/10.

Depending on your planned holding period, you also want to consider area demographic and socio-political-economic trends.  In areas with widening wealth gap, growing population, and increasingly unaffordable rents, you can expect anything from rent control to eminent domain for redevelopment.

There is value to HOAs and MR though. We came to grips with it after not finding anything we liked in the areas. We don?t like that our money disappears into the HOA/MR ether, but in the end we are fine paying it as we are planning to stay in the home for a while. Perhaps indefinitely if we don?t have more children. We?re basically giving up ROI for the place we want to live and know that whatever gains we receive in the future will be severely dented by the MR and HOA we?ve paid over the years.

Not everything should be about ROI unless you are only buying property for investment purposes. To us the extra costs is money well spent for the home we wanted and being able to get a new home which saves us money up front compared to an older resale.

We were determined to find a place with low HOA and no MR if possible, but after months we just didn?t like the options in that category. We?re not typical buyers though I fee in that we?re confident we want to stay in our home for a while.

I'd agree that low HOA is not always good.  If the association is running a deficit, or did not maintain sufficient reserves, the homeowners may be hit with special assessment.  This can get quite scary and run up to 5 figures.

What I'm most concerned with is condo associations with high HOA, which indicates higher liabilities and maintenance costs.  In a RE downturn, if you have significant number of owners in the association that owe more than what their property is worth (upside down), they may decide to stop payment or walk away.  When the property is foreclosed I think the bank is only responsible for payment from when they assume title.  So the remaining homeowners, even if they aren't upside down, become HOA assessment fee knife catchers.

selling your home and want to save a couple shekels?  don't worry about paying your hoa fees for a few months but make sure you close before the lien is filed - there's not a lot the hoa will do to chase after you.  >

 

[momopi]

selling your home and want to save a couple shekels?  don't worry about paying your hoa fees for a few months but make sure you close before the lien is filed - there's not a lot the hoa will do to chase after you.  >

Oh, I bought a bank foreclosed home in Temecula back in 2012 where the previous owner was still living there.  He had stopped paying mortgage and HOA and the bank made a deal with him to maintain the property and receive $12K cash incentive when the house was sold.  When I bought it he had already cleaned out the house except for a bed and some cloths.  He was upside down on the loan and was happy to live there rent free for many months and receive cash bonus on way out.

 

[irvinehomeowner]

Here is another data source showing declining prices for Irvine.  The median peaked in December 2018 at $869,600 and now for September 2019 it sits at $849,600, a 2.3% decline over the hot summer selling season!!

See pages 3 and 4:http://ochousingnews.com/wp-content/uploads/2019/09/New-OC-Irvine-Ocotber-Market-Report.pdf

Orange County declined less than 1% over the same time, and that was with Irvine's poor numbers skewing the total!!  That means the rest of OC is doing better than Irvine.  So what the hell is happening??  Why is Irvine dropping faster than the rest of OC?!?  Enquiring minds want to know.

The Great Slowdown was less than 1%? What happened to prices follow volume? It's been over a year and a half!

Less than 1%?  LL has repeatedly shown you prices dropped more than that even our inhouse realtor (USC) says something to the tune of 5% or so (correct me if I am wrong).  Furthermore, look at the costs of a house now vs last year.  Price is one part of the equation, but one must consider rates as well to figure out costs.  As I mentioned before, if you consider todays rates into this equation and you can buy the same house for double digits cheaper than last year. 

Oh by the way, we still have some ways to go.  You are premature here, just as you probably are with other things in your life.  I wouldnt be surprised to see more price adjustments coming.

So quick to insult and not read. I was referring to what LL said about OC prices.

Your math is not applicable to all buyers and homes.

I?m trying to be civil here but you are so bent on vitriol. Relax, it?s just the Internet.

 

[nosuchreality]

selling your home and want to save a couple shekels?  don't worry about paying your hoa fees for a few months but make sure you close before the lien is filed - there's not a lot the hoa will do to chase after you.  >

LOL, go ahead and do that and watch how fast the HOA ends up clustering fucking your sale.

