Is the California (Irvine) Market Ahead of the US Market?

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<strong>Southern California home sales jump 65 percent in September</strong>



To read the full story, please click here:

http://www.mercurynews.com/realestatenews/ci_10767921





<em>In this world of 24/7 news, global markets, and countless reports on the housing market, it is easy to be misled by information that may not be applicable to your local market area. While national, state, and county reports describe general trends in the housing market, households and REALTORS? alike know that housing markets vary a great deal locally.</em>



Reports on the US housing market do not necessarily reflect what is happening in California. Existing home sales in California rose 57 percent year-over-year in August 2008, compared to an 11 percent decline for the nation. Statewide sales have increased 85 percent since reaching bottom last October, yet national sales have remained virtually unchanged over the same period. Movements in home prices over the past year have played a large role in driving California sales. The statewide median price declined by 40 percent in August compared to a year ago, while the US median price fell 10 percent over the same period. Yet, the supply of homes for sale in California is considerably lower than the corresponding national figure: 7 months versus 10 months. In short, real estate markets tend to be much more local than nationwide statistics or even statewide statistics can illustrate.



In fact, local market patterns frequently differ from state and national trends. Differences in housing markets become more apparent when you compare neighborhoods, communities, and counties. For example, in some markets home prices may have fallen by large margins, even as much as 50 percent from their peak. But other markets have experienced small declines, and a few markets have registered slight increases on occasion in recent months. The same is true of the share of distressed sales in different markets. In some areas, distressed sales (Short Sales, Foreclosures, and REOs or bank-owned properties) account for as much as three-quarters of market activity, while distressed sales in other areas may account for fewer than ten percent of the market.



Many areas reporting a large share of distressed sales of late have had a run up in building and home sales in recent years. It is important to note that for the most part, differences in the mix of homes for sale in the market are driven by local conditions. Even within a city, individual neighborhoods or subdivisions may be behaving quite differently. Because of the barrage of information out there with respect to real estate, it is best to turn to the expert in your local real estate market when considering purchasing or selling a home. In the end, while national and state trends are important, they do not necessarily reflect what is happening in the neighborhood or community where you want to buy or sell a home. Be sure to contact me to get the latest information in IRVINE market when thinking about buying or selling a home!



Irvine Sept Housing Stats:



<img src="http://teamworkhomes.com/crm/stat/stat_ir_08sept.bmp" alt="" />
 
I know many are looking for some denial, and some may find it in "reporting" such as this. But to believe any of this points to a bottom in pricing requires faith and hope -- two emotions that are distinctly unhelpful in financial markets.
 
[quote author="Informed_Decisions" date=1224901115][Because of the barrage of information out there with respect to real estate, it is best to turn to the expert in your local real estate market when considering purchasing or selling a home. </blockquote>




I guess this particular line gives us the important information on the perspective of "informed decisions"
 
I think we are nearing a bottom. When you can get a decent condo for 300K, people will buy. When you can purchase a SFR for 400K, people will buy.

I think homebuyers are very willing to pay 2-3K/month on housing - and that is where the prices are heading right now.

I think the reason why the market imploded was because new homebuyers were spending 4-5k/month on housing.

I think that renting should be around 1-2k/month whereas owning a starter home should be around 2-3k/month.

That's all. To me, the key concern is affordability, not profitability.
 
[quote author="hs_teacher" date=1224902769]I think we are nearing a bottom. When you can get a decent condo for 300K, people will buy. When you can purchase a SFR for 400K, people will buy.

I think homebuyers are very willing to pay 2-3K/month on housing - and that is where the prices are heading right now.

I think the reason why the market imploded was because new homebuyers were spending 4-5k/month on housing.

I think that renting should be around 1-2k/month whereas owning a starter home should be around 2-3k/month.

That's all. To me, the key concern is affordability, not profitability.</blockquote>


I'm just waiting for No_Vas to post some youtube link or something in response to this.
 
