Observations from the front lines of the Irvine housing market?
- Thread starter usctrojancpa
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NEW -> Contingent Buyer Assistance Program
Are you in SV now?
Looks like peak prices for Irvine were mid-2018. Everybody that missed that chance to sell can still get out now with about the same $'s in net proceeds (factoring in loan amortization). If realtors had a fiduciary duty to advise their clients, USC would have failed in that duty by not advising his clients to avoid Irvine. Every other city in Orange County has had better price performance over the past three years.
IHO likes to ask "Where's Liar Loan?" every time the chart fails to regain the prior peak. He'll never acknowledge that I was right to call this Irvine price drop. I was the first to call it back in 2018 when IHO thought a YoY decline in Irvine prices was an impossibility. He was wrong about Irvine values being special and now he can't let it go.
By USC's own admission, it took a massive rate drop from 5% to 2.5% just to keep Irvine prices flattish to slightly down. I wonder what happens when post-pandemic rates start to normalize again? tic, tic, tic...
Realtors definitely don't have a fiduciary duty to tell them to avoid or encourage buying in any particular area or city. The fiduciary duty to zealously represent buyers by being honest and loyal, transparent and providing all information to help buyers make good decisions, using my skills and knowledge to help get homes at the best available prices, and not compromise their confidential information. I've said it before, buying a home where you live is more than an investment and has intangible value to buyers. My buyers tell me when they are ready to buy and I do ask that they'll plan on living in the home for at least 5 years because I have no idea what prices will do in the short term but in the long term they will keep increasing, peak pricing is only temporary until we get the next peak.
Speaking of peak pricing, we had a new median price per SF record in Feb by a wide margin from the previous high (I'll post the Jan & Feb stats this weekend when I have more time to analyze the data). The market in the sub $1m market in and outside of Irvine is complete madness right now, most all my buyers are getting constantly outbid with 5-20 offers per listing. Even the high end is seeing homes sell quickly with multiple offers.
In terms of the former peak in the Spring of 2018, we had a combination of interest rates going higher and stock market volatility due to the Chinese tariffs. Prices dipped about 3-5% from the late Spring 2018 through late 2018 as interest rates went from the low/mid 3% to kissing 5% which caused inventory to start piling up. Then rates started coming back down into the 3s in early 2019 and prices firmed back up and by the end of 2019/early 2020 prices were basically back around peak pricing. So we didn't need rates at 2.50% for prices to head back towards the previous peak, we just needed rates going into the 3s like where they were in early 2018. I'll keep saying this....inventory levels are your tell where prices are going.
You'll be waiting a long, long time for mortgage rates going back up to 5% and well as a 10% price correction. Trying to time the real estate market is just as easy as trying to time the stock market. Did anyone think that prices were going to be up about 10% from pre-covid (Jan/Feb 2020) to today? I know I didn't.
I agree with Liar. Prices peaked in 2018 and dropped in 2019. Since most people that visit this blog are buyers I would look at liars post a bit differently. Rather than 2018 being a good year to sell, I would argue 2019 was a good year to buy. Buying the same home in 2018 vs 2019 would have cost you a lot more especially taking into consideration actual home price, value of money and rates.
For those who follow YoY home price changes, you should really look at inflation adjusted prices. Otherwise you have a built in price increase due to inflation every year. Unless nominal housing prices increased beyond 2-3% every year, I wouldnt consider that in increase in value at all.
With that all said I will make a bold prediction, which Im sure most of you housing bulls wont agree with. I think in the next year or two we will see prices drop again. How much and exactly when is a guessing game. I truly feel right now is the worst time to buy because COVID probably pulled in many potential buyers, rates dropped super low and recently jumped quickly, not yet allowing home prices to adjust accordingly, the stock market is no longer hitting new highs every day making new overnight millionaires, etc.
just my 2 cents.
Am I the only person who caught the contradiction here? In one sentence you claim that inventory levels will tell you where prices are going but in the very next paragraph you imply timing the real estate market is impossible.
Truth is there is no one great indicator of future prices. Everything is a guess in my opinion. Furthermore I would argue that inventory and prices are inversely related but one is not a future indicator of another.
Let me clarify, I don't know where prices are going in the intermediate-term (3 months to 1-2 years) because inventory levels can change dramatically like they did during the lockdown in March/April 2020. In the short term, I believe that inventory levels (1-3 months) are a good indicator of where prices may go in the next several months. In April/May of 2020, I would have said that prices are going to be slightly down to flattish given what was happening with inventory levels but then they turned quickly with the strong demand probably driven by low rates. Low inventory levels (more specifically # of months of inventory) imply a mismatch where there is more demand and supply (aka a seller's market) which means that prices have to increase for supply and demand to get into balance, that's simple economics. I never would have predicted that prices would be up 10%+ from pre-covid to the end of 2020.