 

[Liar Loan]

For the average person who bought in California, the home value is about the same or slighter high now than in 2006.

Do you have a link for this?

At least in Irvine, I think prices today are more than slightly higher than in 2006.

The price of the home I sold a few years ago was higher than what it was in 2006 and today it's even more than that.

And I don't think I can buy a 3CWG home today for the same prices in 2006. Back then, they were $900k to $1m, today they are $1.1m to $1.3m.

I dont, but do a simple google search and it should be easy to find.

This is the OC version of the report I posted earlier (see page 4).  The peak in 2006 was just below $700k and currently it sits just above $700k:
http://ochousingnews.com/wp-content/uploads/2019/09/Orange-County-October-Market-Report.pdf

 

[Liar Loan]

The issue with buying in Irvine vs future mobility is the risk that, your Irvine home may be cash flow negative as a rental.  You can mitigate this somewhat by carefully choosing homes with low HOA and mello roose, such as West Irvine (by Jamboree near Tustin Marketplace) built 20 years ago ($60/month HOA).  I think it's in Tustin school district, but still pretty nice and not too old.

If you're willing to buy south of Irvine, it's much easier to find SFR's during market lows that will cash flow as a rental.  Again you have to be careful with HOA fees, age, condition of the property and school district.  The quality of schools in South OC can vary greatly, for example in Saddleback Valley Union district you have elementary schools rated from 3/10 to 10/10.

Depending on your planned holding period, you also want to consider area demographic and socio-political-economic trends.  In areas with widening wealth gap, growing population, and increasingly unaffordable rents, you can expect anything from rent control to eminent domain for redevelopment.

There is value to HOAs and MR though. We came to grips with it after not finding anything we liked in the areas. We don?t like that our money disappears into the HOA/MR ether, but in the end we are fine paying it as we are planning to stay in the home for a while. Perhaps indefinitely if we don?t have more children. We?re basically giving up ROI for the place we want to live and know that whatever gains we receive in the future will be severely dented by the MR and HOA we?ve paid over the years.

Not everything should be about ROI unless you are only buying property for investment purposes. To us the extra costs is money well spent for the home we wanted and being able to get a new home which saves us money up front compared to an older resale.

We were determined to find a place with low HOA and no MR if possible, but after months we just didn?t like the options in that category. We?re not typical buyers though I fee in that we?re confident we want to stay in our home for a while.

I'd agree that low HOA is not always good.  If the association is running a deficit, or did not maintain sufficient reserves, the homeowners may be hit with special assessment.  This can get quite scary and run up to 5 figures.

What I'm most concerned with is condo associations with high HOA, which indicates higher liabilities and maintenance costs.  In a RE downturn, if you have significant number of owners in the association that owe more than what their property is worth (upside down), they may decide to stop payment or walk away.  When the property is foreclosed I think the bank is only responsible for payment from when they assume title.  So the remaining homeowners, even if they aren't upside down, become HOA assessment fee knife catchers.

This is an excellent comment.

 

[Liar Loan]

Here is another data source showing declining prices for Irvine.  The median peaked in December 2018 at $869,600 and now for September 2019 it sits at $849,600, a 2.3% decline over the hot summer selling season!!

See pages 3 and 4:http://ochousingnews.com/wp-content/uploads/2019/09/New-OC-Irvine-Ocotber-Market-Report.pdf

Orange County declined less than 1% over the same time, and that was with Irvine's poor numbers skewing the total!!  That means the rest of OC is doing better than Irvine.  So what the hell is happening??  Why is Irvine dropping faster than the rest of OC?!?  Enquiring minds want to know.

The Great Slowdown was less than 1%? What happened to prices follow volume? It's been over a year and a half!

