Housing Analysis

[usctrojancpa]

I see the time honored TI tradition of dunking on LiarLoan is alive and well >

Actually think it's great to have LL's perspective. I get that contrarian opinions are disliked but they are often necessary.

Nothing wrong with opposing viewpoints.  One thing that I would like LL to do is make predictions based upon the data that he sees like I do.  It's OK to be wrong but I lost count how many times my predictions aren't right as long as their some sound thought behind the predictions.

 

[Liar Loan]

I see the time honored TI tradition of dunking on LiarLoan is alive and well >

Actually think it's great to have LL's perspective. I get that contrarian opinions are disliked but they are often necessary.

Nothing wrong with opposing viewpoints.  One thing that I would like LL to do is make predictions based upon the data that he sees like I do.  It's OK to be wrong but I lost count how many times my predictions aren't right as long as their some sound thought behind the predictions.

I have made more correct predictions than I can count, many here on TI.  Gold crash in 2012 (deleted by Panda), bitcoin crash in 2017/18 (still an active thread), Irvine price declines in 2018 (according to your charts), etc.

Sure, we could say it doesn't matter that bitcoin crashed by 80% in 2018 because everybody that held on is doing fine now.  But wouldn't it have been better to avoid the 80% crash?  Compound returns are killed when you take a devastating hit like that.  And in the case of housing, your shelter can be taken from you if conditions are severe enough. 

Every major housing downturn has ended with Irvine home owners wailing and gnashing their teeth, wishing they had been smarter about how much they paid for their homes.  IHB documented the many thousands of Irvine residents facing the prospects of eviction and homelessness.  It's the reason TI exists in the first place.

 

[OCtoSV]

USC - what % of your buyers require 2 incomes? As stagflation sets in we could see pressure on professional employment.

 

[usctrojancpa]

I see the time honored TI tradition of dunking on LiarLoan is alive and well >

Actually think it's great to have LL's perspective. I get that contrarian opinions are disliked but they are often necessary.

Nothing wrong with opposing viewpoints.  One thing that I would like LL to do is make predictions based upon the data that he sees like I do.  It's OK to be wrong but I lost count how many times my predictions aren't right as long as their some sound thought behind the predictions.

I have made more correct predictions than I can count, many here on TI.  Gold crash in 2012 (deleted by Panda), bitcoin crash in 2017/18 (still an active thread), Irvine price declines in 2018 (according to your charts), etc.

Sure, we could say it doesn't matter that bitcoin crashed by 80% in 2018 because everybody that held on is doing fine now.  But wouldn't it have been better to avoid the 80% crash?  Compound returns are killed when you take a devastating hit like that.  And in the case of housing, your shelter can be taken from you if conditions are severe enough. 

Every major housing downturn has ended with Irvine home owners wailing and gnashing their teeth, wishing they had been smarter about how much they paid for their homes.  IHB documented the many thousands of Irvine residents facing the prospects of eviction and homelessness.  It's the reason TI exists in the first place.

Fair enough, you called those.  So my question is....when will the price decline begin and what % decline will Irvine see in prices and over what period of time?

 

[irvinebullhousing]

I see the time honored TI tradition of dunking on LiarLoan is alive and well >

Actually think it's great to have LL's perspective. I get that contrarian opinions are disliked but they are often necessary.

Nothing wrong with opposing viewpoints.  One thing that I would like LL to do is make predictions based upon the data that he sees like I do.  It's OK to be wrong but I lost count how many times my predictions aren't right as long as their some sound thought behind the predictions.

I have made more correct predictions than I can count, many here on TI.  Gold crash in 2012 (deleted by Panda), bitcoin crash in 2017/18 (still an active thread), Irvine price declines in 2018 (according to your charts), etc.

Sure, we could say it doesn't matter that bitcoin crashed by 80% in 2018 because everybody that held on is doing fine now.  But wouldn't it have been better to avoid the 80% crash?  Compound returns are killed when you take a devastating hit like that.  And in the case of housing, your shelter can be taken from you if conditions are severe enough. 

Every major housing downturn has ended with Irvine home owners wailing and gnashing their teeth, wishing they had been smarter about how much they paid for their homes.  IHB documented the many thousands of Irvine residents facing the prospects of eviction and homelessness.  It's the reason TI exists in the first place.

