ThirtySomethingWEquity
Active member
fatduck said:
The fed doesn't buy treasuries?
Observations from the front lines of the Irvine housing market?
- Thread starter usctrojancpa
- Start date
NEW -> Contingent Buyer Assistance Program
The fed doesn't buy treasuries?
I provide the same service for my clients but at less cost and we set up a profit share (along with a short rent back, if needed) if the home sellers for over a certain price that we agree to. I only do it for clients that have a home to sell and looking to move up but are stuck. However, the market has gotten so stupid that I'm starting to step in to buy their move-up home for all cash and then flipping it back to them at the same price that I bought it off without a rebate (rebate covers my closing costs on both sides). Then once they move out of their current home I list it for sale and like a magician that's have I create 2 transactions out of 0.
I think this is a great service to go head to head with the big funds. Few people know about your offer. Any tax implications for you and buyers?
I only offer to repeat clients and new clients have an exit property after they purchase their home. If they occupied the home for 2 out of the past 5 years then they will qualify for the gain exemption, even with the profit share payment as it just becomes an installment sale. My dad is the buyer so his tax rate is lower than mine since he lives in Las Vegas. I might provide a post where I provide more detail on the transaction and offer it to more people on TI after year end.
I'm surprised the dems haven't tried to take that $500K tax free gain back as a means to pay for their spending. Must be they have some properties to sell themselves before they go after the rest of us.
Haha, I was inspired after the Rams victory.
I was a bit busy closing out a few escrows in early to mid Jan plus I wanted to really dive into the numbers to come up with my analysis as there was a lot going on in 4Q 2021.
Inventory will remain tight and prices will most likely continue to increase, I can see prices being up around 8-10% in 2022 even with rates going up.
The fed doesn't buy treasuries?
usctrojancpa
Well-known member
Liar Loan said:
I provide the same service for my clients but at less cost and we set up a profit share (along with a short rent back, if needed) if the home sellers for over a certain price that we agree to. I only do it for clients that have a home to sell and looking to move up but are stuck. However, the market has gotten so stupid that I'm starting to step in to buy their move-up home for all cash and then flipping it back to them at the same price that I bought it off without a rebate (rebate covers my closing costs on both sides). Then once they move out of their current home I list it for sale and like a magician that's have I create 2 transactions out of 0.
irvinebullhousing
Well-known member
USCTrojanCPA said:
I think this is a great service to go head to head with the big funds. Few people know about your offer. Any tax implications for you and buyers?
usctrojancpa
Well-known member
Compressed-Village said:
I only offer to repeat clients and new clients have an exit property after they purchase their home. If they occupied the home for 2 out of the past 5 years then they will qualify for the gain exemption, even with the profit share payment as it just becomes an installment sale. My dad is the buyer so his tax rate is lower than mine since he lives in Las Vegas. I might provide a post where I provide more detail on the transaction and offer it to more people on TI after year end.
Ready2Downsize
Well-known member
USCTrojanCPA said:
I'm surprised the dems haven't tried to take that $500K tax free gain back as a means to pay for their spending. Must be they have some properties to sell themselves before they go after the rest of us.
Sidehussle
Member
Actually republicans hate us Cali homeowners most by reducing the cap on our mortgage deduction and installing the 10k SALT limit. That?s hit us harder than any dem in my recent history. TurboTax gives my 5 year trend and under trump my effective tax rate jumped 7 to 10 points
CalBears96
Well-known member
I think fatduck was being sarcastic. Or at least, I hope. 
But yeah, the $10k SALT limit really hurt Cali homeowners.
But yeah, the $10k SALT limit really hurt Cali homeowners.
scubasteve
Active member
...
usctrojancpa
Well-known member
Wow, what a crazy year with increasing buyer demand throughout the year which resulted in prices being up over 28% year-over-year. No way anyone, including myself, would have predicted that prices would have increased so much in the past year. People asked me, was it a lack of supply or was it huge demand that caused the price run up. As you can see in the data, it was the strong demand that caused prices to go up as there were significantly more listed homes for sale in 2021 versus 2020 and 2019. In December, there were days where there were less than 100 homes for sale which translated to about 1-2 weeks of inventory. Instead of inventory levels increasing into the summer, we saw inventory levels continue to drop almost the entire year which is nothing that I?ve seen in 15 years that I?ve been tracking Irvine real estate.
The attached data closes sales through December 2021. Sales volumes started dropping off as inventory levels kept decreasing as we entered the seasonally slow period with each month having sales decrease from 12% to 33% year-over-year from Q4 2020 sales volume. We probably won?t cross 200 sales per month until we get more listings which will probably happen starting in March as we enter Spring selling season. There were 3,702 sold Irvine homes in 2021 or about 309 per month which was an increase of over 30% from 2020 levels and an increase of over 40% from 2019 levels. This clearly shows that demand has swamped supply as most all homes flew into escrow within days with multiple offers. As of January 30th, we have 199 homes in escrow so there will be less than 200 homes close in January and February.
