Housing Bubble 2.0

[irvineoc]

Anyone think we are in another housing bubble in OC/Irvine?  I know there are many cash buyers in Irvine but the non-occupied properties are a risk in my opinion.  When China's economy experiences a downturn, Chinese investors may rush to sell their US real estate for cash.  If this happens, I think Irvine may take a much bigger hit to the downside than expected. 

It may be a repeat of the early 1990's when the Japanese sold their US real estate when their country experienced an economic downturn.

 

[collected]

No because inventory is low, Irvine is booming economically, commercial lease vacancy rates are at 20 year lows, undeveloped land is running low, rents have been posting strong gains, borrowers qualify for loans (no stated income loans), interest rates are low, foreclosures hitting lows, etc...  We aren't even near the 2006 highs once you account for mortgage rates and inflation.  After accounting for mortgage rates and inflation home prices are 30%-40% below 2006 levels. 

 

[lnc]

I don't see a bubble.  Actually the chance of seeing something like the housing bubble of 2007 is very slim, we might not even see one like that ever again in our life time.

However, a mild housing recession like that of the 90's are very likely to happen every 10 year or so.  If the housing downturn happens, we are going to see a significant price drop in second or third tier cities like Riverside, Corona first before it spread to Irvine.  Those cities will take a bigger hit than Irvine does and its not the other way around. 

Do to highly desirability of Irvine, Irvine's housing price will tend to be the last one to drop when downturn happened and first one to raise when recovery began. 

 

[renter1]

I agree with the replies but it doesn't address the first point if Chinese buyers cash out/ Irvine would be impacted since many of the buyers are cash paying Chinese.how could it not??

 

[jmoney74]

Still doesnt mean its a bubble. It will slow down but there are plenty of high income people looking to buy.

 

[collected]

I agree with the replies but it doesn't address the first point if Chinese buyers cash out/ Irvine would be impacted since many of the buyers are cash paying Chinese.how could it not??

We don't know if they're going to cash out.  For all we know there might be more foreign cash buyers in the future and this seems more likely to happen.  China is increasing in GDP every year and so it's citizens will able to buy even more homes in the future.  You might argue that inventory is low because of FCB however rents have been posting strong gains.  FCB typically rent out their homes for extra income.  If there truly was an excess of homes on the market then we wouldn't see rents rise so much.  So even if FCB pull out I think we wouldn't see a major collapse in home prices.  So given this information I don't think it makes sense to take action based on the possibility of FCB pulling out because the exact opposite can happen.  More FCB might buy in the future which would cause you to miss out on additional appreciation. 

 

[NewtoIrvine1]

it's definately going to be a mult-prone cause and effect that can effect housing. Although the chinese are buying many investment/housing properties that isn't the key issue.

The key will be where mortgage rates go from here I will borrow
http://sanjoserealestatelosgatoshom...rate-payments-with-various-interest-rates.png

so essentially the average price home here is 800,000 or so ... so double the numbers. We are at 3.75% today so lets say we have a shift of 150 BP to 200 BP over the next 3 years That will take a 3700 monthly mortgage today on 800,000 to ... 4700 at 5.75% or 27% higher. That ultimately will keep a lid on price appreciation over the next few years.

So lets say that mortgage rates go up and then the chinese sell at the same time and the economy slow down as housing slow down... that could be the trigger potentially for the next recession.

 

[lnc]

I agree with the replies but it doesn't address the first point if Chinese buyers cash out/ Irvine would be impacted since many of the buyers are cash paying Chinese.how could it not??

Of course if significantly number of home owner all need to sell their home and not enough buyers,  the home price will take a hit.

The big question is why would many of them all need to cash out?  What kind of economy/financial catastrophe will force significant number of them to liquidate their real estate asset here all at once? 

The PROC's policy only prevent them from buying not forcing them to sell.  China's economy is only slowing down but not even close to a full blown recession.  Even with a full blown Chinese recession,  I just don't see that will force majority of these home owners to sell their investment property. 

 

[B2FiNiTY]

It is still way early to mid cycle. Until I start seeing mania and my aunts cousin's best friend's sister in law calls me and tells me to buy a house asap because they are going up, I don't call bubble.

 

[irvinehomeowner]

So rates are going to rise and a majority of a certain group of buyers are going to sell their homes?

Wasn't this the same thing being said 8 years ago except it was a certain group of buyers were going to lose their homes when their O-Arms reset?

So... uh... 40-50% drop again?

 

[irvinebullhousing]

So rates are going to rise and a majority of a certain group of buyers are going to sell their homes?

Wasn't this the same thing being said 8 years ago except it was a certain group of buyers were going to lose their homes when their O-Arms reset?

So... uh... 40-50% drop again?

I HAVE A DREAM, THAT ONE DAY.....UH,,,UMMM, SOON I HOPE, THE WHOLE WORLD WOULD CRASH. SO I CAN JUMP IN AND BUY ALL THE DISTRESS PROPERTIES. INCLUDING THE INFAMOUS IRVINE HOOD. SO I CAN RETIRE RICH.

Then I woke up and realized I am just a DUMB SCHMUCK, I shoulda, coulda, woulda.

 

[irvinebullhousing]

Here is some food for thoughts.

http://www.dce.harvard.edu/professional/blog/how-use-real-estate-trends-predict-next-housing-bubble

Where are we now?

It?s important to remember that the Great Recession was not caused by an unexpected event. To those who study the real estate cycle, the crash happened precisely on schedule. It was painful, but it inaugurated the next iteration of the real estate cycle.

As 2014 begins (eight years after the peak and six years after the crash), real estate markets across the country are transitioning from the recovery phase to the expansion phase. Nationally, Mueller?s estimate of the relative position of each asset class is as follows:

This graphic shows the national real estate property type cycle locations

For many cities and asset classes the expansion phase is well under way. According to Glen Mueller, Boston, New York, Denver, and San Francisco, for example, are already experiencing incredibly tight rental markets and robust new construction in apartments.

Those who lived through the financial crisis of 2008 will (we hope) always be weary of the next major crash. If George, Harrison, and Foldvary are right, however, that won?t happen until after the next peak in 2024. 

Between now and then, aside from the occasional slow down, the real estate industry is likely to enjoy a long period of expansion.

 

[irvine buyer]

It looks like the article was penned in 2014.  If so, I would agree that single family and multifamily sectors back then were beginning to enter Phase II.  Fast forward to today and both sectors appear to be well into Phase II with some markets entering Phase III.  SF to San Jose area is an example of such a market already into Phase III where rents are no longer growing and concessions are increasingly common.  I've noticed that today's cycles are shorter and future downturns are likely to be shorter as well due to the level of capital seeking opportunities.  I would be surprised if the current cycle lasts 18 years though.