Observations from the front lines of the Irvine housing market?

[fortune11]

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.

Exactly.  The natural tendency of asset prices is to go up with time.  As long as demographics and interest rates are positive , this is just math . I am talking of aggregates here of course. Individual markets may vary. 

But as John Maynard Keynes said -- " In the long run, we are all dead " so who cares : )

 

[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?

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The buy and hold for decades concept is old and outdated in my opinion.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.

Real estate is a long term investment and we should absolutely focus on 10, 20, 30 years from now. If you are not an investor and simply looking for your primary residence, of course, do what best suits your personal situation. Maybe the best option is to rent, especially if you are not planning to stay there for > 5 years. It takes a lot time and $ to sell real estate (compared to other investments like stocks and ETFs). For an average person, time in the market usually beats timing the market. Also, what do you think the people timing the market are doing while waiting for the market to "correct itself"? Paying rent? So as a property owner, whether the market goes up or down, they win by collecting rent (when people stand on the sidelines) or enjoying value appreciation (when people buy) or both (when the economy is growing).

 

[eyephone]

To most people buying a house is the biggest financial transaction they will make. So I think people want to make sure they are making the right decision.

 

[Kenkoko]

Real estate is a long term investment and we should absolutely focus on 10, 20, 30 years from now. If you are not an investor and simply looking for your primary residence, of course, do what best suits your personal situation. Maybe the best option is to rent, especially if you are not planning to stay there for > 5 years. It takes a lot time and $ to sell real estate (compared to other investments like stocks and ETFs). For an average person, time in the market usually beats timing the market. Also, what do you think the people timing the market are doing while waiting for the market to "correct itself"? Paying rent? So as a property owner, whether the market goes up or down, they win by collecting rent (when people stand on the sidelines) or enjoying value appreciation (when people buy) or both (when the economy is growing).

I agree with some of your points, but I disagree that RE should be a long 10,20,30 year investment. This long buy and hold mindset leads to missed opportunities and mistakes.
I disagree with the sentiment of do what suits your personal situation when buying your primary home if that means the investment consideration part goes out of the window. For a lot of people, their primary home is a hybrid of investment and personal need. Especially first-time home buyers buying in current high Irvine home prices. A lot of these 1st time home buyers are buying close to their max ability to afford.
I strongly disagree with your argument that time in the market beats timing the market.
I am in my late 30s and this is very evident among friends and colleagues in my age group. My best friend was (and still is) one the most successful ones among my age group. He finished school a year early and he already had down payment saved up by his mid-20s. He bought before the crash and compounded his mistake by stretching financially and bought the biggest he could afford. It wasn?t that he was stupid. It was common back then and majority of people back then believed (like a lot of people today) that housing can only go up up and up . Even if the short term looked overheated, the long term 10,20,30 year outlook sold him. I remember standing in his mansion at his house warming party thinking #@$%  I am 10 years behind.
I was not as successful as him. Even took an extra year to get my professional license and did not have down payment saved up until I was almost 30. By then the housing market had turned. So I did the unthinkable thing in your eyes. I paid rent and waited for the market to correct itself. I put my saved down payment and whatever income I had left after paying rent into the equity market. Not because I was clairvoyant or smarter than the average person. The equity market was the only thing working in late 2009 early 2010. I did eventually buy my primary home in 2016, after home prices have gone way up. But, by staying nimble financially  I was able to take advantage of the biggest equity rally in years. I think it?s safe to say as of today, I am years ahead of him to reaching financial freedom. More importantly, I lived the past 8-10 years much more stress free compared to him.
Timing the market is important. Doing a full analysis of opportunity cost & why you are getting into RE today is important. Having an exit strategy, like USC mentioned is important. Focusing on 10,20,30 years for many novice homebuyers will overly simplify a should be complex decision.

 

[bones]

Real estate is a long term investment and we should absolutely focus on 10, 20, 30 years from now. If you are not an investor and simply looking for your primary residence, of course, do what best suits your personal situation. Maybe the best option is to rent, especially if you are not planning to stay there for > 5 years. It takes a lot time and $ to sell real estate (compared to other investments like stocks and ETFs). For an average person, time in the market usually beats timing the market. Also, what do you think the people timing the market are doing while waiting for the market to "correct itself"? Paying rent? So as a property owner, whether the market goes up or down, they win by collecting rent (when people stand on the sidelines) or enjoying value appreciation (when people buy) or both (when the economy is growing).