Prices began falling in January 2019 less than a year after volume started tanking.  Nobody predicted a price bottom would be achieved this early in the downturn.  Irvine is in for many more years of pain.

Also, I hate to break it to you, but Irvine started the last decline in mid-2006 and bottomed out in late 2011, just like the rest of OC.  It did not decline the slowest and recover the fastest during the Great Recession according to these charts.  So that myth is busted.

 

[Happiness]

I bought in 2005 so it was not a good idea from an investment perspective.  However, the joy I derived from watching the kids grow up making lifelong friends and all of the DIY projects I did in the house and they yard was totally worth it. Even with hindsight I would not have changed a thing. Bigger ROI does not compare to the memories and experiences. When you are on your deathbed, you will not reminisce about what a savvy investor you were.

Renting is like socialism ? You must live according to someone else?s rules.
Owning is freedom to live how you want to live.

 

[irvinebullhousing]

Here is another data source showing declining prices for Irvine.  The median peaked in December 2018 at $869,600 and now for September 2019 it sits at $849,600, a 2.3% decline over the hot summer selling season!!

See pages 3 and 4:http://ochousingnews.com/wp-content/uploads/2019/09/New-OC-Irvine-Ocotber-Market-Report.pdf

Orange County declined less than 1% over the same time, and that was with Irvine's poor numbers skewing the total!!  That means the rest of OC is doing better than Irvine.  So what the hell is happening??  Why is Irvine dropping faster than the rest of OC?!?  Enquiring minds want to know.

The Great Slowdown was less than 1%? What happened to prices follow volume? It's been over a year and a half!

Prices began falling in January 2019 less than a year after volume started tanking.  Nobody predicted a price bottom would be achieved this early in the downturn.  Irvine is in for many more years of pain.

Also, I hate to break it to you, but Irvine started the last decline in mid-2006 and bottomed out in late 2011, just like the rest of OC.  It did not decline the slowest and recover the fastest during the Great Recession according to these charts.  So that myth is busted.

Irvine is in for many more years of pain.

Sounds like you are projecting your own experiences on to Irvine. Had you bought in Irvine, your recovery would be much sooner and the pain that you felt would not last as long.

Seriously, whose here feels any pain? Beside LL.

Happiness, made a lot of sense about owning vs. rent. I never thought it that way.

 

[Kenkoko]

Renting is like socialism ? You must live according to someone else?s rules.
Owning is freedom to live how you want to live.

I am not a socialist but this is such an odd statement. Are you brainwashed by the oversimplification that everything about socialism is bad and everything about capitalism is good?

What is it about socialism that's making your living less desirable or less free?

I am truly curious because while I don't want socialism in my government, socialism has its place when it comes to living. In fact with my family, I'm a communist. With my close friends I'm a socialist. In my circle of trust, socialism is the right way to live a loving happy integrated life. 

 

[freedomcm]

Renting is like socialism ? You must live according to someone else?s rules.
Owning is freedom to live how you want to live.

One never owns in Irvine.  Always have to pay (and obey) the HOA.  Always have tax and MR (sometimes increasing).

 

[misme]

Renting is like socialism ? You must live according to someone else?s rules.
Owning is freedom to live how you want to live.

One never owns in Irvine.  Always have to pay (and obey) the HOA.  Always have tax and MR (sometimes increasing).

The bit about the taxes is true anywhere in California and the US for that matter. The bit about HOA is true in many other communities throughout Orange County and Southern California.

 

[Kenkoko]

@kenkoko:

Thanks for the detailed response. I don't remember asking you if you rented before because I assume you owned.

BTW: FWIW, late 20s to me is around that first time buyer age. I think maybe you are talking about people who are 22-25 at which point I'm not sure I would encourage them to buy a house at that age either. This also covers your concern about financial responsibility.

And yes, there is a definitely a segment of the population that will and should never own... but that's not the audience of this forum.

Sure, I always appreciated an honest healthy discussion. The age group for my mentorship program is mostly in the 25-35 range because it is for graduates and post graduates.