Fair enough, you called those.  So my question is....when will the price decline begin and what % decline will Irvine see in prices and over what period of time?

Unfortunately, he won't have an answer for you. Just like you have been asking numerous time in the past. He got no analytical skills other than past experience of a painful wrong timing. While I understand past experience is a good lessons learn, it does not mean that it will reoccur exactly the same. This apple is not the same as 2008 apple when you compare.
Yes, the FED did create this bubble, rate floored at zero, which is why it will shield majority of the homeowners from defaulting when already refinance to an all time low, just like kicking the nonpayment down the road was another method.

When this dam break, if, he reveal where he bought his three car garage home, and I will compare with any 3 car garage home in Irvine and the result will be substantial loss on his home compare to any Irvine home. Guarantee! Maybe, past lessons did not learn well.

 

[usctrojancpa]

USC - what % of your buyers require 2 incomes? As stagflation sets in we could see pressure on professional employment.

About half of my Irvine buyers are single income households and I'd venture to say that about1/3 of the dual income buyers would qualify without needing the 2nd income, that's how strong Irvine buyers are in general.

 

[OCtoSV]

Thanks Martin. So by your estimate 33% of your buyers require dual income. That seems pretty high but I'm going to ask a couple long time Los Gatos based agents at my CC what they see up here, and will report back.

 

[usctrojancpa]

Thanks Martin. So by your estimate 33% of your buyers require dual income. That seems pretty high but I'm going to ask a couple long time Los Gatos based agents at my CC what they see up here, and will report back.

Yes maybe that many need dual income but they are still buying with a lot of cushion (e.g. if they are buying a $2m home their max is $2.5-$3m).

 

[Liar Loan]

I see the time honored TI tradition of dunking on LiarLoan is alive and well >

Actually think it's great to have LL's perspective. I get that contrarian opinions are disliked but they are often necessary.

Nothing wrong with opposing viewpoints.  One thing that I would like LL to do is make predictions based upon the data that he sees like I do.  It's OK to be wrong but I lost count how many times my predictions aren't right as long as their some sound thought behind the predictions.

I have made more correct predictions than I can count, many here on TI.  Gold crash in 2012 (deleted by Panda), bitcoin crash in 2017/18 (still an active thread), Irvine price declines in 2018 (according to your charts), etc.

Sure, we could say it doesn't matter that bitcoin crashed by 80% in 2018 because everybody that held on is doing fine now.  But wouldn't it have been better to avoid the 80% crash?  Compound returns are killed when you take a devastating hit like that.  And in the case of housing, your shelter can be taken from you if conditions are severe enough. 

Every major housing downturn has ended with Irvine home owners wailing and gnashing their teeth, wishing they had been smarter about how much they paid for their homes.  IHB documented the many thousands of Irvine residents facing the prospects of eviction and homelessness.  It's the reason TI exists in the first place.

Fair enough, you called those.  So my question is....when will the price decline begin and what % decline will Irvine see in prices and over what period of time?

This question shows the fundamental difference between our prediction methods.  You make predictions based on your gut feeling derived from buying & selling homes, and I make predictions only when I have sufficient data to do so.  In the case of Irvine and any other housing market, the when & by how much will ultimately be determined by the actions of the four individuals that currently sit on the Federal Reserve Board of Governors.  Predicting when they will act and to what degree is impossible, and forecasters have been getting those predictions wrong for the past 15 years now.

However, the price-to-rent data shows Irvine needs to fall by about 30% to get back in line with historical averages.  It has always gotten back in line with rental parity near the end of its housing declines, and I don't expect this time to be any different.

 

[usctrojancpa]

I see the time honored TI tradition of dunking on LiarLoan is alive and well >

Actually think it's great to have LL's perspective. I get that contrarian opinions are disliked but they are often necessary.

Nothing wrong with opposing viewpoints.  One thing that I would like LL to do is make predictions based upon the data that he sees like I do.  It's OK to be wrong but I lost count how many times my predictions aren't right as long as their some sound thought behind the predictions.

I have made more correct predictions than I can count, many here on TI.  Gold crash in 2012 (deleted by Panda), bitcoin crash in 2017/18 (still an active thread), Irvine price declines in 2018 (according to your charts), etc.

