irvinehomeowner
Well-known member
TLDR? Prices down 9%?
Too many numbers.
Too many numbers.
Observations from the front lines of the Irvine housing market?
- Thread starter usctrojancpa
- Start date
NEW -> Contingent Buyer Assistance Program
I'm a CPA, I can't help it that I like numbers. Prices down 9% from the peak but still up 6% for 2022.
What an understatement, haha
Interest rates have increased materially but prices have fallen much less.
There are two factors that drove this bubble.
(1) Chinese cash buyers.
(2) Low inventory due to really really low refinance rates.
These two groups won't be forced to sell.
The only thing you're correct about is must sell inventory won't increase unless there's massive layoffs that cause people to sell. But even that won't be a lot since most people have refinanced to about 2%. So even getting laid off, they might be able to sustain payments for quite some time.
Jumbo rates are not at 6.35% as my client locked a 0pt loan with Citibank at 5.50% on Friday. Also, the buyers during the 2020-2022 were very strong financially. How do I know this? Because I was both a listing agent and a buyer agent seeing first hand that sellers to picking the strongest buyers possible even if they were the 2nd highest offers because they didn't want to risk escrow falling apart with a buyer that was even close to being iffy. Even if you took out the cash buyers, the average down payments for buyers on my listings and buyers on 3rd party agent listings were 30-40%. I would call those strong hands. Given that we are still above 12/31/21 prices in Irvine, I don't foresee any significant pressure for many of these owners to sell in the near term especially since most all of them have fixed interest rates in the 2%s to 3%s.
Yes, if an owner is cash flow neutral or cash flow positive on their rental there's no reason to sell it unless they need the liquidity. I bought 2 rentals with a client of mine back in 2021 and we locked in a fixed interest rate of 2.99% and we are $1,000 cash flow positive each month on both properties. Do we care what prices are doing in the near term? Not one bit!
I wonder how much that has changed in the last 15 years.
As of February 21, 2023, the jumbo 30-year fixed mortgage rate is 5.90% and the jumbo 15-year rate is 6.27%.
Source: Bankrate (Note, these rates do not include private mortgage insurance (PMI).
Source: Bankrate (Note, these rates do not include private mortgage insurance (PMI).
About 1/3 of the buyers for my listings were cash buyers in the past few years and 15% of my buyers on 3rd party listings were all cash.
If contact Sherry Wang at Citibank and ask her for her 20% down jumbo rate at 0pts for a detached primary home with no relationship deposit discount you'll find out that the rate is in the 5%s if you have A+ credit. Those national averages are garbage, same as Redfin and Zillow guestimates.
What about people who aren't financing? Is 9% down from peak still too high?
usctrojancpa
Well-known member
TLDR? Prices down 9%?
Too many numbers.
I'm a CPA, I can't help it that I like numbers. Prices down 9% from the peak but still up 6% for 2022.
irvinehomeowner
Well-known member
Based on that median price chart, buying any time from 2018-2021 would have been good timing compared to post 2021 prices.
Hugo Township
Active member
What an understatement, haha
usctrojancpa
Well-known member
Interest rates have increased materially but prices have fallen much less.
Long end of the curve is going back up - jumbo 30 yr at 6.35 today. Saw some analysis over the weekend that 2008 bubble was the result of prime borrower speculation, not subprime. This time the bubble is again driven by prime borrower speculation fueled by the search for “passive income”. As I’ve said before this will be a slow burn similar to the 90s where Irvine declined and went sideways for almost a decade.
Must sell inventory will set the new price levels but I don’t see that becoming a factor for another year.
Must sell inventory will set the new price levels but I don’t see that becoming a factor for another year.
CalBears96
Well-known member
Wrong.
There are two factors that drove this bubble.
(1) Chinese cash buyers.
(2) Low inventory due to really really low refinance rates.
These two groups won't be forced to sell.
The only thing you're correct about is must sell inventory won't increase unless there's massive layoffs that cause people to sell. But even that won't be a lot since most people have refinanced to about 2%. So even getting laid off, they might be able to sustain payments for quite some time.
CalBears96
Well-known member
Also, you realize that those who did have "passive income" most likely did have a positive cash flow, right? In which case, they're not selling regardless what happens to the economy.
Isn't that right, Martin?
Isn't that right, Martin?
usctrojancpa
Well-known member
Jumbo rates are not at 6.35% as my client locked a 0pt loan with Citibank at 5.50% on Friday. Also, the buyers during the 2020-2022 were very strong financially. How do I know this? Because I was both a listing agent and a buyer agent seeing first hand that sellers to picking the strongest buyers possible even if they were the 2nd highest offers because they didn't want to risk escrow falling apart with a buyer that was even close to being iffy. Even if you took out the cash buyers, the average down payments for buyers on my listings and buyers on 3rd party agent listings were 30-40%. I would call those strong hands. Given that we are still above 12/31/21 prices in Irvine, I don't foresee any significant pressure for many of these owners to sell in the near term especially since most all of them have fixed interest rates in the 2%s to 3%s.
usctrojancpa
Well-known member
Also, you realize that those who did have "passive income" most likely did have a positive cash flow, right? In which case, they're not selling regardless what happens to the economy.