Mr. Mortgage had a good post to counter the bottom argument<a href="http://mrmortgage.ml-implode.com/2008/10/20/socal-home-sales-you-cant-read-the-headlines/">Mr. Mortgage post</a>



<blockquote></blockquote>In Sept 2008, total sales were in fact up 65% in SoCal over last year at 20,497. But, 50% were foreclosure related meaning only 10,249 organic sales went off. This is significant and worse than a year ago. Also, remember that last Sept sales plunged by 35% from August due to lenders pulling out of the jumbo market all at the same time so it was not a tough month to beat.<blockquote></blockquote>
 
To my knowledge and experience, most homeowners are motivated to buy on needs (to eliminate rent, reduce income tax, upgrade lifestyle and build long-term equity), not driven by fear and greed. Statistics itself will not and can not tell whether one should buy or not buy. Everyone is entitled to his/her own view on the market. Only WHEN you think of taking actions, then you Absolutely need to know local pricing trends and other factors so you can form realistic expectations. It is nothing wrong being a spectator. On the same token, it is OK to jump the fence if you know what to expect.
 
To my knowledge and experience, most homeowners are motivated to buy on needs

<strong>to eliminate rent</strong> You are really replacing rent with a mortgage. Without rental parity that would be a stupid move

<strong>reduce income tax</strong> Negligible considering you pay property tax when you buy which renters don't pay.

<strong>upgrade lifestyle</strong> we have a pool, jacuzzi, arobics room, and a weight room, plus other ammenities I will not have when I decide to buy. I think buying may downgrade my lifestyle.

<strong>build long-term equity </strong>This is the only one I will agree with but you cannot build equity when the home is losing value.
 
It would extremely difficult to prove that 453 new property owners who bought homes in Irvine over last 3 months were wrong in their decision makings. These people happen to make steady higher income, save enough money for down-payment, have good credits to qualify for a loan. Some of these buyers actually pay all cash. Now it is absurd to judge other people without first knowing their financial situations and personal expectations. Now who is more credible and successful? Someone is sitting on the couch day dreaming, or someone actually went out kicking tires and made his dream a reality? Again, it is OK to be a renter, but you can't speak for homeowners unless you are already one.
 
[quote author="trrenter" date=1224910526]To my knowledge and experience, most homeowners are motivated to buy on needs

<strong>to eliminate rent</strong> You are really replacing rent with a mortgage. Without rental parity that would be a stupid move

<span style="font-size: 15px;"><strong>reduce income tax</strong> Negligible considering you pay property tax when you buy which renters don't pay. </span><strong>upgrade lifestyle</strong> we have a pool, jacuzzi, arobics room, and a weight room, plus other ammenities I will not have when I decide to buy. I think buying may downgrade my lifestyle.

<strong>build long-term equity </strong>This is the only one I will agree with but you cannot build equity when the home is losing value.</blockquote>


Are you serious? The 9k or so I'd save in income taxes (if I bought a small condo) is offset by my property taxes?
 
[quote author="Informed_Decisions" date=1224912070]Again, it is OK to be a renter, but you can't speak for homeowners unless you are already one.</blockquote>
I am a Irvine home owner... and I regret my decision to buy while the prices were over-inflated.



Even though I can afford the home I am currently in and selling right now would be basically throwing almost my entire down payment away... it would be better (for me) to save that extra $xxk a year renting a nicer home and then when the prices are low enough... I can buy a nicer home for less than what my current loan is.



It's speculation of course... but based on where the market is, income, credit and loan affordability... it's not that hard to take this risk. Of course... people will always buy for whatever reason they have (I mean I bought like an idiot when prices were already too high)... but if you can wait and rent for less... wouldn't that be a better choice?
 
[quote author="trrenter" date=1224910526]To my knowledge and experience, most homeowners are motivated to buy on needs

<strong>to eliminate rent</strong> You are really replacing rent with a mortgage. Without rental parity that would be a stupid move

<strong>reduce income tax</strong> Negligible considering you pay property tax when you buy which renters don't pay.