Sure, we could say it doesn't matter that bitcoin crashed by 80% in 2018 because everybody that held on is doing fine now.  But wouldn't it have been better to avoid the 80% crash?  Compound returns are killed when you take a devastating hit like that.  And in the case of housing, your shelter can be taken from you if conditions are severe enough. 

Every major housing downturn has ended with Irvine home owners wailing and gnashing their teeth, wishing they had been smarter about how much they paid for their homes.  IHB documented the many thousands of Irvine residents facing the prospects of eviction and homelessness.  It's the reason TI exists in the first place.

Fair enough, you called those.  So my question is....when will the price decline begin and what % decline will Irvine see in prices and over what period of time?

This question shows the fundamental difference between our prediction methods.  You make predictions based on your gut feeling derived from buying & selling homes, and I make predictions only when I have sufficient data to do so.  In the case of Irvine and any other housing market, the when & by how much will ultimately be determined by the actions of the four individuals that sit on the Federal Reserve Board of Governors.  Predicting when they will act and to what degree is impossible, and forecasters have been getting those predictions wrong for the past 15 years now.

However, the price-to-rent data shows Irvine needs to fall about 30% to get back in line with historical averages.  It has always gotten back in line with rental parity near the end of its housing declines, and I don't expect this time to be any different.

I make predictions based upon both data that I see along with what I see with my eyes, it's my prediction as I don't have future data like how aggressive the Fed will get.  One thing that I'm almost 100% certain is that Irvine will never get back to rental parity due to the strong demand to live in Irvine so a 30% decline in prices is not going to happen, way too many people waiting for an kind of material price decline (sorta similar why Tesla stop will never trade near the market multiple).  Obviously that is all barring an type of black swan even like WWIII or another pandemic.

 

[Liar Loan]

One thing that I'm almost 100% certain is that Irvine will never get back to rental parity due to the strong demand to live in Irvine...

The same thing was said about Irvine in 2006, and for the same reasons (endless demand), and yet it did it happen by 2010.  Every housing downturn is predicated on a black swan event, whether it is stagflation in the 80's, El Toro closing in the 90's, or overleverage in the 00's... Black swans are a guaranty.

 

[irvinebullhousing]

TIC, TIC, TIC, so you only see Irvine down turn and nowhere else?

How about where you live? Do you see it going to be better?

 

[sleepy5136]

I see the time honored TI tradition of dunking on LiarLoan is alive and well >

Actually think it's great to have LL's perspective. I get that contrarian opinions are disliked but they are often necessary.

Nothing wrong with opposing viewpoints.  One thing that I would like LL to do is make predictions based upon the data that he sees like I do.  It's OK to be wrong but I lost count how many times my predictions aren't right as long as their some sound thought behind the predictions.

I have made more correct predictions than I can count, many here on TI.  Gold crash in 2012 (deleted by Panda), bitcoin crash in 2017/18 (still an active thread), Irvine price declines in 2018 (according to your charts), etc.

Sure, we could say it doesn't matter that bitcoin crashed by 80% in 2018 because everybody that held on is doing fine now.  But wouldn't it have been better to avoid the 80% crash?  Compound returns are killed when you take a devastating hit like that.  And in the case of housing, your shelter can be taken from you if conditions are severe enough. 

Every major housing downturn has ended with Irvine home owners wailing and gnashing their teeth, wishing they had been smarter about how much they paid for their homes.  IHB documented the many thousands of Irvine residents facing the prospects of eviction and homelessness.  It's the reason TI exists in the first place.

Fair enough, you called those.  So my question is....when will the price decline begin and what % decline will Irvine see in prices and over what period of time?

This question shows the fundamental difference between our prediction methods.  You make predictions based on your gut feeling derived from buying & selling homes, and I make predictions only when I have sufficient data to do so.  In the case of Irvine and any other housing market, the when & by how much will ultimately be determined by the actions of the four individuals that sit on the Federal Reserve Board of Governors.  Predicting when they will act and to what degree is impossible, and forecasters have been getting those predictions wrong for the past 15 years now.

However, the price-to-rent data shows Irvine needs to fall about 30% to get back in line with historical averages.  It has always gotten back in line with rental parity near the end of its housing declines, and I don't expect this time to be any different.