The median home price increase from $581/sf in September 2021 to $626/sf in December 2021 and has continued to increase towards $650/sf in January from what I?ve seen. In some villages of Irvine like Eastwood and Orchard Hills prices have crossed $700/sf for both attached and detached properties. That trend continues into January while the median sales price increase which tells me that the higher-priced homes increased in price at a higher total dollar value as inventory levels dries up. It almost as if we saw a short squeeze in prices in 4Q 2021 because of the low inventory levels, sort of a buyer FOMO.
Inventory levels continued their decline of over 50% from September to December from 274 homes to 136 homes. From a year-over-year basis, inventory levels declined approx. 70% from 4Q 2020 levels. It?s normal to see inventory levels from 3Q to 4Q but not a 50%+ decrease. The last 3 months of 2021 saw inventory levels sink below 1 month of inventory which is a super hot seller?s market. I saw 10-20 offers on all of my Irvine listings in 4Q 2021 and experienced the same thing on the buyer side. The lower end of the market (sub $1m) would have 20-40 offers on some listings. Even my 116 Crossover (a $3m+ home) received 16 offers. We would have never seen anything like that 1-2 years ago. From what I?ve seen and heard from other agents and new home sales people, there are a lot of buyers coming from the LA area and the Bay area where prices are $800/sf to $1,500/sf so Irvine looks very affordable to them. The main reason they are moving down here is because they have the ability to work from home or only go back into the office a few times a month to once a week.
It has been harder and harder for me to get my buyers a home, especially first time home buyers with only 20% or less in down payment, forget about trying to buy a home if you are a contingent move-up buyer. It?s not just an Irvine issue, the problem goes almost throughout Orange County as there?s strong demand for homes in Lake Forest, Costa Mesa, Aliso Viejo, Laguna Hills, San Clemente, Huntington Beach, etc. Most of the buyers out there are move-up buyers looking to upgrade their home as they?ve seen a big run up in the price of their current homes. Removing the loan and appraisal contingencies right off the bat and removing contingencies in 7-10 days has become the home. I even lost out on getting 2 buyers a home because the top buyer removed all contingencies right off the bat (this is something that I would never advise my client to do as it?s too risky).
In terms of new homes, all new home builder wait lists are packed up buyers so a buyer trying to register today will either have to wait 4-6 months to get a lot where prices will be must higher or they have way more people on the wait list than they have homes that they will sell. Builders are increasing prices 1-2% per phase release ($15-$30k) or in some cases increasing by $100k+ per phase like Cetara did as they are seeing the same pricing and inventory level trends that I am. Also, builders have either slashed their broker co-ops (Irvine Pacific cut theirs twice in 2021) or have completely done away with them like CalPac Homes. The sales people tell me that most of their buyers are people from out-of-town who can work from home.
Interest rates stayed in a relatively tight range in 2021 from around 2.50% to 3.00% but as we got into 2022 rates have increased from 3.00% to 3.50% for conforming rates with rates on jumbo loans being 3.00% to 3.25%. Investment property rates are now around 4% up from the low 3% in the middle of 2021. We will most likely see interest rates continue to grind higher in 2022 as the Fed pulls back buying MBS bonds as well as even begin to sell their portfolio of MBS bonds holdings with quantitative tightening. I can see rates getting close to around 4% in 2022. This along with the continued increase in pricing will most likely take the marginal buyers out of the market.
Overall, the market remains to be on fire and properties continue to fly into escrow in days with multiple offers. I am seeing more and more agent just accept the highest offer right off the bat instead of doing best & final counters (I call those the ?lazy? agents because they can get more money for their sellers by sending best and final counters). On average, I got my sellers above $50k higher prices by sending out best and final counters in 2021 as compared to the highest offer before counters (including getting my 116 Crossover seller an extra $100k in sales price). I believe that prices will continue to increase in 2022 but at a slower pace versus 2021, maybe another 5-10% is my base case prediction.
The attached data closes sales through December 2021. Sales volumes started dropping off as inventory levels kept decreasing as we entered the seasonally slow period with each month having sales decrease from 12% to 33% year-over-year from Q4 2020 sales volume. We probably won?t cross 200 sales per month until we get more listings which will probably happen starting in March as we enter Spring selling season. There were 3,702 sold Irvine homes in 2021 or about 309 per month which was an increase of over 30% from 2020 levels and an increase of over 40% from 2019 levels. This clearly shows that demand has swamped supply as most all homes flew into escrow within days with multiple offers. As of January 30th, we have 199 homes in escrow so there will be less than 200 homes close in January and February.