I agree with some of your points, but I disagree that RE should be a long 10,20,30 year investment. This long buy and hold mindset leads to missed opportunities and mistakes.
I disagree with the sentiment of do what suits your personal situation when buying your primary home if that means the investment consideration part goes out of the window. For a lot of people, their primary home is a hybrid of investment and personal need. Especially first-time home buyers buying in current high Irvine home prices. A lot of these 1st time home buyers are buying close to their max ability to afford.
I strongly disagree with your argument that time in the market beats timing the market.
I am in my late 30s and this is very evident among friends and colleagues in my age group. My best friend was (and still is) one the most successful ones among my age group. He finished school a year early and he already had down payment saved up by his mid-20s. He bought before the crash and compounded his mistake by stretching financially and bought the biggest he could afford. It wasn?t that he was stupid. It was common back then and majority of people back then believed (like a lot of people today) that housing can only go up up and up . Even if the short term looked overheated, the long term 10,20,30 year outlook sold him. I remember standing in his mansion at his house warming party thinking #@$%  I am 10 years behind.
I was not as successful as him. Even took an extra year to get my professional license and did not have down payment saved up until I was almost 30. By then the housing market had turned. So I did the unthinkable thing in your eyes. I paid rent and waited for the market to correct itself. I put my saved down payment and whatever income I had left after paying rent into the equity market. Not because I was clairvoyant or smarter than the average person. The equity market was the only thing working in late 2009 early 2010. I did eventually buy my primary home in 2016, after home prices have gone way up. But, by staying nimble financially  I was able to take advantage of the biggest equity rally in years. I think it?s safe to say as of today, I am years ahead of him to reaching financial freedom. More importantly, I lived the past 8-10 years much more stress free compared to him.
Timing the market is important. Doing a full analysis of opportunity cost & why you are getting into RE today is important. Having an exit strategy, like USC mentioned is important. Focusing on 10,20,30 years for many novice homebuyers will overly simplify a should be complex decision.

I'm with Ken on this one.  For me, I'm all about the exit (3-5 years).  Not to mention, there are a lot more job hopping these days.  We see a lot of job relocation sales on TI alone.  Gone are the days where someone stays in their job (and their house) for 10+ years.  I also think a lot of Irvine isn't from Irvine (as evident by the population growth numbers, I suppose) so a lot of people don't have strong ties to this area which makes picking up and relocating for life quality/job/family/schools that much more prevalent.

 

[paperboyNC]

I disagree with the sentiment of do what suits your personal situation when buying your primary home if that means the investment consideration part goes out of the window. For a lot of people, their primary home is a hybrid of investment and personal need. Especially first-time home buyers buying in current high Irvine home prices. A lot of these 1st time home buyers are buying close to their max ability to afford.
I strongly disagree with your argument that time in the market beats timing the market.
I am in my late 30s and this is very evident among friends and colleagues in my age group. My best friend was (and still is) one the most successful ones among my age group. He finished school a year early and he already had down payment saved up by his mid-20s. He bought before the crash and compounded his mistake by stretching financially and bought the biggest he could afford. It wasn?t that he was stupid. It was common back then and majority of people back then believed (like a lot of people today) that housing can only go up up and up . Even if the short term looked overheated, the long term 10,20,30 year outlook sold him. I remember standing in his mansion at his house warming party thinking #@$%  I am 10 years behind.
I was not as successful as him. Even took an extra year to get my professional license and did not have down payment saved up until I was almost 30. By then the housing market had turned. So I did the unthinkable thing in your eyes. I paid rent and waited for the market to correct itself. I put my saved down payment and whatever income I had left after paying rent into the equity market. Not because I was clairvoyant or smarter than the average person. The equity market was the only thing working in late 2009 early 2010. I did eventually buy my primary home in 2016, after home prices have gone way up. But, by staying nimble financially  I was able to take advantage of the biggest equity rally in years. I think it?s safe to say as of today, I am years ahead of him to reaching financial freedom. More importantly, I lived the past 8-10 years much more stress free compared to him.
Timing the market is important. Doing a full analysis of opportunity cost & why you are getting into RE today is important. Having an exit strategy, like USC mentioned is important. Focusing on 10,20,30 years for many novice homebuyers will overly simplify a should be complex decision.