I make predictions based upon both data that I see along with what I see with my eyes, it's my prediction as I don't have future data like how aggressive the Fed will get.  One thing that I'm almost 100% certain is that Irvine will never get back to rental parity due to the strong demand to live in Irvine so a 30% decline in prices is not going to happen, way too many people waiting for an kind of material price decline (sorta similar why Tesla stop will never trade near the market multiple).  Obviously that is all barring an type of black swan even like WWIII or another pandemic.

It seems to be clear that the government will never let housing go down like it did in 2008-2009. If a black swan event happens and layoffs occur, I can foresee the gov implementing forbearances again.

 

[irvinehomeowner]

These so called "predictions" are hooey without quantification.

Saying something is going to drop, crash or be in pain without specifying a measure is just tarot cards, palm reading or astrology.

It's like saying Netflix is going to drop when it's $100/share and it runs all the way up to $500/share and then drops down to $400 and you claim "See, it dropped!".

I'll take USC's data and experience based analysis any day over someone who keeps moving the goalposts to fit their so-called predictions.

And don't misunderstand, I have the utmost respect for people who feel they have the data to make such proclamations but I also frown when they are wrong and can't admit why.

Check this thread... there were people saying housing was going to drop in 2018 and on... but NONE of those same people said to get back in before prices exploded. So were people better off buying during "The Great Drop" or waiting until now?

 

[CalBears96]

These so called "predictions" are hooey without quantification.

Yup, nobody, not even the great LL can make accurate "predictions", so buy a home when you need one to live in. Simple as that. In the long term that slight drop from 2018 to 2020 (yes, VERY slight drop, not some HUGE drop) is an insignificant blip. I mean, you just take rise from Dec 2021 to Feb 2022 and it's already more than that 2 year period.

 

[Kenkoko]

Agree most of these prediction are valueless without quantification.

But a lot of bearish arguments & reasons made in this long thread were not valueless. Like myself arguing for investing in stocks, equities and crypto instead of housing. Or Liarloan using rental parity to establish his view.

I will go out on a limb and claim that potential buyers reading this thread are smart enough to not just blindly follow any predictions. I think to people who are still  contemplating buying, the reasons why we make our predictions are far more valuable to them than whether the prediction turned out right or wrong.

I don't always agree with LiarLoan, but honestly he gets too much crap for posting his convictions.

Even if you don't appreciate contrarian opinions like I do, he does put in the effort and bring data to justify his conclusions. Unlike certain purple texts 

Yup, nobody, not even the great LL can make accurate "predictions", so buy a home when you need one to live in. Simple as that. In the long term that slight drop from 2018 to 2020 (yes, VERY slight drop, not some HUGE drop) is an insignificant blip. I mean, you just take rise from Dec 2021 to Feb 2022 and it's already more than that 2 year period.

There is a whole younger generation of people who disagree with this old school mentality of ignoring timing & just buy a home when you need to live in.

Rental parity matters to people who can distinguish the difference between their want (to buy a house) and their actual need (housing)

Therefore you see much higher % of younger people renting (especially when the rent vs. buy favors renting)

And investing their money in stocks, cryptos, NFTs etc

 

[usctrojancpa]

One thing that I'm almost 100% certain is that Irvine will never get back to rental parity due to the strong demand to live in Irvine...

The same thing was said about Irvine in 2006, and for the same reasons (endless demand), and yet it did it happen by 2010.  Every housing downturn is predicated on a black swan event, whether it is stagflation in the 80's, El Toro closing in the 90's, or overleverage in the 00's... Black swans are a guaranty.

Irvine never got to rental parity back in 2008-2010, close but not quite.  Also, all loans are fully underwritten today until the loans after your screen name (aka Option ARM loans).  You have no idea how strong today's buyers are in Irvine.  I see it first hand on both sides of the table.  Will we get a downturn?  Of course, but it may just be 5-10% price decline after another price increase of 5-10% from today. 

 

[usctrojancpa]

I see the time honored TI tradition of dunking on LiarLoan is alive and well >

Actually think it's great to have LL's perspective. I get that contrarian opinions are disliked but they are often necessary.

