Housing Analysis

[Ready2Downsize]

Many younger people I mentor want to take active control of their financial investments and take on more risks, hoping to hit home runs not singles.

Older generation folks with rental properties are just rubbing their mittens with that mindset.  Only a handful will make that home run. Most will strike out and rent forever.  I dunno.  Nothing wrong with hitting singles.  Go ichiro

Lots of old people now who were forever renters, now on fixed incomes hurting badly with rent increases.

Maybe they never saved. Maybe they did but had unexpected expenses, like alimony, child support, medical bills, car accident that left them unable to work, etc. Maybe they would have lost their house and been homeless. Who knows? All I know is I own my home free and clear, haven't had a mortgage in over 10 years and no one will ever take it from me as long as I pay my property taxes, HOA, insurance and utilities which I can do on my own meager social security when I take it, even without my 401K or other investments.

What are those old people going to do? I don't know, maybe become homeless.

This is what I mean by CARE-FREE.

It's not carefree. I still have to maintain the house and my property taxes can go up a little more than 2% if voters put extra bonds on the house, but no one can go raise my rent willy nilly.

 

[sleepy5136]

The people you are mentoring are not ready for home ownership... but for those who are and have the financial stability and location longevity, waiting for timing may not be a viable strategy.

Many of them are ready financially, especially the older millennials. It's a lifestyle and financial choice not to.

This is a generational shift. If you're ever curious, there's a TV series by CNBC on how millennials spend their money that can shed light on this.

They have software engineers making 650k a year, lawyers making 200k, dentist making 150k, to amazon worker making 60k, all choose to not buy homes.

I hope they don't look at a home as purely a financial asset because it's mainly a commodity first and foremost and secondarily an inflation hedge since it's a real tangible asset. You need a place to live so either you'll rent, you'll buy a home, or you'll live with your parents. Last I checked rents are up over 20% YOY and living at home into your 30s isn't what a lot of people want to do. I've helped a ton of millennials buyers buy their first home and their move up home over the years so there is a good group of them that are looking to buy. As IHO stated, it's not easy to time the real estate market and very few people do it well.

Problem is home prices have gone up the same percentage as well. If one were to buy in Irvine, you will need at least 900k+ and if that goes up by 20% YOY.... that takes you to 1.08m for an attached condo..... Unless mommy/daddy got your back or you have a strong income stream in your primary job, that generally makes it difficult for FTHB...

 

[CalBears96]

The people you are mentoring are not ready for home ownership... but for those who are and have the financial stability and location longevity, waiting for timing may not be a viable strategy.

Many of them are ready financially, especially the older millennials. It's a lifestyle and financial choice not to.

This is a generational shift. If you're ever curious, there's a TV series by CNBC on how millennials spend their money that can shed light on this.

They have software engineers making 650k a year, lawyers making 200k, dentist making 150k, to amazon worker making 60k, all choose to not buy homes.

I hope they don't look at a home as purely a financial asset because it's mainly a commodity first and foremost and secondarily an inflation hedge since it's a real tangible asset. You need a place to live so either you'll rent, you'll buy a home, or you'll live with your parents. Last I checked rents are up over 20% YOY and living at home into your 30s isn't what a lot of people want to do. I've helped a ton of millennials buyers buy their first home and their move up home over the years so there is a good group of them that are looking to buy. As IHO stated, it's not easy to time the real estate market and very few people do it well.

Problem is home prices have gone up the same percentage as well. If one were to buy in Irvine, you will need at least 900k+ and if that goes up by 20% YOY.... that takes you to 1.08m for an attached condo..... Unless mommy/daddy got your back or you have a strong income stream in your primary job, that generally makes it difficult for FTHB...

You buy what you can afford. Then you move up when you afford it.

 

[The Motor Court Company]

for a lot of Americans, homeownership is forced saving to build up equity....also part of American dream but that is being taken away...
the current market is not healthy...

