Observations from the front lines of the Irvine housing market?

[irvinebullhousing]

So, the hot season with hot home selling need to cool down.
I hate hotness We will enjoy a little less noise from housing mania.

Good!!!!

I am seeing drastically reduced in late payment to bankers which translate to people (homeowners) have a healthy financial hold of their money. Sure, you will also have some sellers that want to move to a bigger house and trade up, therefore I see some optimistic asking price. But I see little to none that must sell and dropping price to avoid foreclosure like in 2007-2010 era.

All I have to say is if you wait, make sure to plan your stay in a comfortable and livable neighborhood just in case it becomes an extended situation.

 

[usctrojancpa]

Thank You USCT!  Who else would wake up 4 am in the Sunday morning and post this good info.

I'm re-post USCT's inventory level graph here, the graph of the day!

I couldn't sleep so I figured I'd do something productive while I was up.  haha

 

[usctrojancpa]

So, the hot season with hot home selling need to cool down.
I hate hotness We will enjoy a little less noise from housing mania.

Good!!!!

I am seeing drastically reduced in late payment to bankers which translate to people (homeowners) have a healthy financial hold of their money. Sure, you will also have some sellers that want to move to a bigger house and trade up, therefore I see some optimistic asking price. But I see little to none that must sell and dropping price to avoid foreclosure like in 2007-2010 era.

All I have to say is if you wait, make sure to plan your stay in a comfortable and livable neighborhood just in case it becomes an extended situation.

Agreed, there are some sellers who still think we are in a stronger seller market than we really are hence their highly optimistic listing prices.  Some of those sellers are not motivated to sell and just looking for a sucker to offer them a "move out" price and if they don't get that number they'll just take the home off the market.  The motivated sellers that want to sell but started at a highly optimistic price are periodically reducing their asking prices.  There's nothing wrong with having a more neutral market with flattish prices where there aren't multiple offers left and right. 

 

[Lallo]

Although I believe the top has been reached,I?m starting to think we may not see a big drop in prices.  Currently I?m seeing homes sell at asking or slightly below. If the home is in the 600k range and below, they may get multiple offers depending on desirability and condition of the home. Also,I?ve seen multiple homes taken off the market and put up for lease. So, IMHO, if you?re thinking of buying be realistic on how much of a reduction you may get and if you decide to wait, run the numbers and see if what you pay in rent vs what it cost to own makes it worth waiting.

 

[newbieinirvine]

Thanks for the data and stats @USCTrojanCPA. Having gone through the GRC and massive run-up since then, do you think the combination of these items below will signal a bigger drop AND slowdown in the market:

? limitations on/capping of SALT deductions & the IRS enforcing it on taxpayers for 2018 (probably won't see the effects until taxpayers file 2018 taxes early next year)
? beginning of the plateau of SFH (detached $1M-1.5M) prices in the summer
? less FCBs buying? (not sure if there are any stats on this buyer pool)
? rates rising maybe .25% per quarter/semiannually affecting cost of capital
? possible drop in corporate earnings and equities correction causing jobs to dip in OC/Irvine?

Anecdotally and not driven by any data analyses at all, I've just been seeing more and more price drops ($30-45K increments) on Zillow/Redfin/Realtor for the $1.1-1.4M detached SFHs. Equating to a 2-3% price decrease from list prices, but will it drop further perhaps even 5-10% (gasp!)?

By popular demand, I figured this was a long time coming. There?s been a lot of click bait articles out there that real estate, including Southern California real estate, is ?showing cracks? in various markets so I wanted to provide data on how the Irvine real estate market is performing. 

July 2018 sales were down 1% from June July 2017 but rebounded 4% from the drop of 11% in June 2018 (versus June 2017).  From a trailing 12-month perspective Irvine sales are down 2% or 47 transactions.  Inventory as of 7/31/18 increased 13% from 7/31/17 but remains 4% lower than inventory as of 7/31/16.  Based upon this data, we have 3 months of inventory using July 2018 sales and 2.66 months of inventory using the past 3 months which remains a weak seller?s market.  Inventory levels peak in July/August like I?ve mentioned in other threads.  Note that the inventory levels in the schedule are higher than what I saw when I pulled up the total active inventory in Irvine as of 7/31/18 which was 687 but I decided to use these higher figures to be conservative (the conservative CPA in me?haha).