Great points. Of course 2005/2006 were extreme once in a life time situations. I was in a similar situation as your friend as I had enough money saved up for a downpayment by my mid-20s and everyone advised to buy,buy,buy. I saw that renting was HALF the cost of buying and rented until 2011. I pulled the trigger at the bottom once I realized buying was CHEAPER than renting.

Stocks are obviously the same thing - buying tech stocks in 99-00 was terrible.

 

[irvinebullhousing]

I disagree with the sentiment of do what suits your personal situation when buying your primary home if that means the investment consideration part goes out of the window. For a lot of people, their primary home is a hybrid of investment and personal need. Especially first-time home buyers buying in current high Irvine home prices. A lot of these 1st time home buyers are buying close to their max ability to afford.
I strongly disagree with your argument that time in the market beats timing the market.
I am in my late 30s and this is very evident among friends and colleagues in my age group. My best friend was (and still is) one the most successful ones among my age group. He finished school a year early and he already had down payment saved up by his mid-20s. He bought before the crash and compounded his mistake by stretching financially and bought the biggest he could afford. It wasn?t that he was stupid. It was common back then and majority of people back then believed (like a lot of people today) that housing can only go up up and up . Even if the short term looked overheated, the long term 10,20,30 year outlook sold him. I remember standing in his mansion at his house warming party thinking #@$%  I am 10 years behind.
I was not as successful as him. Even took an extra year to get my professional license and did not have down payment saved up until I was almost 30. By then the housing market had turned. So I did the unthinkable thing in your eyes. I paid rent and waited for the market to correct itself. I put my saved down payment and whatever income I had left after paying rent into the equity market. Not because I was clairvoyant or smarter than the average person. The equity market was the only thing working in late 2009 early 2010. I did eventually buy my primary home in 2016, after home prices have gone way up. But, by staying nimble financially  I was able to take advantage of the biggest equity rally in years. I think it?s safe to say as of today, I am years ahead of him to reaching financial freedom. More importantly, I lived the past 8-10 years much more stress free compared to him.
Timing the market is important. Doing a full analysis of opportunity cost & why you are getting into RE today is important. Having an exit strategy, like USC mentioned is important. Focusing on 10,20,30 years for many novice homebuyers will overly simplify a should be complex decision.

Great points. Of course 2005/2006 were extreme once in a life time situations. I was in a similar situation as your friend as I had enough money saved up for a downpayment by my mid-20s and everyone advised to buy,buy,buy. I saw that renting was HALF the cost of buying and rented until 2011. I pulled the trigger at the bottom once I realized buying was CHEAPER than renting.

Stocks are obviously the same thing - buying tech stocks in 99-00 was terrible.

Agree here that the Great Recession is a once in a life time event. At least in my life time anyways. So now those that haven't  bought, the only sensible thing to to right now is rent and calculate your Rent vs. owned. Or buy in a low cost area. By the way low cost mean more crimes and schools is not that great. True, crimes are everywhere, but high homes price means much lesser crimes.

 

[Hugo Township]

Timing the market is important.

The message I read from this post is that it's better to be lucky than good.

 

[Kenkoko]

The message I read from this post is that it's better to be lucky than good.

I was definitely lucky not good. I wanted a big house like my buddy had and even begged my parents for help on the down payment. This is quite common among FCB families that parents help with the down payment on the kid?s 1st house. I was lucky that they chose to ignore my request and paid off my sizable student loan instead. I was not entirely happy with their decision back then, but I am extremely grateful now.

 

[usctrojancpa]

Real estate is a long term investment and we should absolutely focus on 10, 20, 30 years from now. If you are not an investor and simply looking for your primary residence, of course, do what best suits your personal situation. Maybe the best option is to rent, especially if you are not planning to stay there for > 5 years. It takes a lot time and $ to sell real estate (compared to other investments like stocks and ETFs). For an average person, time in the market usually beats timing the market. Also, what do you think the people timing the market are doing while waiting for the market to "correct itself"? Paying rent? So as a property owner, whether the market goes up or down, they win by collecting rent (when people stand on the sidelines) or enjoying value appreciation (when people buy) or both (when the economy is growing).