 

[CalBears96]

for a lot of Americans, homeownership is forced saving to build up equity....also part of American dream but that is being taken away...
the current market is not healthy...

It's pretty much a given that the current market will peak soon...some time from mid year to end of the year.

 

[sleepy5136]

The people you are mentoring are not ready for home ownership... but for those who are and have the financial stability and location longevity, waiting for timing may not be a viable strategy.

Many of them are ready financially, especially the older millennials. It's a lifestyle and financial choice not to.

This is a generational shift. If you're ever curious, there's a TV series by CNBC on how millennials spend their money that can shed light on this.

They have software engineers making 650k a year, lawyers making 200k, dentist making 150k, to amazon worker making 60k, all choose to not buy homes.

I hope they don't look at a home as purely a financial asset because it's mainly a commodity first and foremost and secondarily an inflation hedge since it's a real tangible asset. You need a place to live so either you'll rent, you'll buy a home, or you'll live with your parents. Last I checked rents are up over 20% YOY and living at home into your 30s isn't what a lot of people want to do. I've helped a ton of millennials buyers buy their first home and their move up home over the years so there is a good group of them that are looking to buy. As IHO stated, it's not easy to time the real estate market and very few people do it well.

Problem is home prices have gone up the same percentage as well. If one were to buy in Irvine, you will need at least 900k+ and if that goes up by 20% YOY.... that takes you to 1.08m for an attached condo..... Unless mommy/daddy got your back or you have a strong income stream in your primary job, that generally makes it difficult for FTHB...

You buy what you can afford. Then you move up when you afford it.

Let's not even talk about OC. Let's talk LA county. Inglehood itself is already expensive and you can walk out the next day and get robbed. East LA and their old homes are expensive as heck and requires a complete renovation.

Right now it looks like the best option is to get a WFH job and relocate to lower cost of living states. But that has a ripple affect. Homes there will then get bid up and eventually price out the locals. This is exactly why I don't understand why the gov had to implement forbearances. There is no "right" to own a home. If you can't afford your mortgage then you will need to sell and put that inventory to the market. The government completely screwed FTHB the best opportunity to buy in 2020 and instead helped 55+ homeowners to pay less taxes despite the wealth and equity they already built in their current homes.

 

[irvinebullhousing]

Unintended consequences.

When government try to fix something, it break something else.

Government also handout tax free money, student loans forgiveness, free childcare, free masks, free test kit. Many use these test kit and free money for a luxurious vacation. Many did not want to work, getting free money is better than working, extended unemployment with 600 bucks a week + ca unemployment benefit = better pay than working and drive to work.

Nobody complain about it, except me.

Again, don?t fight the force, go with the force.

I say, if you want it, you will get it, with planning. Handout does not works in the long run.

 

[usctrojancpa]

for a lot of Americans, homeownership is forced saving to build up equity....also part of American dream but that is being taken away...
the current market is not healthy...

It's pretty much a given that the current market will peak soon...some time from mid year to end of the year.

That's my prediction too, most all of the 8-10% price gains that I predicted this year will be in the first half of the year.  I think the second half of the year will be more calm without the crazy bidding wars for most homes but I guess we shall see.

 

[Nani]

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.

Historically, highly paid tech employees could not easily work remotely. Now that they can, tons are leaving San Francisco / Silicon Valley for the better weather and 'less expensive' housing in SoCal. I wouldn't be surprised if Irvine outperforms 'the market' in the foreseeable future. (Not saying it can't go down, but it has strong support).

 

[Kenkoko]

I hope they don't look at a home as purely a financial asset because it's mainly a commodity first and foremost and secondarily an inflation hedge since it's a real tangible asset. You need a place to live so either you'll rent, you'll buy a home, or you'll live with your parents. Last I checked rents are up over 20% YOY and living at home into your 30s isn't what a lot of people want to do. I've helped a ton of millennials buyers buy their first home and their move up home over the years so there is a good group of them that are looking to buy. As IHO stated, it's not easy to time the real estate market and very few people do it well.

