Number 1 question today: What will higher rates do to home prices and sales?

[sgip]

Answer A: No one knows.

Answer B: Here are some educated guesses via Calculated Risk:

http://www.calculatedriskblog.com/2016/12/2017-housing-forecasts.html

So far the easiest read appears to be this one:

http://www.freddiemac.com/finance/report/20161130_interest_rates_headed_higher.html

Discuss,


My .02c

Soylent Green Is People

 

[themarketingguy77]

Generally higher interest rates lead to slower home purchases\affordability - however, the question is... Do these same laws apply to buyers in Irvine?


I have a feeling it won't affect Irvine buyers much...

 

[Paris167]

Generally higher interest rates lead to slower home purchases\affordability - however, the question is... Do these same laws apply to buyers in Irvine?


I have a feeling it won't affect Irvine buyers much...

one word...FCB
I met a realtor today in the neighborhood who drove all the way from LA to hand out flyers in Orchard Hills (and other similar OC communities) for his $25,000,000 Beverly Hills property. they are looking for all cash buyers. The fact that they were in irvine tells you something no?

 

[usctrojancpa]

I've started seeing higher activity of investors at my recent listings, especially 1031 exchange investors.  I think rates would have to head into the 5s before we see a noticeable effect on prices in Irvine.  During the taper tantrum we were around 4.50% on the 30-year mortgage and prices didn't start falling.

 

[hello]

Generally higher interest rates lead to slower home purchases\affordability - however, the question is... Do these same laws apply to buyers in Irvine?


I have a feeling it won't affect Irvine buyers much...

why would it not affect irvine buyers?  Im curious to know what your thought process is. 

 

[usctrojancpa]

Generally higher interest rates lead to slower home purchases\affordability - however, the question is... Do these same laws apply to buyers in Irvine?


I have a feeling it won't affect Irvine buyers much...

why would it not affect irvine buyers?  Im curious to know what your thought process is. 

It will but on the margin.  But from what I've seen, Irvine buyers tend to be very conservative buyers underbuying a home...meaning that they may be pre-approved to buy up to a $1m home but rather will want to stay under $800k-$850k.

 

[themarketingguy77]

Yes, 100% agree USCTrojan. I'm an Irvine buyer and I will be buying conservatively as well. Petaluma preapproved us for $1m, but gee, I'm not going to go close to that.

My thoughts are simply that Irvine is a very stable market - families here are certainly making money and want their kids to go to the schools here. The location is too good. I think if you can afford to live in Irvine - you should for the appreciation aspect and for the lifestyle. Clean plazas, nice roads, all the greenery.

Luxury is a curse, we all want to keep up and live this life - haha!

 

[irvinebullhousing]

I still see buying regardless of rate on the upswing. There are many reasons to buy other than pure betting on appreciation. Sure, it will makes people pause quick and short as buyers compare recent run up to what they could have had a few months ago.  Life will goes on and adjust to the new normal, because unless you plan to wait forever for the best time, there is no real best time other than the need that you must full fill today or in the short future.

You just gotta plan for the DELTA, and have a backup plan in case of disaster recovery. For most people buying a house IS a never wrecking experience. The pride of home ownership is not for everyone. For those that can stand to all the noise and filter out in the long run will always comes out ahead.

 

[usctrojancpa]

Plus many people think that we'll get an economic downturn eventually (maybe in the next few years).  Guess what will happen to interest rates when that downturn comes?  Yup, interest rates will go back down and people will get to refi.  Rates were in the mid 4s during the taper tantrum and went back down to the low 3s within a 12-24 months.  We aren't going straight up with interest rates, they will go up and they will go down.

 

[Paris167]

Generally higher interest rates lead to slower home purchases\affordability - however, the question is... Do these same laws apply to buyers in Irvine?


I have a feeling it won't affect Irvine buyers much...

why would it not affect irvine buyers?  Im curious to know what your thought process is. 

It will but on the margin.  But from what I've seen, Irvine buyers tend to be very conservative buyers underbuying a home...meaning that they may be pre-approved to buy up to a $1m home but rather will want to stay under $800k-$850k.