I agree with some of your points, but I disagree that RE should be a long 10,20,30 year investment. This long buy and hold mindset leads to missed opportunities and mistakes.
I disagree with the sentiment of do what suits your personal situation when buying your primary home if that means the investment consideration part goes out of the window. For a lot of people, their primary home is a hybrid of investment and personal need. Especially first-time home buyers buying in current high Irvine home prices. A lot of these 1st time home buyers are buying close to their max ability to afford.
I strongly disagree with your argument that time in the market beats timing the market.
I am in my late 30s and this is very evident among friends and colleagues in my age group. My best friend was (and still is) one the most successful ones among my age group. He finished school a year early and he already had down payment saved up by his mid-20s. He bought before the crash and compounded his mistake by stretching financially and bought the biggest he could afford. It wasn?t that he was stupid. It was common back then and majority of people back then believed (like a lot of people today) that housing can only go up up and up . Even if the short term looked overheated, the long term 10,20,30 year outlook sold him. I remember standing in his mansion at his house warming party thinking #@$%  I am 10 years behind.
I was not as successful as him. Even took an extra year to get my professional license and did not have down payment saved up until I was almost 30. By then the housing market had turned. So I did the unthinkable thing in your eyes. I paid rent and waited for the market to correct itself. I put my saved down payment and whatever income I had left after paying rent into the equity market. Not because I was clairvoyant or smarter than the average person. The equity market was the only thing working in late 2009 early 2010. I did eventually buy my primary home in 2016, after home prices have gone way up. But, by staying nimble financially  I was able to take advantage of the biggest equity rally in years. I think it?s safe to say as of today, I am years ahead of him to reaching financial freedom. More importantly, I lived the past 8-10 years much more stress free compared to him.
Timing the market is important. Doing a full analysis of opportunity cost & why you are getting into RE today is important. Having an exit strategy, like USC mentioned is important. Focusing on 10,20,30 years for many novice homebuyers will overly simplify a should be complex decision.

I'm with Ken on this one.  For me, I'm all about the exit (3-5 years).  Not to mention, there are a lot more job hopping these days.  We see a lot of job relocation sales on TI alone.  Gone are the days where someone stays in their job (and their house) for 10+ years.  I also think a lot of Irvine isn't from Irvine (as evident by the population growth numbers, I suppose) so a lot of people don't have strong ties to this area which makes picking up and relocating for life quality/job/family/schools that much more prevalent.

Bingo...in today's world people change jobs every few years so the average home selling every 4-7 years is very reasonable.  Plus a lot of buyers will purchase their first home (attached or detached condo) and then want to move up to a true SRF within 3-5 years so that's why it's very important to consider the exit strategy where that first home will be as appealing as possible to both future buyers and/or renters.

 

[ThirtySomethingWEquity]

Move up buyers should be hoping for propery prices to crash then.  I'd be in a much better shape if my condo lost value and bigger houses proportionally lost the same % value...

 

[Liar Loan]

Move up buyers should be hoping for propery prices to crash then.  I'd be in a much better shape if my condo lost value and bigger houses proportionally lost the same % value...

Condos tend to lose more value on a percentage basis than move up homes though.  The reason is that condo owners have less resources to tough it out during a recession compared to those that own more expensive properties.  If you are going to own during a crash, you would be better off owning the higher end home that is going to have a smaller drop in value.

 

[ThirtySomethingWEquity]

Move up buyers should be hoping for propery prices to crash then.  I'd be in a much better shape if my condo lost value and bigger houses proportionally lost the same % value...

Condos tend to lose more value on a percentage basis than move up homes though.  The reason is that condo owners have less resources to tough it out during a recession compared to those that own more expensive properties.  If you are going to own during a crash, you would be better off owning the higher end home that is going to have a smaller drop in value.

Want to make a bet that in OC, this won't be the case, and the inverse will be true?  There are a lot more people in Orange County that can afford a condo than can afford move up homes.  Check the time on the market for things over 1 million vs. condos in 700k and less.

 

[Liar Loan]

Move up buyers should be hoping for propery prices to crash then.  I'd be in a much better shape if my condo lost value and bigger houses proportionally lost the same % value...

Condos tend to lose more value on a percentage basis than move up homes though.  The reason is that condo owners have less resources to tough it out during a recession compared to those that own more expensive properties.  If you are going to own during a crash, you would be better off owning the higher end home that is going to have a smaller drop in value.