The median home price increase from $581/sf in September 2021 to $626/sf in December 2021 and has continued to increase towards $650/sf in January from what I?ve seen. In some villages of Irvine like Eastwood and Orchard Hills prices have crossed $700/sf for both attached and detached properties. That trend continues into January while the median sales price increase which tells me that the higher-priced homes increased in price at a higher total dollar value as inventory levels dries up. It almost as if we saw a short squeeze in prices in 4Q 2021 because of the low inventory levels, sort of a buyer FOMO.
Inventory levels continued their decline of over 50% from September to December from 274 homes to 136 homes. From a year-over-year basis, inventory levels declined approx. 70% from 4Q 2020 levels. It?s normal to see inventory levels from 3Q to 4Q but not a 50%+ decrease. The last 3 months of 2021 saw inventory levels sink below 1 month of inventory which is a super hot seller?s market. I saw 10-20 offers on all of my Irvine listings in 4Q 2021 and experienced the same thing on the buyer side. The lower end of the market (sub $1m) would have 20-40 offers on some listings. Even my 116 Crossover (a $3m+ home) received 16 offers. We would have never seen anything like that 1-2 years ago. From what I?ve seen and heard from other agents and new home sales people, there are a lot of buyers coming from the LA area and the Bay area where prices are $800/sf to $1,500/sf so Irvine looks very affordable to them. The main reason they are moving down here is because they have the ability to work from home or only go back into the office a few times a month to once a week.
It has been harder and harder for me to get my buyers a home, especially first time home buyers with only 20% or less in down payment, forget about trying to buy a home if you are a contingent move-up buyer. It?s not just an Irvine issue, the problem goes almost throughout Orange County as there?s strong demand for homes in Lake Forest, Costa Mesa, Aliso Viejo, Laguna Hills, San Clemente, Huntington Beach, etc. Most of the buyers out there are move-up buyers looking to upgrade their home as they?ve seen a big run up in the price of their current homes. Removing the loan and appraisal contingencies right off the bat and removing contingencies in 7-10 days has become the home. I even lost out on getting 2 buyers a home because the top buyer removed all contingencies right off the bat (this is something that I would never advise my client to do as it?s too risky).
In terms of new homes, all new home builder wait lists are packed up buyers so a buyer trying to register today will either have to wait 4-6 months to get a lot where prices will be must higher or they have way more people on the wait list than they have homes that they will sell. Builders are increasing prices 1-2% per phase release ($15-$30k) or in some cases increasing by $100k+ per phase like Cetara did as they are seeing the same pricing and inventory level trends that I am. Also, builders have either slashed their broker co-ops (Irvine Pacific cut theirs twice in 2021) or have completely done away with them like CalPac Homes. The sales people tell me that most of their buyers are people from out-of-town who can work from home.
Interest rates stayed in a relatively tight range in 2021 from around 2.50% to 3.00% but as we got into 2022 rates have increased from 3.00% to 3.50% for conforming rates with rates on jumbo loans being 3.00% to 3.25%. Investment property rates are now around 4% up from the low 3% in the middle of 2021. We will most likely see interest rates continue to grind higher in 2022 as the Fed pulls back buying MBS bonds as well as even begin to sell their portfolio of MBS bonds holdings with quantitative tightening. I can see rates getting close to around 4% in 2022. This along with the continued increase in pricing will most likely take the marginal buyers out of the market.
Overall, the market remains to be on fire and properties continue to fly into escrow in days with multiple offers. I am seeing more and more agent just accept the highest offer right off the bat instead of doing best & final counters (I call those the ?lazy? agents because they can get more money for their sellers by sending best and final counters). On average, I got my sellers above $50k higher prices by sending out best and final counters in 2021 as compared to the highest offer before counters (including getting my 116 Crossover seller an extra $100k in sales price). I believe that prices will continue to increase in 2022 but at a slower pace versus 2021, maybe another 5-10% is my base case prediction.
usctrojancpa
Well-known member
usctrojancpa
Well-known member
lnc said:
Haha, I was inspired after the Rams victory.
AccidentalAnalytics
Member
MM, was waiting for a Safe Harbor disclosure. lol
Thanks for your insights.
Thanks for your insights.
usctrojancpa
Well-known member
AccidentalAnalytics said:
I was a bit busy closing out a few escrows in early to mid Jan plus I wanted to really dive into the numbers to come up with my analysis as there was a lot going on in 4Q 2021.
sleepy5136
Well-known member
Thanks USC for posting these types of updates. Definitely very insightful!
usctrojancpa
Well-known member
OCLuvr said:
Inventory will remain tight and prices will most likely continue to increase, I can see prices being up around 8-10% in 2022 even with rates going up.