Truth!
We could have easily bought Trevi but who wants all that house for our small family of 4? I think most savvy Irvine buyers underbuy to what they need and keep additional capital for investments. I have never thought of our primary residence as an investment because until the day I decide to sell it, it doesn't matter. Obviously you don't want to lose money so you want to buy a home is an area where you hope it holds value. And if when I sell it I gain a little equity then great. But for now my primary home is a liability. The true wealth building assets are the investments that bring you positive cash flow every month, it makes $$ for you while you sleep. Those are the true investments you want to save your $$ for. And most Irvine buyers, as highly educated as they are know this and capitalize on it.

 

[eyephone]

Generally higher interest rates lead to slower home purchases\affordability - however, the question is... Do these same laws apply to buyers in Irvine?


I have a feeling it won't affect Irvine buyers much...

why would it not affect irvine buyers?  Im curious to know what your thought process is. 

It will but on the margin.  But from what I've seen, Irvine buyers tend to be very conservative buyers underbuying a home...meaning that they may be pre-approved to buy up to a $1m home but rather will want to stay under $800k-$850k.

Truth!
We could have easily bought Trevi but who wants all that house for our small family of 4? I think most savvy Irvine buyers underbuy to what they need and keep additional capital for investments. I have never thought of our primary residence as an investment because until the day I decide to sell it, it doesn't matter. Obviously you don't want to lose money so you want to buy a home is an area where you hope it holds value. And if when I sell it I gain a little equity then great. But for now my primary home is a liability. The true wealth building assets are the investments that bring you positive cash flow every month, it makes $$ for you while you sleep. Those are the true investments you want to save your $$ for. And most Irvine buyers, as highly educated as they are know this and capitalize on it.

I have to agree with Paris regarding investments. I read that the average American couple has $5000 saved for retirement. (I know it's shocking)

 

[Paris167]

If they have $5000 saved that's something. I think most have nothing. They figure they would work until they die. I work with some physicians that have this same mentality (which is even more shocking given these are educated people - they should know better). And we have many family and friends who are in their 30s, not saving for retirement, have no life insurance, no disability insurance all with very young kids. This is not a priority for Americans - but you can bet they all have large lovely homes, 70 inch big screen TVs, brand new fancy cars - But tell someone to pay $100 copay for a ER visit and all hell breaks loose - they can't "afford" that! such a joke  : The "priorities" for most Americans are so "f*cked up"

 

[lovingit]

Generally higher interest rates lead to slower home purchases\affordability - however, the question is... Do these same laws apply to buyers in Irvine?


I have a feeling it won't affect Irvine buyers much...

why would it not affect irvine buyers?  Im curious to know what your thought process is. 

It will but on the margin.  But from what I've seen, Irvine buyers tend to be very conservative buyers underbuying a home...meaning that they may be pre-approved to buy up to a $1m home but rather will want to stay under $800k-$850k.

Truth!
We could have easily bought Trevi but who wants all that house for our small family of 4? I think most savvy Irvine buyers underbuy to what they need and keep additional capital for investments. I have never thought of our primary residence as an investment because until the day I decide to sell it, it doesn't matter. Obviously you don't want to lose money so you want to buy a home is an area where you hope it holds value. And if when I sell it I gain a little equity then great. But for now my primary home is a liability. The true wealth building assets are the investments that bring you positive cash flow every month, it makes $$ for you while you sleep. Those are the true investments you want to save your $$ for. And most Irvine buyers, as highly educated as they are know this and capitalize on it.

She said "we could have easily bought Trevi" like people on this forum cared or asked.....

 

[woodburyowner]

Isn't there also a pool of buyers in Irvine that stretch their budget to live/buy here?  I mean if Irvine is the perfect place for schools, shopping, work, etc.  I'm sure there are people that look at Tustin or Lake Forest and just say why don't we just stretch ourselves to live in Irvine and be done with it?  These guys will be most affected by the interest rate hike and then have to settle for Tustin or Lake Forest.  Or just buy something smaller in Irvine.

 

[usctrojancpa]

Isn't there also a pool of buyers in Irvine that stretch their budget to live/buy here?  I mean if Irvine is the perfect place for schools, shopping, work, etc.  I'm sure there are people that look at Tustin or Lake Forest and just say why don't we just stretch ourselves to live in Irvine and be done with it?  These guys will be most affected by the interest rate hike and then have to settle for Tustin or Lake Forest.  Or just buy something smaller in Irvine.

There are but they are mainly the ones looking at more of the entry level homes in Irvine.  As a listing agent, I see the loan pre-approval letters and proof of funds and can tell you that Irvine buyers on average are materially stronger than non-Irvine buyers (i.e. larger cash positions and higher loan pre-approval amounts).