So what does all this mean and where are we possibly heading?  Well, it?s clear that the market has cooled off a bit with an increase in inventory and a small decline in sales.  But the market cooling off isn?t necessarily a bad thing, it?ll allow for prices to flatten out and give buyers a chance to buy homes.  Properties that show well and that are prices right still go into escrow quickly and many of them with multiple offers.  The sub $1m market is doing better than the $1m+ market but ?unicorn? $1m+ properties with larger and/or view lots sell quickly as well.  This is most evident from me hearing that several home builders have increased their broker co-ops on their $1m+ homes in the past 4-6 weeks. The economy is still providing a tailwind with a strong job market, increasing wages, and a strong stock market so I don?t foresee that prices will drop in the near term.  The August data will be a good indicator if we are continuing to soften or if we are flattening out.

On the 30-year fixed interest rate loan front, we have seen rates drop from around 4.50% at the end of July to as around 4.25%-4.375%.  Rates got as high as 4.75% in July from what I heard.  Rates dripped due to heartburn due to tariff talk and the Turkish currency concerns.  Rates on 7/1 ARM loans are down to 3.25-3.50% from basically being around 4% in late July.  The FED will most likely rate their Fed Funds Rate in Sept by another 0.25% but that really has no impact on longer term mortgage rates.  I?ve been telling my clients that we?ll see 4% before we see 5% in rates so let?s see if I?ll be right.

Below are some charts for the infographics fans out there.  I?ll be updating this data every month going forward.


Chart of the Irvine sales volume since Jan. 2008

http://crmls.stats.10kresearch.com/infoserv/s-v1/f5Rk-zq8.PNG?w=800&h=600


Chart of the Irvine inventory levels since Jan. 2008

http://crmls.stats.10kresearch.com/infoserv/s-v1/f5R9-Y9X?w=800&h=600

 

[meccos12]

Thanks for the data and stats @USCTrojanCPA. Having gone through the GRC and massive run-up since then, do you think the combination of these items below will signal a bigger drop AND slowdown in the market:

? limitations on/capping of SALT deductions & the IRS enforcing it on taxpayers for 2018 (probably won't see the effects until taxpayers file 2018 taxes early next year)
? beginning of the plateau of SFH (detached $1M-1.5M) prices in the summer
? less FCBs buying? (not sure if there are any stats on this buyer pool)
? rates rising maybe .25% per quarter/semiannually affecting cost of capital
? possible drop in corporate earnings and equities correction causing jobs to dip in OC/Irvine?

Anecdotally and not driven by any data analyses at all, I've just been seeing more and more price drops ($30-45K increments) on Zillow/Redfin/Realtor for the $1.1-1.4M detached SFHs. Equating to a 2-3% price decrease from list prices, but will it drop further perhaps even 5-10% (gasp!)?

Many would argue we are already seeing a slowdown.  Likely more to come.

 

[irvinehomeowner]

Why is it an indicator of a slowdown? Look at USC's graphs, sales and volume always go down after summer.

Can it just be an indicator that summer is over... the real estate groundhog?

 

[newbieinirvine]

By popular demand, I figured this was a long time coming. There?s been a lot of click bait articles out there that real estate, including Southern California real estate, is ?showing cracks? in various markets so I wanted to provide data on how the Irvine real estate market is performing. 

July 2018 sales were down 1% from June July 2017 but rebounded 4% from the drop of 11% in June 2018 (versus June 2017).  From a trailing 12-month perspective Irvine sales are down 2% or 47 transactions.  Inventory as of 7/31/18 increased 13% from 7/31/17 but remains 4% lower than inventory as of 7/31/16.  Based upon this data, we have 3 months of inventory using July 2018 sales and 2.66 months of inventory using the past 3 months which remains a weak seller?s market.  Inventory levels peak in July/August like I?ve mentioned in other threads.  Note that the inventory levels in the schedule are higher than what I saw when I pulled up the total active inventory in Irvine as of 7/31/18 which was 687 but I decided to use these higher figures to be conservative (the conservative CPA in me?haha).