I would say the home buying conversations come up most often in the over age 30 group.

I think there are couple of reasons for the age to skew older than you think. 1) School cost has gone up since I went through the program 15 years ago. It?s more than doubled so people are much more in debt. 2) Millennials tend to start family later than previous generations and this often goes hand in hand with becoming 1st time home-buyers.

You bring up a good point about the audience. This is actually something I argued with you before, don?t know if you remember.

This is actually the main reason I even jumped into this thread. I felt like a lot of the comments / advice posted wouldn?t apply to most regular people who might be silent readers of this forum.

No offense to anyone posting on TI but most TI posters are deep in the Irvine bubble. Look at the previous posted polls.

Most TI posters live in 1-2 million homes and have household income doubling the Irvine average.

I am guessing your intended audience are other posters on TI.  But isn?t it kind of pointless?

I was a long time lurker on this forum. I am fairly confident in saying I?ve not seen any regular TI poster able to convince another regular TI poster in just about anything.

Just look at the political threads on TI. Most regular posters on TI are neck deep in their ideology. Most posts are drained of nuance, subtlety & caveat. It?s basically one echo chamber shouting at another echo chamber.

 

[irvinehomeowner]

Here is another data source showing declining prices for Irvine.  The median peaked in December 2018 at $869,600 and now for September 2019 it sits at $849,600, a 2.3% decline over the hot summer selling season!!

See pages 3 and 4:http://ochousingnews.com/wp-content/uploads/2019/09/New-OC-Irvine-Ocotber-Market-Report.pdf

Orange County declined less than 1% over the same time, and that was with Irvine's poor numbers skewing the total!!  That means the rest of OC is doing better than Irvine.  So what the hell is happening??  Why is Irvine dropping faster than the rest of OC?!?  Enquiring minds want to know.

The Great Slowdown was less than 1%? What happened to prices follow volume? It's been over a year and a half!

Prices began falling in January 2019 less than a year after volume started tanking.  Nobody predicted a price bottom would be achieved this early in the downturn.  Irvine is in for many more years of pain.

Also, I hate to break it to you, but Irvine started the last decline in mid-2006 and bottomed out in late 2011, just like the rest of OC.  It did not decline the slowest and recover the fastest during the Great Recession according to these charts.  So that myth is busted.

Such a sensationalist. You had already admitted that Irvine declined slower and recovered faster... remember... you blamed it on the FCBs, are you going back on that now? And when it started and bottomed out is not the main measurement of stability/recovery, it's the percentage drop (which was already compared) and how long it gets back to last peak pricing (or within $560 ).

Let's look at your OCHN (Larry again?) data. It's median prices which isn't the best indicator but it's the data you are referencing. You have to eyeball it but on Page 4 for both Irvine and OC, yes, they peak about the same time, 2006, and they both bottom out around the same time (close to 2013, not 2011). But, look at the percentage drop... again eyeballing it, Irvine dropped about $750k to $565k... around 25% (or should we say 30% as you like to claim) and OC dropped about $695k to $450k... around 35%. Whoah! If 1-5% is such a big difference to you guys, 10% must be huuuuuuuuggge!!

And now let's look at the recovery. Again eyeballing it (so I'll admit any error with my estimates), Irvine got back to $750k midway through 2015 (not sure how accurate the hashmarks are)... let's say 2016 because someone get's picky over $560 difference. OC gets back to $695k somewhere in 2018... and we'll round down just for LL... so 2018. Hmmm... OC took 2 years longer to recover than Irvine... based on the data that you provided.

Now, you are probably is trying to set me up which is why you said Irvine would take 10 years to recoup, 2006 to 2016 and even in the 90s, Irvine looks like it was 90 to 99, whereas OC looks like 90 to 00... but the percentage drop looks smaller.