 

[irvinebullhousing]

Generally higher interest rates lead to slower home purchases\affordability - however, the question is... Do these same laws apply to buyers in Irvine?


I have a feeling it won't affect Irvine buyers much...

why would it not affect irvine buyers?  Im curious to know what your thought process is. 

It will but on the margin.  But from what I've seen, Irvine buyers tend to be very conservative buyers underbuying a home...meaning that they may be pre-approved to buy up to a $1m home but rather will want to stay under $800k-$850k.

Truth!
We could have easily bought Trevi but who wants all that house for our small family of 4? I think most savvy Irvine buyers underbuy to what they need and keep additional capital for investments. I have never thought of our primary residence as an investment because until the day I decide to sell it, it doesn't matter. Obviously you don't want to lose money so you want to buy a home is an area where you hope it holds value. And if when I sell it I gain a little equity then great. But for now my primary home is a liability. The true wealth building assets are the investments that bring you positive cash flow every month, it makes $$ for you while you sleep. Those are the true investments you want to save your $$ for. And most Irvine buyers, as highly educated as they are know this and capitalize on it.

She said "we could have easily bought Trevi" like people on this forum cared or asked.....

#Fight.....Are you ready, Are you ready, Let's get it on....

 

[iacrenter]

HUMBRAG--this is a TI art form 

"A person that wants to be humble, however, takes time to brag about something."
http://www.urbandictionary.com/define.php?term=HUMBRAG

 

[eyephone]

Maybe they should have a intro to finance class required for all majors.

If they have $5000 saved that's something. I think most have nothing. They figure they would work until they die. I work with some physicians that have this same mentality (which is even more shocking given these are educated people - they should know better). And we have many family and friends who are in their 30s, not saving for retirement, have no life insurance, no disability insurance all with very young kids. This is not a priority for Americans - but you can bet they all have large lovely homes, 70 inch big screen TVs, brand new fancy cars - But tell someone to pay $100 copay for a ER visit and all hell breaks loose - they can't "afford" that! such a joke  : The "priorities" for most Americans are so "f*cked up"

 

[nyc to oc]

Generally higher interest rates lead to slower home purchases\affordability - however, the question is... Do these same laws apply to buyers in Irvine?


I have a feeling it won't affect Irvine buyers much...

why would it not affect irvine buyers?  Im curious to know what your thought process is. 

It will but on the margin.  But from what I've seen, Irvine buyers tend to be very conservative buyers underbuying a home...meaning that they may be pre-approved to buy up to a $1m home but rather will want to stay under $800k-$850k.

Truth!
We could have easily bought Trevi but who wants all that house for our small family of 4? I think most savvy Irvine buyers underbuy to what they need and keep additional capital for investments. I have never thought of our primary residence as an investment because until the day I decide to sell it, it doesn't matter. Obviously you don't want to lose money so you want to buy a home is an area where you hope it holds value. And if when I sell it I gain a little equity then great. But for now my primary home is a liability. The true wealth building assets are the investments that bring you positive cash flow every month, it makes $$ for you while you sleep. Those are the true investments you want to save your $$ for. And most Irvine buyers, as highly educated as they are know this and capitalize on it.

Yes, I agree. You want to keep in mind who is going to buy your house from you when its time to move on. If you get an excessively grand house, you are really limiting your pool of potential buyers and will take longer to sell. I see  some of my older co-workers now nearing retirement age, trying to downsize and sell their huge houses--nobody wants them! one has been on the market for 3 years and comes with an acre of land, >5000 sq foot estates in villa park, north tustin, anaheim hills, yorba linda...unfortunately, I think a fair number of younger affluent buyers don't want that kind of headache--now there are more dual income households, as opposed to a generation ago, more stay at home spouses who have the time to maintain this kind of property). I see a really big grand house (beyond what is comfortable for a family) as a headache and maintenance cost/liability, not an asset. An acre of land sounds nice until you realize you have to irrigate it all because we essentially in a natural desert/scrubland. I'd rather have the smaller house to live in and rental properties on the side so I can retire early and stop with the mandatory overtime

 

[Ready2Downsize]

so I can retire early and stop with the mandatory overtime


You will LOVE retiring early. I did it when my youngest wasn't even a teenager and my kids tell me all their friends parents are at least 10 years older than me..... so know I was not old by any means.

Unless I were destitute you couldn't PAY me to go back to work.