Irvine back to 2000 prices?

[irvinehomeowner]

So back in the heyday when bears and bulls would fight over where Irvine home prices would go when the bubble burst on IHB... it was often said that 2000 prices would be the bottom... I believe AZDave even said something like the 1999 or before.

I always argued against that because I distinctly remember shopping for homes in Irvine in 1999 and at that time, 3-4br new SFRs (Oak Creek, Harvard Square and West Irvine) were around $300k and I could not fathom that same type of home going for that low any time soon.

So here we are, inventory is low, interest rates are low... and many properties are receiving multiple bids (the last 3 homes we looked at were in that situation)... and prices aren't even close to what they were in 2000. Even at 3% inflation, that same home should be $440k right now, at 5% inflation, $540k. Can anyone buy an 4br SFR (not a detached condo) for $540k right now?

Or are we in a mini-bubble and prices will "crash" again?

 

[OCgasman]

Resales are going at asking price, frequently over.  I think it's simply supply & demand economics + low rates.  You can't discount the FCB variable either for Irvine.  There's just very little inventory right now.  Let's see what happens to prices when inventory creeps up to historic averages and Great Park/Orchard Hills homes start getting built.  The new SFR in Woodbridge/University Park are priced crazy, but I bet they will have no problems selling them with a long waiting list.

 

[momopi]

If Irvine homes had fallen to 2000 price levels, investors would jump all over it.  At that price level it's possible to make a small cash flow with today's low interest rates.

 

[Liar Loan]

If Irvine homes had fallen to 2000 price levels, investors would jump all over it.  At that price level it's possible to make a small cash flow with today's low interest rates.

This is what happened in most of OC except it bottomed at 2002 levels.  Once I started to see investors scooping up condos in my area back in '09, I knew prices could not go much lower.  I also knew it was time to buy a house when I could pick one up for the same as what I could rent one for. 

Prices COULD have reached late 90's levels had the Fed and US government not intervened.  Hell, prices could have reached 1980's levels had every major financial institution been allowed to fail.  What would have happened if AIG, BofA, Citibank, GM, and Chrysler had been allowed to go BK?  Most people don't appreciate that a Depression was averted.

 

[irvinehomeowner]

Most people don't appreciate that a Depression was averted.

And that was one of my contentions why I didn't think prices could drop that low... because if they did... that would mean we were in a zombie apocalypse.

Instead... we are in a unicorn apocalypse.

 

[irvinehomeshopper]

China's new regime is cracking down on corruption by the last regime. This is the last opportunity to launder cash out for foreign RE before getting caught. Wealthy nationals are limited to buying one investment property in China. Many of such investments sit vacant in massive inventory creating ghost cities across China. Many are seeking to buy oversea properties.

This fuels the FCB cash purchases in the Silicon Valley and SoCal suburbs. When interest rate is less than inflation buyers are looking to buy. Irvine in particular is well branded in China since so many new cities there were modeled after the thoughtful master plan concept.

This buying frenzy will continue to spike upward. We will see insane prices benchmark at $400/sf soon. Even when Chinese cash goes away home prices remain stubborn in the desirable cities.

 

[hamilton]

China's new regime is cracking down on corruption by the last regime. This is the last opportunity to launder cash out for foreign RE before getting caught. Wealthy nationals are limited to buying one investment property in China. Many of such investments sit vacant in massive inventory creating ghost cities across China. Many are seeking to buy oversea properties.

This fuels the FCB cash purchases in the Silicon Valley and SoCal suburbs. When interest rate is less than inflation buyers are looking to buy. Irvine in particular is well branded in China since so many new cities there were modeled after the thoughtful master plan concept.

This buying frenzy will continue to spike upward. We will see insane prices benchmark at $400/sf soon. Even when Chinese cash goes away home prices remain stubborn in the desirable cities.

It's also to note that many wealthy Chinese are making plans to leave the country; they've already made their money and have no intention of getting jailed/caught doing whatever activities it is they were doing to make that much money in the first place.  A lot of them will end up in SoCal and the one thing they all have in common is that they are obsessed with our real estate.  From their point of view not only do you get land but even Irvine pricing is a bargain compared to some of the real estate prices they have back in China.