And again, this doesn't speak to the type of houses sold. As with the data I posted for California, that was single family residences, so you can expect better stability and recovery (7-8 years in the 90s from my previous post). That's the reason why median is flawed because it doesn't consider the same type of stock. That's also why my Irvine 3CWG took less time to recover than your HB condo.

Also to address the "2006 same as 2019 prices" post, the current high for Irvine based on eyeballing that graph again is $830k. Compared to the high in 2006 ($750k)... that's not "about the same" prices. While for OC, in 2006 was about $695k and now is at about $725k (which is closer to "same")... once again Irvine beats the OC (about 10.6% to 4.3%... or as others like to round in their favor, 11% to 4%).

And to note, this data source contradicts LL's claims of Irvine rents declining...

From page 3 of the Irvine report:

Historically, properties in this market sell at a 9.2% premium. Today's premium is 2.3%. This market is 6.9% undervalued.
Median home price is $849,600, and resale $/SF is $477/SF. Prices fell 1.3% year-over-year.
Monthly cost of ownership is $3,635, and rents average $3,554, making owning $080 per month more costly than renting.
Rents rose 2.7% year-over-year. The current capitalization rate (rent/price) is 4.0%.

And from the OC report:

Historically, properties in this market sell at a 1.9% premium. Today's discount is 4.2%. This market is 6.1% undervalued.
Median home price is $721,100, and resale $/SF is $423/SF. Prices fell 0.5% year-over-year.
Monthly cost of ownership is $3,085, and rents average $3,219, making owning $134 per month less costly than renting.
Rents rose 3.4% year-over-year. The current capitalization rate (rent/price) is 4.3%.

It actually costs more to own vs rent in OC compared to Irvine!!!

Again, data is not fool proof. It can vary depending on the source and metrics. While LL likes to use data from sites so he can say Irvine prices are "bottoming" (so far a whopping 1.3% according to this data he posted), other sites have Irvine slightly up like Redfin (I found this link that lets you pick and choose many different options):
https://www.redfin.com/blog/data-center

For Irvine, Redfin says it's up 3% for August 2019 YOY although sales are down 10% (why is this again?).

Oh and by the way:

The median peaked in December 2018 at $869,600 and now for September 2019 it sits at $849,600, a 2.3% decline over the hot summer selling season!!

So the top wasn't July 2018, it was December 2018? Which month is it? You keep changing your statement. Redfin says April 2019 at $882k was peak.

And being in the mortgage business, you should know that it's a spring to summer season and then end of year season. September is too late, people aren't buying any more. It's seasonal.

 

[Happiness]

Renting is like socialism ? You must live according to someone else?s rules.
Owning is freedom to live how you want to live.

I am not a socialist but this is such an odd statement. Are you brainwashed by the oversimplification that everything about socialism is bad and everything about capitalism is good?

Let me tell you something about "bad" and "good".

In free societies, there is no "bad" or "good", there is only personal preference.

In socialist/communist societies, there is no personal preference and everything is very clearly divided into "bad" and "good".

 

[irvinehomeowner]

@kenkoko:

Thanks for the detailed response. I don't remember asking you if you rented before because I assume you owned.

BTW: FWIW, late 20s to me is around that first time buyer age. I think maybe you are talking about people who are 22-25 at which point I'm not sure I would encourage them to buy a house at that age either. This also covers your concern about financial responsibility.

And yes, there is a definitely a segment of the population that will and should never own... but that's not the audience of this forum.

Sure, I always appreciated an honest healthy discussion. The age group for my mentorship program is mostly in the 25-35 range because it is for graduates and post graduates.

I would say the home buying conversations come up most often in the over age 30 group.

I think there are couple of reasons for the age to skew older than you think. 1) School cost has gone up since I went through the program 15 years ago. It?s more than doubled so people are much more in debt. 2) Millennials tend to start family later than previous generations and this often goes hand in hand with becoming 1st time home-buyers.

This is my opinion, but if you are over 30 and you are not financially responsible (as you mentioned), then you have bigger problems than looking for a house. That's always why my first caveat is affordability.