So what does all this mean and where are we possibly heading?  Well, it?s clear that the market has cooled off a bit with an increase in inventory and a small decline in sales.  But the market cooling off isn?t necessarily a bad thing, it?ll allow for prices to flatten out and give buyers a chance to buy homes.  Properties that show well and that are prices right still go into escrow quickly and many of them with multiple offers.  The sub $1m market is doing better than the $1m+ market but ?unicorn? $1m+ properties with larger and/or view lots sell quickly as well.  This is most evident from me hearing that several home builders have increased their broker co-ops on their $1m+ homes in the past 4-6 weeks. The economy is still providing a tailwind with a strong job market, increasing wages, and a strong stock market so I don?t foresee that prices will drop in the near term.  The August data will be a good indicator if we are continuing to soften or if we are flattening out.

On the 30-year fixed interest rate loan front, we have seen rates drop from around 4.50% at the end of July to as around 4.25%-4.375%.  Rates got as high as 4.75% in July from what I heard.  Rates dripped due to heartburn due to tariff talk and the Turkish currency concerns.  Rates on 7/1 ARM loans are down to 3.25-3.50% from basically being around 4% in late July.  The FED will most likely rate their Fed Funds Rate in Sept by another 0.25% but that really has no impact on longer term mortgage rates.  I?ve been telling my clients that we?ll see 4% before we see 5% in rates so let?s see if I?ll be right.

Below are some charts for the infographics fans out there.  I?ll be updating this data every month going forward.


Chart of the Irvine sales volume since Jan. 2008

http://crmls.stats.10kresearch.com/infoserv/s-v1/f5Rk-zq8.PNG?w=800&h=600


Chart of the Irvine inventory levels since Jan. 2008

http://crmls.stats.10kresearch.com/infoserv/s-v1/f5R9-Y9X?w=800&h=600

Post summer cool-off maybe but I think it's softening overall. I guess we can wait for
USCTrojanCPA to post the August data and subsequent months to track and see how it plays out!

I'm still holding on cash and waiting to buy...

 

[Liar Loan]

Year-over-year stats are down which means it's not just a seasonal effect.

 

[irvinehomeowner]

Year-over-year stats are down which means it's not just a seasonal effect.

But could still be a cyclical one?

 

[Liar Loan]

Year-over-year stats are down which means it's not just a seasonal effect.

But could still be a cyclical one?

Sometimes there are one year blips as part of a larger cycle.  The stats for 2014 weren't good either and a lot of people called a premature top. 

My feeling is you won't have another RE downturn until significant job losses start as a lead in to recession.

 

[usctrojancpa]

Thanks for the data and stats @USCTrojanCPA. Having gone through the GRC and massive run-up since then, do you think the combination of these items below will signal a bigger drop AND slowdown in the market:

? limitations on/capping of SALT deductions & the IRS enforcing it on taxpayers for 2018 (probably won't see the effects until taxpayers file 2018 taxes early next year)
? beginning of the plateau of SFH (detached $1M-1.5M) prices in the summer
? less FCBs buying? (not sure if there are any stats on this buyer pool)
? rates rising maybe .25% per quarter/semiannually affecting cost of capital
? possible drop in corporate earnings and equities correction causing jobs to dip in OC/Irvine?

Anecdotally and not driven by any data analyses at all, I've just been seeing more and more price drops ($30-45K increments) on Zillow/Redfin/Realtor for the $1.1-1.4M detached SFHs. Equating to a 2-3% price decrease from list prices, but will it drop further perhaps even 5-10% (gasp!)?

By popular demand, I figured this was a long time coming. There?s been a lot of click bait articles out there that real estate, including Southern California real estate, is ?showing cracks? in various markets so I wanted to provide data on how the Irvine real estate market is performing. 