Millennials, as a block, doesn't even look at real tangible assets the same way as Boomers & Gen Xs. Look at the recent rise and the disparity between gold & bitcoin for example. Both are essentially financial religions but look at the diverging trend.

It's a bit interesting that the 20% YOY increase in rent keeps popping up as if it's happening in a vacuum. Mentioning the huge pop in home prices should be included to give it proper context.

Bankrate did a poll in May 2021 and found that 64% of millennials have regrets about buying their current home. Maybe not everything is peachy after buying a house?

And maybe living at home into your 30s isn't what a lot of people want, but it's also the reality. New York Times reported last month that more U.S. men aged 18-34 live with their parents than with romantic partners.

Lastly, telling millennials that something is not easy & few people do it well - isn't likely to stop them. Look at the whole wall street bets / Gamestop debacle 

 

[Kenkoko]

Unintended consequences.

When government try to fix something, it break something else.

Government also handout tax free money, student loans forgiveness, free childcare, free masks, free test kit. Many use these test kit and free money for a luxurious vacation. Many did not want to work, getting free money is better than working, extended unemployment with 600 bucks a week + ca unemployment benefit = better pay than working and drive to work.

Nobody complain about it, except me.

Again, don?t fight the force, go with the force.

I say, if you want it, you will get it, with planning. Handout does not works in the long run.

Don't really understand the vitriol aimed at the people at or near the bottom.

May I suggest looking at the combined share of total US wealth held by *just* the top 1% ?

The top 1% own more than the bottom 90% COMBINED

The struggling people at the bottom is not the problem.

 

[irvinebullhousing]

Unintended consequences.

When government try to fix something, it break something else.

Government also handout tax free money, student loans forgiveness, free childcare, free masks, free test kit. Many use these test kit and free money for a luxurious vacation. Many did not want to work, getting free money is better than working, extended unemployment with 600 bucks a week + ca unemployment benefit = better pay than working and drive to work.

Nobody complain about it, except me.

Again, don?t fight the force, go with the force.

I say, if you want it, you will get it, with planning. Handout does not works in the long run.

Don't really understand the vitriol aimed at the people at or near the bottom.

May I suggest looking at the combined share of total US wealth held by *just* the top 1% ?

The top 1% own more than the bottom 90% COMBINED

The struggling people at the bottom is not the problem.

There is none animosity coming from me toward people that did needed the help during the crisis. The "Unintend Consequenses" occur when you scramble to plug giants holes, and there were many holes to plugs. Double giant bazooka, in this case the FED and Fiscal pumps in unisone thus creating a massive response to fix the issues at hands during pandemic crisis. It also rained money on people that did not need the money and got it. When you have uncheck money handout, 100% crooks will be born and game the system to exploits the freebies. So much so, now Biden have to create a task force to go after stimulus thefs.These are all the unintended consequences. When money given away, it will be spent freely, easy come, easy goes. So what happen when the next crisis occur? More help, more handout. Teach a man to fish and not have to feed the man for the rest of his life. With gas prices high, now more crying that they need more help. Here we go again.

 

[The Motor Court Company]

wall street bets, gamestop, AMC, bitcoin, NFT?it may have more to do with the free government stimulus money?free house money to gamble why not?

I hope they don't look at a home as purely a financial asset because it's mainly a commodity first and foremost and secondarily an inflation hedge since it's a real tangible asset. You need a place to live so either you'll rent, you'll buy a home, or you'll live with your parents. Last I checked rents are up over 20% YOY and living at home into your 30s isn't what a lot of people want to do. I've helped a ton of millennials buyers buy their first home and their move up home over the years so there is a good group of them that are looking to buy. As IHO stated, it's not easy to time the real estate market and very few people do it well.