How much was this "painful" Irvine price drop you predicted? 5%, 10% 20%?
Do you even know what the prices are now compared to 2018?
Prices ebb and flow all the time. Could it have been seasonal?
Boom!
I don't think anyone is saying try not to be prudent with your timing... just to be aware that sometimes you can't wait for timing or... can't accurately guess to point where you get paralysis by analysis.
As I've said, you you just need to look at your affordability and long term ability to stay and then make your decision. I know people like to counter back with "average move time is less than 5 years" but who knows what your situation is 5 years from now... maybe you lucked out and can afford a bigger home so you sell and move up.
As for Liar Loan, that's a different subject. He doesn't think Irvine is a good place to make the "largest investment of your life"... which seems contrary to why everyone tends to buy in Irvine in the first place. He always thinks prices in Irvine is dropping every 2 to 3 years... and that everywhere else it's better but who here agrees with that? Where is TalkHB or TalkAlisoVideo or TalkSanCelemente?
IMO that's what people should avoid doing -
Pulling the trigger on a big investment, not because of conviction but to avoid getting paralysis by analysis - is most likely a terrible financial decision.
But, I agree this is commonly seen. Real life is more complicated and I fully agree buying a home is more than just a financial decision for many people.
To me, part of the solution is to learn to invest. Make the home purchase / investment a smaller slice of your portfolio.
Instead of just hoping "maybe you lucked out and can afford a bigger home so you sell and move up"
The point is if you invested properly, in 5-10 years, you could afford the same home regardless whether the home price went up or down.
When we bought our home in 2016, a coworker of mine almost followed. His family loved the layout and the builder had a cancellation & offered a discount.
But they eventually decided not to pull the trigger because it was very close the their max affordability and they would have to liquidate their entire stock portfolio to make down payment.
It turned out great for them. Their stock portfolio has gone up 350% since 2016 while the Irvine RE gone up less than 30%.
I get that many people feel like they don't have 5-10 years to wait / waste. But immediate gratification has opportunity costs.
And with proper investment, a 5-10 years wait could lead to many more years of financial freedom on the back end.
Dr. CA Real Estate
New member
.
Dr. CA Real Estate
New member
OCtoSV said:
Are you in SV now?
Liar Loan
Well-known member
USCTrojanCPA said:
Looks like peak prices for Irvine were mid-2018. Everybody that missed that chance to sell can still get out now with about the same $'s in net proceeds (factoring in loan amortization). If realtors had a fiduciary duty to advise their clients, USC would have failed in that duty by not advising his clients to avoid Irvine. Every other city in Orange County has had better price performance over the past three years.
IHO likes to ask "Where's Liar Loan?" every time the chart fails to regain the prior peak. He'll never acknowledge that I was right to call this Irvine price drop. I was the first to call it back in 2018 when IHO thought a YoY decline in Irvine prices was an impossibility. He was wrong about Irvine values being special and now he can't let it go.
By USC's own admission, it took a massive rate drop from 5% to 2.5% just to keep Irvine prices flattish to slightly down. I wonder what happens when post-pandemic rates start to normalize again? tic, tic, tic...
zubs
Well-known member
When you say normalize, do you mean interest rates going back to 5.5%?
How do we get to 5.5% interest rates from here? It would be worth it to go through this exercise. I'll start.
In 2018 interest rates climbed to 4.5%, but by the end of 2019, Powell had to bring it back down to 3.5%.
Also, from USC and the people posting here, I don't think Irvine prices are slightly down from 2018 when there are 6 bidders on a property.
How do we get to 5.5% interest rates from here? It would be worth it to go through this exercise. I'll start.
In 2018 interest rates climbed to 4.5%, but by the end of 2019, Powell had to bring it back down to 3.5%.
Also, from USC and the people posting here, I don't think Irvine prices are slightly down from 2018 when there are 6 bidders on a property.
usctrojancpa
Well-known member
Liar Loan said:
Realtors definitely don't have a fiduciary duty to tell them to avoid or encourage buying in any particular area or city. The fiduciary duty to zealously represent buyers by being honest and loyal, transparent and providing all information to help buyers make good decisions, using my skills and knowledge to help get homes at the best available prices, and not compromise their confidential information. I've said it before, buying a home where you live is more than an investment and has intangible value to buyers. My buyers tell me when they are ready to buy and I do ask that they'll plan on living in the home for at least 5 years because I have no idea what prices will do in the short term but in the long term they will keep increasing, peak pricing is only temporary until we get the next peak.
Speaking of peak pricing, we had a new median price per SF record in Feb by a wide margin from the previous high (I'll post the Jan & Feb stats this weekend when I have more time to analyze the data). The market in the sub $1m market in and outside of Irvine is complete madness right now, most all my buyers are getting constantly outbid with 5-20 offers per listing. Even the high end is seeing homes sell quickly with multiple offers.
