Irvine Dream said:
http://www.msn.com/en-us/money/real...e-us-markets-might-be-ready-to-pop/ar-BBgv6CB
Particularly troublesome were the 30 counties found by RealtyTrac to have both higher unaffordability rate and higher foreclosure rates than the national average ? two big red flags that such areas are moving closer to a bubble.
Those counties include Kings County, N.Y.; San Francisco, San Mateo and Alameda counties in the San Francisco metro area; Suffolk County in the Boston metro area;
Orange County in Southern California; Honolulu County, Hawaii; Denver County, Colo.; Washington County, Utah, in the St. George metro area; and Deschutes County, Ore., in the Bend metro area, the firm reports.
But Irvine is different because of FCB?
If it is higher affordability rate than the national average, then wouldn't your San Fran and OC almost always make this list? The real question to me is how much the metrics in OC vary in comparison with historical OC metrics, imo. I presume OC has had higher affordability rates than the national average for the last 15 to 20 years. Yes, income is higher in OC vs. your national average but pricing outweighs it by more, imo. Same can be said for places like San Francisco, etc, or at least I presume.
If the actual affordability metrics when compared to historical are significantly higher then OC rates, then I would say there is more that could potentially be there, however, I believe under current scenarios, while pricing is high (and I believe it is pretty high), the metrics are much more supportable then they were during the bubble. You have better financed homes (e.g., people in general have put more money down in the latest craze...which will minimize excess supply that would result in prices crashing much more significantly) but on top of that you have a lower interest rate environment. So even if something today is selling for a peak price in 06/07, interest rates today are right around 4% (if not slightly lower and the annual average is a little above 4%; in 13, average was 3.98%). However, rates in 05 / 06 / 07 (average int rate on 30 yr fixed) were 5.87, 6.41%, and 6.34%.
You plug in the calculator and compare a confirming loan (417K) of 4% to 5.87% (the lowest average rate during that 3 year bubble era) and you are talking about a monthly payment (Principal & Interest) as follows:
417K / 4%: 1990.82
417K / 5.87%: 2465.38
That means a house selling today vs. the previous peak, would be 19.2% more affordable on a monthly basis. This is also ignoring inflation as well, as incomes have risen, albeit not significantly, during the 7 years since the peak, which would actually drive a number greater than the 19.2%. Just some general food for thought. As I mentioned earlier, this also doesn't account for the fact that you would expect to see less foreclosures (which is what ultimately resulted in the overall depth of the housing crash) given the fact that mortgages aren't as easy to come by, generally require larger down payments and more verification, and you don't have those interest only loans being handed out like candy on Halloween.
All that said, I wouldn't be surprised if we saw some market correction in terms of prices (and I don't see any significant increases on the s/t horizon), however, I think part of that would be more driven by increased supply of new homes (lots of new home developments will be rolling full steam in Irvine) and some increases in interest rates (which will impact housing pricing, albeit, might not have much impact on overall affordability).
LT, I think we will see prices continue to grow though, largely driven by the fact that after this next wave of projects in Irvine, there will be extremely limited developmental opportunities, thus meaning all that will be left is organic supply from resale markets, so presuming Irvine schools and the local economy stay strong and overall demand for Irvine is strong, the lower supply and general benefits of Irvine, might lead for Irvine's appreciation 20 years from now being relatively consistent with the general long-term appreciation metrics, which are closer to 5%.
Just my 2 cents and I hope the above holds true since we are likely buying a new place shortly. Maybe I am just saying all of the above to convince myself it is a good idea.