Millennials, as a block, doesn't even look at real tangible assets the same way as Boomers & Gen Xs. Look at the recent rise and the disparity between gold & bitcoin for example. Both are essentially financial religions but look at the diverging trend.

It's a bit interesting that the 20% YOY increase in rent keeps popping up as if it's happening in a vacuum. Mentioning the huge pop in home prices should be included to give it proper context.

Bankrate did a poll in May 2021 and found that 64% of millennials have regrets about buying their current home. Maybe not everything is peachy after buying a house?

And maybe living at home into your 30s isn't what a lot of people want, but it's also the reality. New York Times reported last month that more U.S. men aged 18-34 live with their parents than with romantic partners.

Lastly, telling millennials that something is not easy & few people do it well - isn't likely to stop them. Look at the whole wall street bets / Gamestop debacle 

 

[Kenkoko]

Teach a man to fish and not have to feed the man for the rest of his life.

This has always been sold to the American public as a viable solution, but in reality it's not.

Modern economic transformation can't easily be solved by "teaching a man to fish".

The manufacturing sector has lost about 5 million jobs since 2000. Almost three-quarters of manufacturing workers were men, average age 52.

The success rate of government retraining program is between 0-15%. This probably shocks nobody. Human beings are not infinitely flexible widgets.

Of course there are new jobs created by the economic transformation. But they tend to be in different places for people with different skill sets.

Believing we can successfully train millions of middle age men, mostly in the Midwest with high school diplomas, to become software engineers & big data scientist and move to Seattle is not realistic.

Average male wages have declined since 1990 in real terms. At least one-sixth of prime working age men 25-54 are either unemployed or out of the workforce.

This is a real problem, and Trump was smart enough to realize it and successfully tapped into it to help win his election.

So who should "teach a man to fish" ? And how?

I have no good answers. Trump didn't really revive manufacturing.

Government aid may not be the best solution, but it's certainly better than any retraining programs.

 

[AW]

Teach a man to fish and not have to feed the man for the rest of his life.

This has always been sold to the American public as a viable solution, but in reality it's not.

Modern economic transformation can't easily be solved by "teaching a man to fish".

The manufacturing sector has lost about 5 million jobs since 2000. Almost three-quarters of manufacturing workers were men, average age 52.

The success rate of government retraining program is between 0-15%. This probably shocks nobody. Human beings are not infinitely flexible widgets.

Of course there are new jobs created by the economic transformation. But they tend to be in different places for people with different skill sets.

Believing we can successfully train millions of middle age men, mostly in the Midwest with high school diplomas, to become software engineers & big data scientist and move to Seattle is not realistic.

Average male wages have declined since 1990 in real terms. At least one-sixth of prime working age men 25-54 are either unemployed or out of the workforce.

This is a real problem, and Trump was smart enough to realize it and successfully tapped into it to help win his election.

So who should "teach a man to fish" ? And how?

I have no good answers. Trump didn't really revive manufacturing.

Government aid may not be the best solution, but it's certainly better than any retraining programs.

You?ve mentioned you?re mentoring young?uns, what are you mentoring/advising, finances, real estate, life coaching?
(sorry if this was already mentioned buried in this thread)

 

[usctrojancpa]

wall street bets, gamestop, AMC, bitcoin, NFT?it may have more to do with the free government stimulus money?free house money to gamble why not?

I hope they don't look at a home as purely a financial asset because it's mainly a commodity first and foremost and secondarily an inflation hedge since it's a real tangible asset. You need a place to live so either you'll rent, you'll buy a home, or you'll live with your parents. Last I checked rents are up over 20% YOY and living at home into your 30s isn't what a lot of people want to do. I've helped a ton of millennials buyers buy their first home and their move up home over the years so there is a good group of them that are looking to buy. As IHO stated, it's not easy to time the real estate market and very few people do it well.

Millennials, as a block, doesn't even look at real tangible assets the same way as Boomers & Gen Xs. Look at the recent rise and the disparity between gold & bitcoin for example. Both are essentially financial religions but look at the diverging trend.