Nothing wrong with opposing viewpoints.  One thing that I would like LL to do is make predictions based upon the data that he sees like I do.  It's OK to be wrong but I lost count how many times my predictions aren't right as long as their some sound thought behind the predictions.

I have made more correct predictions than I can count, many here on TI.  Gold crash in 2012 (deleted by Panda), bitcoin crash in 2017/18 (still an active thread), Irvine price declines in 2018 (according to your charts), etc.

Sure, we could say it doesn't matter that bitcoin crashed by 80% in 2018 because everybody that held on is doing fine now.  But wouldn't it have been better to avoid the 80% crash?  Compound returns are killed when you take a devastating hit like that.  And in the case of housing, your shelter can be taken from you if conditions are severe enough. 

Every major housing downturn has ended with Irvine home owners wailing and gnashing their teeth, wishing they had been smarter about how much they paid for their homes.  IHB documented the many thousands of Irvine residents facing the prospects of eviction and homelessness.  It's the reason TI exists in the first place.

Fair enough, you called those.  So my question is....when will the price decline begin and what % decline will Irvine see in prices and over what period of time?

This question shows the fundamental difference between our prediction methods.  You make predictions based on your gut feeling derived from buying & selling homes, and I make predictions only when I have sufficient data to do so.  In the case of Irvine and any other housing market, the when & by how much will ultimately be determined by the actions of the four individuals that sit on the Federal Reserve Board of Governors.  Predicting when they will act and to what degree is impossible, and forecasters have been getting those predictions wrong for the past 15 years now.

However, the price-to-rent data shows Irvine needs to fall about 30% to get back in line with historical averages.  It has always gotten back in line with rental parity near the end of its housing declines, and I don't expect this time to be any different.

I make predictions based upon both data that I see along with what I see with my eyes, it's my prediction as I don't have future data like how aggressive the Fed will get.  One thing that I'm almost 100% certain is that Irvine will never get back to rental parity due to the strong demand to live in Irvine so a 30% decline in prices is not going to happen, way too many people waiting for an kind of material price decline (sorta similar why Tesla stop will never trade near the market multiple).  Obviously that is all barring an type of black swan even like WWIII or another pandemic.

It seems to be clear that the government will never let housing go down like it did in 2008-2009. If a black swan event happens and layoffs occur, I can foresee the gov implementing forbearances again.

Bingo, more eviction moratoriums and mortgage forbearances will be coming when the next black swan event comes.

 

[The Motor Court Company]

Cheap debt is like drug addiction very hard to get get rid of?what worries me is the divide between the haves and have nots is growing?.

 

[irvinehomeowner]

There is a whole younger generation of people who disagree with this old school mentality of ignoring timing & just buy a home when you need to live in.

Actually... timing is probably more old school in my opinion. For decades people have been trying to time housing to the point of missing out on opportunities due to paralysis by analysis.

I've seen multiple cycles in my lifetime and I've seen people close to me try to time real estate and it's hit and miss. They buy high, sell low... buy low, sell high... buy middle, sell middle... etc... but in most cases, what I've seen is as long as they can afford it and wait it out, they will always come out positive. It's only when people overextend or use ninja financing they really get into trouble.

I myself have bought during peaks and lows... and either way, came out fine.

Rental parity matters to people who can distinguish the difference between their want (to buy a house) and their actual need (housing)

Therefore you see much higher % of younger people renting (especially when the rent vs. buy favors renting)

And investing their money in stocks, cryptos, NFTs etc

Rental parity is great just from a financial perspective. But as I've said before, if people aren't cognizant of their budget to recognize investing the difference, they are going to fall into pitfalls anyways (I see renters who drive really nice cars... so where is the smart money there?).

There are also non-tangibles (or maybe what some people refer to as emotional reasons) as to why people want to own vs rent, that needs to be taken into consideration too.

Buying vs renting can't just be X, Y, and Z... there are many factors that have to be considered... and because timing is so inexact, you can't easily say when is the best time to buy... esp when you want to be picky on where and what you live in.

I monitored the entire Irvine pricing movement from 2005 to 2015 for 3CG homes... when it was high, there was more to choose from, when it was low, the selection was crappy, so timing, rental parity and non-emotional decision trees don't always work.