My point is it's not just a temporary influx of Chinese money, it's here to stay.

 

[freedomcm]

I was pretty bear-ish, but completely missed the boat on one key factor:  interest rates.

It never even entered my mind that interest rates would drop by half.  If you disregard the FCBs (a big if, I'll grant you), it is still about affordability.  but 3% mortgages make your $300k nominal/$400k inflation adjusted house pencil out at what, $700k?

 

[irvinehomeowner]

The funny thing was, many of the bears (especially IrvineRenter Larry) said that rates would go up.

And when asked if the government will help soften the collapse, the bears' answer was always "There is nothing the gov can do to stop this crash". Afterwards, when asked "I thought you said the gov couldn't help?", the bears were all "We didn't think they would go that far". Okay... that's fair... but when you say there is nothing that the gov can do... at least admit some error in your opinion.

 

[Liar Loan]

The funny thing was, many of the bears (especially IrvineRenter Larry) said that rates would go up.

And when asked if the government will help soften the collapse, the bears' answer was always "There is nothing the gov can do to stop this crash". Afterwards, when asked "I thought you said the gov couldn't help?", the bears were all "We didn't think they would go that far". Okay... that's fair... but when you say there is nothing that the gov can do... at least admit some error in your opinion.

Well said IHO. 

P.S.  His post for today is entitled "Never forget the bulls and bubble deniers were completely and totally wrong".

 

[irvinehomeowner]

P.S.  His post for today is entitled "Never forget the bulls and bubble deniers were completely and totally wrong".

I dropped him a "reminder" in the comments section.

 

[irvinebullhousing]

Have any one caught the 60 minutes CBS shows last week about the over building in China. Miles and miles and miles of homes and shopping center were build, a whole subdivision without anyone living or using the space... It like a ghost city...These are funded and drive by the Chinese government to build and keeping their economy on tear for last few years....BUT things will collapse there in China and it will happen very soon....Hold on to your horses!!!!!!!

 

[gld2]

What does it to do with the Irvine's housing price?  are they related?

Have any one caught the 60 minutes CBS shows last week about the over building in China. Miles and miles and miles of homes and shopping center were build, a whole subdivision without anyone living or using the space... It like a ghost city...These are funded and drive by the Chinese government to build and keeping their economy on tear for last few years....BUT things will collapse there in China and it will happen very soon....Hold on to your horses!!!!!!!

 

[zubs]

There are a lot of Chinese who already have enough exposure to the Chinese realestate market.  The bearish reports of a Chinese property bubble will cause more of them to invest overseas, in which Irvine is one of the main beneficiaries.

Although it may cost 10% ~ 40% to exchange money from RMBs to USDs and get it out of China, it may still be pragmatic for the wealthy Chinese to invest in other countries not their own.  See Neil Heywood's death for more on getting money out of China.  The dude was trying to charge a higher fee then what was expected so he was tricked into drinking cyanide.

 

[momopi]

China does not allow freehold land-ownership.  The State and collectives own the land and you get 50-70 year "surface use" land-rights when you purchase the property.  Since RE ownership is relatively recent in China, we cannot predict how laws may change via various reforms.  However, we can assume that if you buy a property there today under current land-use scheme, the value of your property will eventually decrease to zero, assuming the building last that long.  I stayed at my ex-fiance's father's condo in Tianjin back in 2007 and could hear the neighbors through the walls.  Many developments around the city were "hit and run".

On the plus side, I'm not aware of property owners being responsible for demolition costs.  In Japan, if you buy a condo on a 50-60 year leasehold (Chijoken/Chinshakuken), it's possible that you may be responsible for the cost of demolition & cleanup at the end of the lease.

 

[Irvinecommuter]

Have any one caught the 60 minutes CBS shows last week about the over building in China. Miles and miles and miles of homes and shopping center were build, a whole subdivision without anyone living or using the space... It like a ghost city...These are funded and drive by the Chinese government to build and keeping their economy on tear for last few years....BUT things will collapse there in China and it will happen very soon....Hold on to your horses!!!!!!!

See late 1980s Japan.