It's a bit interesting that the 20% YOY increase in rent keeps popping up as if it's happening in a vacuum. Mentioning the huge pop in home prices should be included to give it proper context.

Bankrate did a poll in May 2021 and found that 64% of millennials have regrets about buying their current home. Maybe not everything is peachy after buying a house?

And maybe living at home into your 30s isn't what a lot of people want, but it's also the reality. New York Times reported last month that more U.S. men aged 18-34 live with their parents than with romantic partners.

Lastly, telling millennials that something is not easy & few people do it well - isn't likely to stop them. Look at the whole wall street bets / Gamestop debacle 

Let's see how things play out when the Fed raises rates and quantitative tightening, nothing that any young folks have seen in their lifetime.  The first things that will get sold is non-tangible assets like Cypto and NFTs. Let's see how much these folks care about money when they start losing it.

 

[Kenkoko]

You?ve mentioned you?re mentoring young?uns, what are you mentoring/advising, finances, real estate, life coaching?
(sorry if this was already mentioned buried in this thread)

Probably mentioned it a few years back, so likely buried deep somewhere in this thread.

Been part of the alumni mentorship program for my alma mater for almost a decade now. They are postgraduates healthcare professionals.

My main focus is private practice management but not limited to it.

We do end up talking about a wide range of stuff including finances, life planning, investing, philosophy, even politics.

 

[Liar Loan]

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?

REMINDER: You refused to acknowledge the drop until Cares, USC, and others basically forced you to admit it with their own data.  Now it's YOU shifting the goal posts by saying: "It's not a valid prediction unless you say when people should jump back in."  Haha!!

Irvine home owners lost money over those years while the rest of OC was still going up, up, up, and I warned you.  The best move would have been to sell your Irvine clunker and buy a non-Irvine coastal home.  You would have avoided the price drops AND benefitted from the stimulus-driven appreciation of the past two years.

This advice only applies if you care about Max ROI.  If you don't mind losing money on Irvine homes in exchange for high mello roos and toxic waste in your water supply, well then by all means, keep paying up!

 

[Liar Loan]

Irvine never got to rental parity back in 2008-2010, close but not quite.

Here is data that shows that it did.

Home values dropped by 30% and interest rates dropped from 6.5% to 4.5% making ownership costs more in line with rental costs, especially when you factor in the interest deduction and the decrease in property tax / mello roos that corresponded with declining home values.

 

[irvinehomeowner]

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?

REMINDER: You refused to acknowledge the drop until Cares, USC, and others basically forced you to admit it with their own data.  Now it's YOU shifting the goal posts by saying: "It's not a valid prediction unless you say when people should jump back in."  Haha!!

Here you go with your dancing posts again.

You really should just be called Liar... not Liar Loan.

If you recall... back then I kept asking "How much?"... I even posted a poll for it because I said if the drop was within a percentage of seasonal drops... it's not really a drop. What was the The Great Drop of 2018?

You predicted "pain" for Irvine home owners... where is it? Anyone who bought before 2018 or during 2018-2020 doesn't seem to be in very much pain right now.

Irvine home owners lost money over those years while the rest of OC was still going up, up, up, and I warned you.  The best move would have been to sell your Irvine clunker and buy a non-Irvine coastal home.  You would have avoided the price drops AND benefitted from the stimulus-driven appreciation of the past two years.

This advice only applies if you care about Max ROI.  If you don't mind losing money on Irvine homes in exchange for high mello roos and toxic waste in your water supply, well then by all means, keep paying up!

You are the one moving goalposts now. You are mixing MRs, toxicity, max ROI and whatever else you want to throw in to prove your "pain" prediction.

I'm sorry you are so hurt that Irvine didn't die like you wanted it to, but when you are the only one in the room making the argument... logic dictates that maybe you aren't on the right side of it.

But Liar Loan never admits fault... EVER. And that's a you problem.