July 2018 sales were down 1% from June July 2017 but rebounded 4% from the drop of 11% in June 2018 (versus June 2017).  From a trailing 12-month perspective Irvine sales are down 2% or 47 transactions.  Inventory as of 7/31/18 increased 13% from 7/31/17 but remains 4% lower than inventory as of 7/31/16.  Based upon this data, we have 3 months of inventory using July 2018 sales and 2.66 months of inventory using the past 3 months which remains a weak seller?s market.  Inventory levels peak in July/August like I?ve mentioned in other threads.  Note that the inventory levels in the schedule are higher than what I saw when I pulled up the total active inventory in Irvine as of 7/31/18 which was 687 but I decided to use these higher figures to be conservative (the conservative CPA in me?haha).

So what does all this mean and where are we possibly heading?  Well, it?s clear that the market has cooled off a bit with an increase in inventory and a small decline in sales.  But the market cooling off isn?t necessarily a bad thing, it?ll allow for prices to flatten out and give buyers a chance to buy homes.  Properties that show well and that are prices right still go into escrow quickly and many of them with multiple offers.  The sub $1m market is doing better than the $1m+ market but ?unicorn? $1m+ properties with larger and/or view lots sell quickly as well.  This is most evident from me hearing that several home builders have increased their broker co-ops on their $1m+ homes in the past 4-6 weeks. The economy is still providing a tailwind with a strong job market, increasing wages, and a strong stock market so I don?t foresee that prices will drop in the near term.  The August data will be a good indicator if we are continuing to soften or if we are flattening out.

On the 30-year fixed interest rate loan front, we have seen rates drop from around 4.50% at the end of July to as around 4.25%-4.375%.  Rates got as high as 4.75% in July from what I heard.  Rates dripped due to heartburn due to tariff talk and the Turkish currency concerns.  Rates on 7/1 ARM loans are down to 3.25-3.50% from basically being around 4% in late July.  The FED will most likely rate their Fed Funds Rate in Sept by another 0.25% but that really has no impact on longer term mortgage rates.  I?ve been telling my clients that we?ll see 4% before we see 5% in rates so let?s see if I?ll be right.

Below are some charts for the infographics fans out there.  I?ll be updating this data every month going forward.


Chart of the Irvine sales volume since Jan. 2008

http://crmls.stats.10kresearch.com/infoserv/s-v1/f5Rk-zq8.PNG?w=800&h=600


Chart of the Irvine inventory levels since Jan. 2008

http://crmls.stats.10kresearch.com/infoserv/s-v1/f5R9-Y9X?w=800&h=600

Sure, happy to provide the data and my take on it.  I think we are just cooling off not melting down.  Prices have risen 4-8% since the start of the year and I think the market is not beginning to digest these gains.  Also, most of the price reductions that you see are on homes that are/were overpriced in the first place so that's not really a great indicator of where market prices are heading.  Sellers thought that the market was stronger than they thought and prices their homes too high, simple as that.  I'll be keeping a close eye on sales along with inventory levels to see if we are flatting out or cooling off further. 

 

[usctrojancpa]

Year-over-year stats are down which means it's not just a seasonal effect.

But could still be a cyclical one?

Sometimes there are one year blips as part of a larger cycle.  The stats for 2014 weren't good either and a lot of people called a premature top. 

My feeling is you won't have another RE downturn until significant job losses start as a lead in to recession.

Let's see how many of those "optimistic" sellers pull their homes off the market and how many of real sellers.  If inventory levels keep going up or don't drop going into Oct then I think that's a signal that prices might be heading lower.

 

[Hugo Township]

Year-over-year stats are down which means it's not just a seasonal effect.

But could still be a cyclical one?

Sometimes there are one year blips as part of a larger cycle.  The stats for 2014 weren't good either and a lot of people called a premature top. 

My feeling is you won't have another RE downturn until significant job losses start as a lead in to recession.

Let's see how many of those "optimistic" sellers pull their homes off the market and how many of real sellers.  If inventory levels keep going up or don't drop going into Oct then I think that's a signal that prices might be heading lower.

A friend of mine just pulled his high 600s townhome in East Irvine off the market since it didn't sell right away. He's a real seller and just one data point, but I feel like this kind of offering was really hot just a year ago.

 

[usctrojancpa]

Year-over-year stats are down which means it's not just a seasonal effect.

But could still be a cyclical one?

Sometimes there are one year blips as part of a larger cycle.  The stats for 2014 weren't good either and a lot of people called a premature top. 

