[IHB Post 3/29/11] Predictions versus reality: Irvine Renter?s track record

[irvinehomeowner]

Now that IR has received real data from Dataquick, he's going to do more data-based analysis of market conditions. His post today compares what he predicted to what actually happened from Jan 2007 to now:
http://www.irvinehousingblog.com/bl...s-versus-reality-irvine-renters-track-record/

And while I understand the unforeseen gov intervention (although at the time, the uber-bears claimed there was nothing the gov could do), it doesn't explain why some areas still crashed hard and Irvine did not (I guess I should throw in a "yet" here).

 

[IndieDev]

Now that IR has received real data from Dataquick, he's going to do more data-based analysis of market conditions. His post today compares what he predicted to what actually happened from Jan 2007 to now:
http://www.irvinehousingblog.com/bl...s-versus-reality-irvine-renters-track-record/

And while I understand the unforeseen gov intervention (although at the time, the uber-bears claimed there was nothing the gov could do), it doesn't explain why some areas still crashed hard and Irvine did not (I guess I should throw in a "yet" here).

I've personally met "Irvine Renter" at the Spectrum and discussed the Irvine market with him, he's a sharp guy, and he knows the external and internal factors driving the housing market to a tee. I don't really follow his blog, but I do read it occasionally, it's entertaining if not simply for the funny pictures.

That being said, his predictions from 2007 could not have predicted trillions of dollars of government intervention. We can't fault him for that since his prediction was based on market fundamentals only.

What we can say is that he was right in predicting that the market in Irvine would get crushed, which it did to a tune of about 27% in the median home price (as of March 28th, 2011). He predicted 40%, and without the bailout of 2009-2010, he may have hit the mark. Judging by the current market, 2011-2012 may be Irvine Renter's defining moment. 

 

[usctrojancpa]

Now that IR has received real data from Dataquick, he's going to do more data-based analysis of market conditions. His post today compares what he predicted to what actually happened from Jan 2007 to now:
http://www.irvinehousingblog.com/bl...s-versus-reality-irvine-renters-track-record/

And while I understand the unforeseen gov intervention (although at the time, the uber-bears claimed there was nothing the gov could do), it doesn't explain why some areas still crashed hard and Irvine did not (I guess I should throw in a "yet" here).

I've personally met "Irvine Renter" at the Spectrum and discussed the Irvine market with him, he's a sharp guy, and he knows the external and internal factors driving the housing market to a tee. I don't really follow his blog, but I do read it occasionally, it's entertaining if not simply for the funny pictures.

That being said, his predictions from 2007 could not have predicted trillions of dollars of government intervention. We can't fault him for that since his prediction was based on market fundamentals only.

What we can say is that he was right in predicting that the market in Irvine would get crushed, which it did to a tune of about 27% in the median home price (as of March 28th, 2011). He predicted 40%, and without the bailout of 2009-2010, he may have hit the mark. Judging by the current market, 2011-2012 may be Irvine Renter's defining moment. 

The problem is that there is a big divergence between the attached product and the newer detached product.  The attached product (even my Irvine condo that I sold, thank goodness) has gotten killed to the tune of 35%-40% declines from the peak.  However, the newer detached products in Northpark, Northwood Pointe, Northwood II, Woodbury, Quail Hill, and Turtle Ridge have faired a lot better probably only being down 15-20% from the peak.  There's no other city that I track in OC that has as money cash buyers as Irvine does.  I was a little shocked that my buyers for 25 Torrey Pine who were willing to pay about $20k over comps for outbid for that home.  Just doesn't make a lot of sense.  Is there some downside risk in home prices in Irvine, sure but prices seem to be very sticky for that desirable detached product.

 

[irvinehomeowner]

What we can say is that he was right in predicting that the market in Irvine would get crushed, which it did to a tune of about 27% in the median home price (as of March 28th, 2011).

Is 27% really "crushed"... or typical for real estate cycles consider how high it upticked during the last boom cycle? And that 27% isn't at every level... there are several areas that are not even 15% off.

I'm not sure if anyone with any realistic view thought the prices were going to stay that high forever... but by the same token, some of those 50% across the board drops people were predicting didn't sound very realistic either.

 

[IndieDev]

I will be the first to admit that the median price isn't an exact indicator for every neighborhood everywhere, that's why it's a median. It's an internal market indicator, nothing more. Just like the CPI doesn't predict the price movement of specific consumer goods, the median cannot do the same for specific homes and neighborhoods.

What it does show that Irvine is not immune to fundamentals, and that the current trend is downward.

Whether places like QH, or detached product in Northpark will be able to maintain their 2006-2007 price levels is really a judgement call. Do you believe market fundamentals will push prices lower, or do you believe Irvine is special?

When in doubt, I personally try to stick with fundamentals. ;D

 

[irvinehomeowner]

I believe in the power of the FCB and that Irvine is the magic unicorn of real estate.

And like AZDave, I don't have to prove my beliefs... I just have to believe.  :-X

EDIT: I'm joking by the way... some people take what I say on the Internet a bit too seriously.

 

[IndieDev]

  There's no other city that I track in OC that has as money cash buyers as Irvine does.  I was a little shocked that my buyers for 25 Torrey Pine who were willing to pay about $20k over comps for outbid for that home.  Just doesn't make a lot of sense.  Is there some downside risk in home prices in Irvine, sure but prices seem to be very sticky for that desirable detached product.

The following isn't based on fundamentals, but I think buyer psychology plays into it a bit. There was a time where people, some friends and associates, were simply locked out of the OC market because the prices were too high. This was about a 5-6 year period.