<strong>upgrade lifestyle</strong> we have a pool, jacuzzi, arobics room, and a weight room, plus other ammenities I will not have when I decide to buy. I think buying may downgrade my lifestyle.

<strong>build long-term equity </strong>This is the only one I will agree with but you cannot build equity when the home is losing value.</blockquote>


I respect your choice. I wish I could time the market. I wish people didn't trade (or treat) real estate as stock for short-term profit. Even Greenspan admitted days ago he could be wrong 40% of time forecasting the market. A broken clock will tell the right time twice a day. That is why I don't believe in forcast. There are so many uncertainties out there. As far as local market is concerned, I might disagree with most people's assessment. I am still waiting to see a coherent analysis of supply/demand in Irvine market from anyone here. All I see is supply-side speculation. In my view, it is a TRUE denial of the fact that affordability has come back to the market. That is why Irvine has about only 4 months inventory. This is a fact, and you know for certain for the last 12 months, we have had a heathy balance of supply and demand.
 
I feel that there is a very large "shadow inventory" of homes that are behind in payments and do not even show up on the foreclosure radar as of yet. It will take 12 to 18 months for these homes to go thru the rinse cycle and hit the market. As people lose jobs more of these will begin the long road.



Until the entire forclosure situation has cleared up there is a good chance that the prices will swing below whatever the metric being used to judge prices is. Just because the price makes sense doesn't mean that they won't go lower due to supply and inability of buyers to get financing. I am currently working on a short sale for a client and the bank wouldn't even talk with the owner until he is several months behind in payments. It could be another 8-10 months until it goes to NOD so look at the time lines.



And I am the IHB bear.



Enjoy!
 
[quote author="Informed_Decisions" date=1224913723]I am still waiting to see a coherent analysis of supply/demand in Irvine market from anyone here. All I see is supply-side speculation. In my view, it is a TRUE denial of the fact that affordability has come back to the market. That is why Irvine has about only 4 months inventory. This is a fact, and you know for certain for the last 12 months, we have had a heathy balance of supply and demand.</blockquote>


If you want detailed analysis, there are a series of <a href="http://www.irvinehousingblog.com/analysis/">analysis posts</a> on the main blog, and there is a <a href="http://www.thegreathousingbubble.com/">book </a>you might be interested in ;).



Prices are certainly more affordable than they were in 2006; however, affordability by any historical measure has not returned to the market. The reason inventories are low is because discretionary sellers are not selling, and the ARM resets which will cause more distressed properties are not due until 2009-2011. Financing is becoming harder to find and more expensive. This is curtailing demand, and these trends will continue. If not for the kool-aid intoxicated overreaching to buy the overpriced real estate, there would be even fewer transactions. The market is not healthy. It is perched on the edge of an abyss waiting for the recession, ARM resets and further credit tightening to push it over the edge.
 
[quote author="xsocal land merchant" date=1224913801]I feel that there is a very large "shadow inventory" of homes that are behind in payments and do not even show up on the foreclosure radar as of yet. It will take 12 to 18 months for these homes to go thru the rinse cycle and hit the market. As people lose jobs more of these will begin the long road.



Until the entire forclosure situation has cleared up there is a good chance that the prices will swing below whatever the metric being used to judge prices is. Just because the price makes sense doesn't mean that they won't go lower due to supply and inability of buyers to get financing. I am currently working on a short sale for a client and the bank wouldn't even talk with the owner until he is several months behind in payments. It could be another 8-10 months until it goes to NOD so look at the time lines.



And I am the IHB bear.



Enjoy!</blockquote>


Lot of houses are for rent.
 
25w100K you must be single with no kids.



Are you also taking into consideration standard deductions? In my situation it will not save me a ton of money in taxes because of what I get in standard deductions. Other then a mortgage I wouldn't have have a lot to itemize. No mileage, childcare, home office etc.



I should have said in many cases it could be neglible.



http://www.alllaw.com/articles/tax/article3.asp



The link has a few good examples of the tax benefits from itemizing the interst etc.
 
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