In terms of the former peak in the Spring of 2018, we had a combination of interest rates going higher and stock market volatility due to the Chinese tariffs. Prices dipped about 3-5% from the late Spring 2018 through late 2018 as interest rates went from the low/mid 3% to kissing 5% which caused inventory to start piling up. Then rates started coming back down into the 3s in early 2019 and prices firmed back up and by the end of 2019/early 2020 prices were basically back around peak pricing. So we didn't need rates at 2.50% for prices to head back towards the previous peak, we just needed rates going into the 3s like where they were in early 2018. I'll keep saying this....inventory levels are your tell where prices are going.
You'll be waiting a long, long time for mortgage rates going back up to 5% and well as a 10% price correction. Trying to time the real estate market is just as easy as trying to time the stock market. Did anyone think that prices were going to be up about 10% from pre-covid (Jan/Feb 2020) to today? I know I didn't.
Liar Loan said:
I agree with Liar. Prices peaked in 2018 and dropped in 2019. Since most people that visit this blog are buyers I would look at liars post a bit differently. Rather than 2018 being a good year to sell, I would argue 2019 was a good year to buy. Buying the same home in 2018 vs 2019 would have cost you a lot more especially taking into consideration actual home price, value of money and rates.
For those who follow YoY home price changes, you should really look at inflation adjusted prices. Otherwise you have a built in price increase due to inflation every year. Unless nominal housing prices increased beyond 2-3% every year, I wouldnt consider that in increase in value at all.
With that all said I will make a bold prediction, which Im sure most of you housing bulls wont agree with. I think in the next year or two we will see prices drop again. How much and exactly when is a guessing game. I truly feel right now is the worst time to buy because COVID probably pulled in many potential buyers, rates dropped super low and recently jumped quickly, not yet allowing home prices to adjust accordingly, the stock market is no longer hitting new highs every day making new overnight millionaires, etc.
just my 2 cents.
USCTrojanCPA said:
Am I the only person who caught the contradiction here? In one sentence you claim that inventory levels will tell you where prices are going but in the very next paragraph you imply timing the real estate market is impossible.
Truth is there is no one great indicator of future prices. Everything is a guess in my opinion. Furthermore I would argue that inventory and prices are inversely related but one is not a future indicator of another.
usctrojancpa
Well-known member
kpatnps said:
Let me clarify, I don't know where prices are going in the intermediate-term (3 months to 1-2 years) because inventory levels can change dramatically like they did during the lockdown in March/April 2020. In the short term, I believe that inventory levels (1-3 months) are a good indicator of where prices may go in the next several months. In April/May of 2020, I would have said that prices are going to be slightly down to flattish given what was happening with inventory levels but then they turned quickly with the strong demand probably driven by low rates. Low inventory levels (more specifically # of months of inventory) imply a mismatch where there is more demand and supply (aka a seller's market) which means that prices have to increase for supply and demand to get into balance, that's simple economics. I never would have predicted that prices would be up 10%+ from pre-covid to the end of 2020.
irvinehomeowner
Well-known member
Liar Loan said:
How much was this "painful" Irvine price drop you predicted? 5%, 10% 20%?
Do you even know what the prices are now compared to 2018?
Prices ebb and flow all the time. Could it have been seasonal?
Boom!
My opinion is probably going to be very unpopular on TI. But I very much disagree with the popular notion that it's hard to time the market so don't.
It's such a defeatist attitude and frankly why would you apply that kind of attitude to one of the largest investment you're going to make ?
And to me, that advise is only good if you are an extremely risk averse first time home buyer who has parked your down payment in cash or cash like savings account generating near 0% return.
Even if you are just buying a starter home/condo in Irvine, 20% down is 150k-200k. Are there many home buyers who would really have 200k sitting in cash savings? This is 2021 not 1995.
Even if they did, that's not the smart thing to do, especially given what the federal fiscal and monetary policy had been for the past 10 + years.
Much of the opinions offered and the RE discourse on TI tend to treat home buying as if it is in a vacuum. I mean it's fun to debate whether peak price point was in 2018 or 2021 and get an internet dunk on LiarLoan
But other than that, it seems like a rather pointless academic discussion.
S&P 500 has gone up 30-40% since 2018 and the Nasdaq has gone up 100% since 2018.
If you are a smart home buyer who didn't park your down payment in cash or cash like accounts and just invested in index fund like an average person. Then whether 2018 or 2021 was the RE price peak becomes quite pointless.
It's such a defeatist attitude and frankly why would you apply that kind of attitude to one of the largest investment you're going to make ?
And to me, that advise is only good if you are an extremely risk averse first time home buyer who has parked your down payment in cash or cash like savings account generating near 0% return.