My feeling is you won't have another RE downturn until significant job losses start as a lead in to recession.

Let's see how many of those "optimistic" sellers pull their homes off the market and how many of real sellers.  If inventory levels keep going up or don't drop going into Oct then I think that's a signal that prices might be heading lower.

A friend of mine just pulled his high 600s townhome in East Irvine off the market since it didn't sell right away. He's a real seller and just one data point, but I feel like this kind of offering was really hot just a year ago.

He may have been a "real" seller but he wasn't a "motivated" seller which means that he didn't need to sell the townhome hence taking it off the market.  My point is that there isn't a lot of "motivated" sellers out there today hence you'll see more people like your friend and "non-real" sellers pulling their listings off the market once they realize they won't get the price they thought/wanted to get.

 

[newbieinirvine]

Year-over-year stats are down which means it's not just a seasonal effect.

But could still be a cyclical one?

Sometimes there are one year blips as part of a larger cycle.  The stats for 2014 weren't good either and a lot of people called a premature top. 

My feeling is you won't have another RE downturn until significant job losses start as a lead in to recession.

Let's see how many of those "optimistic" sellers pull their homes off the market and how many of real sellers.  If inventory levels keep going up or don't drop going into Oct then I think that's a signal that prices might be heading lower.

A friend of mine just pulled his high 600s townhome in East Irvine off the market since it didn't sell right away. He's a real seller and just one data point, but I feel like this kind of offering was really hot just a year ago.

He may have been a "real" seller but he wasn't a "motivated" seller which means that he didn't need to sell the townhome hence taking it off the market.  My point is that there isn't a lot of "motivated" sellers out there today hence you'll see more people like your friend and "non-real" sellers pulling their listings off the market once they realize they won't get the price they thought/wanted to get.

Maybe we should wait for the ones who bought at peak values and for 2018 taxes to be filed then there will be more "motivated" sellers 

 

[Agent Joe]

Unless you are trading real estate like stocks, maybe we should focus on longer term? Where do you think Irvine real estate prices are heading in 10, 20, 30 years?

 

[qwerty]

Unless you are trading real estate like stocks, maybe we should focus on longer term? Where do you think Irvine real estate prices are heading in 10, 20, 30 years?

Up, just like every other place in the world.

 

[Kenkoko]

Unless you are trading real estate like stocks, maybe we should focus on longer term? Where do you think Irvine real estate prices are heading in 10, 20, 30 years?

Up, like any other desirable places to live.

But should we really be focusing on 10,20,30 years? newer statistics show people change homes about every 5 years.
Staying Nimble financially and taking advantage of the economic cycle can mean achieving financial freedom decades ahead.
The buy and hold for decades concept is old and outdated in my opinion. The fear of missing out is overblown especially in a city like Irvine.  People can name what they like by village/tract/model, you can almost be certain that the house you want will pop up in resale someday.

 

[usctrojancpa]

Unless you are trading real estate like stocks, maybe we should focus on longer term? Where do you think Irvine real estate prices are heading in 10, 20, 30 years?

Up, like any other desirable places to live.

But should we really be focusing on 10,20,30 years? newer statistics show people change homes about every 5 years.
Staying Nimble financially and taking advantage of the economic cycle can mean achieving financial freedom decades ahead.
The buy and hold for decades concept is old and outdated in my opinion. The fear of missing out is overblown especially in a city like Irvine.  People can name what they like by village/tract/model, you can almost be certain that the house you want will pop up in resale someday.

I think people are much less long-term focused today than they were 10-20 years ago because of websites like Redfin and Zillow which show the current "guestimate" of what their home is worth.  Those people like to feel good seeing the value of their home go up.  It is true that people do sell their homes within 5-7 years on average, this is especially true if you are buying your first home (e.g. an attached condo) before getting married and/or having kids.  I tell all of my buyers that they need to focus on the exit strategy because they will sell the home eventually, for some of those buyers it's tough to understand that as they are so focused on buying a home and are baffled that I'm talking about exit strategy.  For me, it's simple...when my clients do well, I do well so it's my job to get into the best home at the best price.