You bring up a good point about the audience. This is actually something I argued with you before, don?t know if you remember.

I sort of remember. I think it was about what type of price range buyers are in TI. I even posted a poll about to figure that out. I think you said most people were looking at less than $1m and the poll said otherwise.

This is actually the main reason I even jumped into this thread. I felt like a lot of the comments / advice posted wouldn?t apply to most regular people who might be silent readers of this forum.

No offense to anyone posting on TI but most TI posters are deep in the Irvine bubble. Look at the previous posted polls.

Most TI posters live in 1-2 million homes and have household income doubling the Irvine average.

I am guessing your intended audience are other posters on TI.  But isn?t it kind of pointless?

Not really, while a bulk of the active posters are as you describe, there have been a few who were first time homebuyers like JamesK, moc and a few others. This forum is mainly about Irvine housing, thus aimed an anyone who is interested in Irvine home ownership or Irvine real estate. I was wrong in my previous statement, there is information that is useful to renters too (stuff like negotiating with TIC on leases, issue with certain apartment complexes, dealing with landlords), it's just not the focus of this site.

I was a long time lurker on this forum. I am fairly confident in saying I?ve not seen any regular TI poster able to convince another regular TI poster in just about anything.

Actually you'd be surprised. The majority of IHB (the precursor to TI) didn't believe in the influence of FCBs. Now, everyone knows what an FCB is (or sort of).

Also, Option ARMs were not looked favorably on. But a number of TI members are now in 5/1 or 7/1 ARMs.

And just recently, how many members are now looking at solar which before was a joked about topic on TI.

Just look at the political threads on TI. Most regular posters on TI are neck deep in their ideology. Most posts are drained of nuance, subtlety & caveat. It?s basically one echo chamber shouting at another echo chamber.

Well, that's another animal. Prior to Trump, it wasn't as heated. I guess orange is the new hot button.

But that's the nature of forums and the Internet. Maybe people won't admit openly that someone's opinion may have changed the way they look at things but it could have an affect.

Like for me, I can admit volume is slower than past seasons... it's just not translating to proportionately lower prices.

 

[Kenkoko]

Let me tell you something about "bad" and "good".

In free societies, there is no "bad" or "good", there is only personal preference.

In socialist/communist societies, there is no personal preference and everything is very clearly divided into "bad" and "good".

So it is the oversimplified propaganda version of socialism. Thanks for clarifying. ;D

Seriously tho, socialism in America isn?t the same dirty word you probably think it is. This isn?t just my opinion, look at the data. About 60% of US age 18-34 prefer socialism over capitalism.

You seem to have a strong feeling about socialism and communism which is great.

But if you?re going to have strong feelings about something, may I suggest looking up what socialism and communism actually mean?

 

[zubs]

When USC bought his house in 2011, he posted it on TI and  I bought a house in 2012.  He influenced me and I bought my house right before the 20% increase.  So these posts here do influence major decisions.

Just look at the tesla solar thread.

 

[irvinehomeowner]

When USC bought his house in 2011, he posted it on TI and  I bought a house in 2012.  He influenced me and I bought my house right before the 20% increase.

Yeah... the 2013 jump was a surprise. But that's why that Irvine graph is not applicable to all products, because homes we were looking at in 2013 were definitely the same or higher priced than similar homes in 2006. That's when Pavilion Park opened up and those were all in the $1m+ range which was the same price range as like-sized homes in 2006.

 

[irvinehomeowner]

Seriously tho, socialism in America isn?t the same dirty word you probably think it is. This isn?t just my opinion, look at the data. About 60% of US age 18-34 prefer socialism over capitalism.

[...]

But if you?re going to have strong feelings about something, may I suggest looking up what socialism and communism actually mean?

Devils' advocate:

Based on your experience with that age range and fiscal responsiblity/maturity... do *they* even know what socialism and communism mean?