Want to make a bet that in OC, this won't be the case, and the inverse will be true?  There are a lot more people in Orange County that can afford a condo than can afford move up homes.  Check the time on the market for things over 1 million vs. condos in 700k and less.

It's not about Days on Market, but about the financial status of those that own in each segment.  Condo owners have less earnings and less savings than people that own more expensive move up homes, on average.  When a recession hits, those with the least means lose their houses the quickest and that segment gets hit with the most distressed sales.  It's a big reason why mortgage underwriting treats condos as riskier than SFR's.

Even in big bad Irvine, condos had much higher loss rates than SFR's during the Great Recession.  Just ask IHO.  He'll tell ya'. 

 

[usctrojancpa]

Move up buyers should be hoping for propery prices to crash then.  I'd be in a much better shape if my condo lost value and bigger houses proportionally lost the same % value...

Condos tend to lose more value on a percentage basis than move up homes though.  The reason is that condo owners have less resources to tough it out during a recession compared to those that own more expensive properties.  If you are going to own during a crash, you would be better off owning the higher end home that is going to have a smaller drop in value.

Want to make a bet that in OC, this won't be the case, and the inverse will be true?  There are a lot more people in Orange County that can afford a condo than can afford move up homes.  Check the time on the market for things over 1 million vs. condos in 700k and less.

It's not about Days on Market, but about the financial status of those that own in each segment.  Condo owners have less earnings and less savings than people that own more expensive move up homes, on average.  When a recession hits, those with the least means lose their houses the quickest and that segment gets hit with the most distressed sales.  It's a big reason why mortgage underwriting treats condos as riskier than SFR's.

Even in big bad Irvine, condos had much higher loss rates than SFR's during the Great Recession.  Just ask IHO.  He'll tell ya'. 

This is true, attached condos in Irvine dropped by about 30% from the peak prices in 2006/2007 while detached homes only dropped about 20%.  Detached homes (condos as well) will always appreciate more and retain their value better than attached condos with the reason you mentioned (the avg attached condo owner isn't as well healed financially as the detached home owner). 

 

[meccos12]

Just saw this come up on redfin feed.
https://www.redfin.com/CA/Irvine/89-Nassau-92620/home/40101603

Props to Martin for getting sellers to come down so much from list price on this house.
Although the original list price was ridiculously high, it takes some skills to talk down prices this much for a house that was on the market for only a month.

I would love to hear the details on how the price was driven down 140K from list.

 

[eyephone]

It?s market forces

 

[irvinebullhousing]

This is a primary example of using bad news to extrapolate values for buyers. A win for both buyers and seller in my opinion.  Close to half a million dollars, that's right, increased in 6 years. All in a mean while living in a good neighborhood and good school. Of course, I did not account for all the costs involve with selling and owning, but those numbers are the typical numbers that I would expect when you buy for the long run in desirable neighborhood.

Good job UscCPA. He knows what he is doing.

 

[eyephone]

Let the bargains begin

This is a primary example of using bad news to extrapolate values for buyers. A win for both buyers and seller in my opinion.  Close to half a million dollars, that's right, increased in 6 years. All in a mean while living in a good neighborhood and good school. Of course, I did not account for all the costs involve with selling and owning, but those numbers are the typical numbers that I would expect when you buy for the long run in desirable neighborhood.

Good job UscCPA. He knows what he is doing.

 

[usctrojancpa]

Just saw this come up on redfin feed.
https://www.redfin.com/CA/Irvine/89-Nassau-92620/home/40101603

Props to Martin for getting sellers to come down so much from list price on this house.
Although the original list price was ridiculously high, it takes some skills to talk down prices this much for a house that was on the market for only a month.

I would love to hear the details on how the price was driven down 140K from list.

The home was sitting on the market for a bit of time and it was grossly overpriced, not even sure how they came up with that high price.  We took a close look at closed comps and decided to start with an offer at $1.4m emailing the listing agent closed comps to support our offer amount since the home was a complete blank slate (my client actually liked that because they weren't paying for other people's upgrades).  I think the listing agent probably had a heart-to-heart discussion with the seller that if they wanted to sell it that they'd have to come down a good bit.  I'm sure she forwarded my email with my analysis of why our original offer of $1.4m was reasonable which probably helped.  The owner is going to renovate the home so it'll look 10x better when they are done with it and they'll get every penny back for all of the updated (wood flooring, paint, counters, bathrooms, etc).