I think a lot of what may be happening here is two fold:
1) Pent up demand
2) People who saved a lot of money during the boom years

Again it's a theory based on psychology and emotion, but it makes sense to me from anecdotal experience.

 

[freedomcm]

I still think that a repeat sales index is the only useful measure.  As you all say, $/sf and median are too affected by the selling mix.

Where is IPO and his Irvine CS index?

Last time I saw it, Irvine had dropped from ~230 at the peak to ~190, about 18%.

My estimation of the Costa Mesa index is off ~30% for the higher end stuff, comparable to the Irvine stock.

 

[rickr]

I was talking to my Accountant yesterday who happens to be Asian and he told me within the Asian community buying these new large homes in Irvine has a lot to do with peer pressure.

Asian wives want to show off to their friends and family.

I guess you can say this for any ethnicity but he claims Irvine is just a huge status symbol for Asians.

Is this true?

 

[IndieDev]

I was talking to my Accountant yesterday who happens to be Asian and he told me within the Asian community buying these new large homes in Irvine has a lot to do with peer pressure.

Asian wives want to show off to their friends and family.

I guess you can say this for any ethnicity but he claims Irvine is just a huge status symbol for Asians.

Is this true?

I didn't want to be the one to bring this up, but if it's not true, I don't know what is. Donald Bren's brochure material is full of young asians prancing around in pocket parks.

 

[waitin4ever]

IHO, You do have lot of good points (except when you are not drooling over the 3CWG, driveway, back yard & SFR)
so don't worry about what people think.

I believe in the power of the FCB and that Irvine is the magic unicorn of real estate.

And like AZDave, I don't have to prove my beliefs... I just have to believe.  :-X

EDIT: I'm joking by the way... some people take what I say on the Internet a bit too seriously.

 

[usctrojancpa]

I was talking to my Accountant yesterday who happens to be Asian and he told me within the Asian community buying these new large homes in Irvine has a lot to do with peer pressure.

Asian wives want to show off to their friends and family.

I guess you can say this for any ethnicity but he claims Irvine is just a huge status symbol for Asians.

Is this true?

I didn't want to be the one to bring this up, but if it's not true, I don't know what is. Donald Bren's brochure material is full of young asians prancing around in pocket parks.

Oh come now, since when were you politically correct?  haha

 

[usctrojancpa]

I was talking to my Accountant yesterday who happens to be Asian and he told me within the Asian community buying these new large homes in Irvine has a lot to do with peer pressure.

Asian wives want to show off to their friends and family.

I guess you can say this for any ethnicity but he claims Irvine is just a huge status symbol for Asians.

Is this true?

That's a part of it, but there's also the central location, great schools, safe neighborhoods, and planned layout. 

 

[IndieDev]

I was talking to my Accountant yesterday who happens to be Asian and he told me within the Asian community buying these new large homes in Irvine has a lot to do with peer pressure.

Asian wives want to show off to their friends and family.

I guess you can say this for any ethnicity but he claims Irvine is just a huge status symbol for Asians.

Is this true?

I didn't want to be the one to bring this up, but if it's not true, I don't know what is. Donald Bren's brochure material is full of young asians prancing around in pocket parks.

Oh come now, since when were you politically correct?  haha

I love the Chinese. They are the best drivers in the world. I was riding shotgun on the 101 near Beijing (not in California), and two lanes were becoming one due to some road construction. This guy in a Mercedes S-Class comes from behind, and tries to "beat" me and my driver to the lane narrowing down. He does beat us, but manages to scrub against the right side of our vehicle leaving a nasty looking, long skid mark on his back passenger door, before he speeds off. Our airbag light came on and everything.

What's not to love? 

 

[edhne]

The question becomes why have other markets been crushed despite intervention but Irvine has been less impacted. Would it then be correct to argue that Miami and Las Vegas and inland empire would have been down 80% and irvine down 40% if not for gov't intervention?

I guess you can argue that Irvine's prices have proven to be stickier but that inevitably, it will "catch" up to the rest of the those other markets. But that is irrespective of government intervention.

[/quote]

I've personally met "Irvine Renter" at the Spectrum and discussed the Irvine market with him, he's a sharp guy, and he knows the external and internal factors driving the housing market to a tee. I don't really follow his blog, but I do read it occasionally, it's entertaining if not simply for the funny pictures.

That being said, his predictions from 2007 could not have predicted trillions of dollars of government intervention. We can't fault him for that since his prediction was based on market fundamentals only.

What we can say is that he was right in predicting that the market in Irvine would get crushed, which it did to a tune of about 27% in the median home price (as of March 28th, 2011). He predicted 40%, and without the bailout of 2009-2010, he may have hit the mark. Judging by the current market, 2011-2012 may be Irvine Renter's defining moment. 
[/quote]
The problem is that there is a big divergence between the attached product and the newer detached product.  The attached product (even my Irvine condo that I sold, thank goodness) has gotten killed to the tune of 35%-40% declines from the peak.  However, the newer detached products in Northpark, Northwood Pointe, Northwood II, Woodbury, Quail Hill, and Turtle Ridge have faired a lot better probably only being down 15-20% from the peak.  There's no other city that I track in OC that has as money cash buyers as Irvine does.  I was a little shocked that my buyers for 25 Torrey Pine who were willing to pay about $20k over comps for outbid for that home.  Just doesn't make a lot of sense.  Is there some downside risk in home prices in Irvine, sure but prices seem to be very sticky for that desirable detached product.
[/quote]