Even if you are just buying a starter home/condo in Irvine, 20% down is 150k-200k. Are there many home buyers who would really have 200k sitting in cash savings? This is 2021 not 1995.
Even if they did, that's not the smart thing to do, especially given what the federal fiscal and monetary policy had been for the past 10 + years.
Much of the opinions offered and the RE discourse on TI tend to treat home buying as if it is in a vacuum. I mean it's fun to debate whether peak price point was in 2018 or 2021 and get an internet dunk on LiarLoan
But other than that, it seems like a rather pointless academic discussion.
S&P 500 has gone up 30-40% since 2018 and the Nasdaq has gone up 100% since 2018.
If you are a smart home buyer who didn't park your down payment in cash or cash like accounts and just invested in index fund like an average person. Then whether 2018 or 2021 was the RE price peak becomes quite pointless.
irvinehomeowner
Well-known member
Kenkoko said:
I don't think anyone is saying try not to be prudent with your timing... just to be aware that sometimes you can't wait for timing or... can't accurately guess to point where you get paralysis by analysis.
As I've said, you you just need to look at your affordability and long term ability to stay and then make your decision. I know people like to counter back with "average move time is less than 5 years" but who knows what your situation is 5 years from now... maybe you lucked out and can afford a bigger home so you sell and move up.
As for Liar Loan, that's a different subject. He doesn't think Irvine is a good place to make the "largest investment of your life"... which seems contrary to why everyone tends to buy in Irvine in the first place. He always thinks prices in Irvine is dropping every 2 to 3 years... and that everywhere else it's better but who here agrees with that? Where is TalkHB or TalkAlisoVideo or TalkSanCelemente?
Cornflakes
Active member
It is somewhat possible to time the market. If you follow general rule of thumb that when you are about to purchase a home and you have to offer over asking price, then worry that you might be still outbid, or when you as a buyer pretty much have no negotiating power...you are late to the party. ALmost guaranteed that you are buying into a peak. Things might get better from here for a little while, but only little. The seller you bought from banked most of those hefty gains.
IF you had time on your side and can wait out, the dip will come and offer you better price. The issue is that wait can be too long for some of us, and we all have a finite amount of time to live. What is the point if I have to wait 5-10 years only to hope that I might get lower price on the home...?
Weather stock market or real estate, those who has long term view and capacity to ride out high or low waves will do better.
IF you had time on your side and can wait out, the dip will come and offer you better price. The issue is that wait can be too long for some of us, and we all have a finite amount of time to live. What is the point if I have to wait 5-10 years only to hope that I might get lower price on the home...?
Weather stock market or real estate, those who has long term view and capacity to ride out high or low waves will do better.
irvinehomeowner said:
IMO that's what people should avoid doing -
Pulling the trigger on a big investment, not because of conviction but to avoid getting paralysis by analysis - is most likely a terrible financial decision.
But, I agree this is commonly seen. Real life is more complicated and I fully agree buying a home is more than just a financial decision for many people.
To me, part of the solution is to learn to invest. Make the home purchase / investment a smaller slice of your portfolio.
Instead of just hoping "maybe you lucked out and can afford a bigger home so you sell and move up"
Cornflakes said:
The point is if you invested properly, in 5-10 years, you could afford the same home regardless whether the home price went up or down.
When we bought our home in 2016, a coworker of mine almost followed. His family loved the layout and the builder had a cancellation & offered a discount.
But they eventually decided not to pull the trigger because it was very close the their max affordability and they would have to liquidate their entire stock portfolio to make down payment.
It turned out great for them. Their stock portfolio has gone up 350% since 2016 while the Irvine RE gone up less than 30%.
I get that many people feel like they don't have 5-10 years to wait / waste. But immediate gratification has opportunity costs.
And with proper investment, a 5-10 years wait could lead to many more years of financial freedom on the back end.
It comes down to whether you see the home as a place you live or an investment tool. You can think of it as both, but you can't always think of it as an investment solely. Not saying anyone here does that or anything.
As for stocks, that's another risk you have to take. Sure it grew 360% from 2016 as Kenkoko says, but it could have gone to 0. Whereas for homes which grew only 30%, you at least have a place to live even in case it depreciates.
If you already own a home and thinking of buying an investment property, then I think timing kind of matters more. But for your primary residential home, I think finding the home where your family feels happy is what matters the most. If you think you will feel horrible when the home price is going down, then maybe buying a home is not for you no matter what time or season.
As for stocks, that's another risk you have to take. Sure it grew 360% from 2016 as Kenkoko says, but it could have gone to 0. Whereas for homes which grew only 30%, you at least have a place to live even in case it depreciates.
If you already own a home and thinking of buying an investment property, then I think timing kind of matters more. But for your primary residential home, I think finding the home where your family feels happy is what matters the most. If you think you will feel horrible when the home price is going down, then maybe buying a home is not for you no matter what time or season.