Isn't that right, Martin?
Yes, if an owner is cash flow neutral or cash flow positive on their rental there's no reason to sell it unless they need the liquidity. I bought 2 rentals with a client of mine back in 2021 and we locked in a fixed interest rate of 2.99% and we are $1,000 cash flow positive each month on both properties. Do we care what prices are doing in the near term? Not one bit!
irvinehomeowner
Well-known member
What percentage of your buyers (and the people who bought your listings) were CBs?
I wonder how much that has changed in the last 15 years.
come on...anybody can get special rates with enough juice but per Bankrate the man on the street is f***ed - as are most sellers that need to sell:
Today's national jumbo mortgage rate trends
For today, Tuesday, February 21, 2023, the national average 30-year fixed jumbo mortgage APR is 6.88%, increased to compared to last week’s of 6.71%. The national average 30-year fixed jumbo refinance APR is 6.95%, up compared to last week’s of 6.85%.I'm speaking more broadly, not just Irvine, for which I agree with your 1&2 mostly though a lot of those 1) try to AirBnB them illegally (bait and switch for a south OC house then when you make the res "hey - it's in Irvine GP!"I almost got scammed by one and reported it to AirBnB and told the landlord I would report them to Irvine PD and INS which elicited them to immediately provide a full refund)
CalBears96
Well-known member
You can't get anything right, can you? The 6.88% is conforming rate. Jumbo rate is lower than that.
As of February 21, 2023, the jumbo 30-year fixed mortgage rate is 5.90% and the jumbo 15-year rate is 6.27%.
Today's Jumbo Mortgage Rates
| National averages of the lowest jumbo mortgage rates offered by more than 200 of the country's top lenders, with a loan-to-value ratio (LTV) of 80%, an applicant with a FICO credit score of 700-760, and no mortgage points. | ||
|---|---|---|
| Loan Type | Purchase | Refinance |
| Jumbo 30-Year Fixed | 5.90% | 5.90% |
| Jumbo 15-Year Fixed | 6.27% | 6.27% |
| Jumbo 7/6 ARM | 5.96% | 6.06% |
| Jumbo 5/6 ARM | 5.94% | 5.94% |
Today's Rates for All Mortgage Loan Types
| National averages of the lowest rates offered by more than 200 of the country's top lenders, with a loan-to-value ratio (LTV) of 80%, an applicant with a FICO credit score of 700-760, and no mortgage points. | ||
|---|---|---|
| Loan Type | Purchase | Refinance |
| 30-Year Fixed | 6.95% | 7.22% |
| FHA 30-Year Fixed | 6.90% | 7.09% |
| VA 30-Year Fixed | 6.70% | 7.12% |
| Jumbo 30-Year Fixed | 5.90% | 5.90% |
| 20-Year Fixed | 6.74% | 7.14% |
| 15-Year Fixed | 6.24% | 6.43% |
| Jumbo 15-Year Fixed | 6.27% | 6.27% |
| 10-Year Fixed | 6.22% | 6.42% |
| 10/6 ARM | 7.02% | 7.27% |
| 7/6 ARM | 6.96% | 7.35% |
| Jumbo 7/6 ARM | 5.96% | 6.06% |
| 5/6 ARM | 7.05% | 7.35% |
| Jumbo 5/6 ARM | 5.94% | 5.94% |
usctrojancpa
Well-known member
About 1/3 of the buyers for my listings were cash buyers in the past few years and 15% of my buyers on 3rd party listings were all cash.
usctrojancpa
Well-known member
If contact Sherry Wang at Citibank and ask her for her 20% down jumbo rate at 0pts for a detached primary home with no relationship deposit discount you'll find out that the rate is in the 5%s if you have A+ credit. Those national averages are garbage, same as Redfin and Zillow guestimates.
Mawesome Sauce
Member
The goal of the fed is to push the rates in bonds so high that you would have to be stupid to by real estate over bonds as a source of fixed income. In that case the Chinese buyers will still pick property, but other than them nobody else will.
What kind of moron locks a 5.5% rate right now when the 10 year is up 60 basis pts this month alone? Better to wait until its at 7 or 8% and only compete with Chinese cash buyers which won't float the Irvine new construction market forever (h/t Mawsome Sauce). Job losses are piling up in OC and the remote workers are getting axed first. Our EVP even gently coaxed one of his salespeople to move up here from L.A. without relo and she did as she saw the writing on the wall.
I copied and pasted from Bankrate, which BTW is where I got my 1.99% zero cost 15, so it's not always garbage. And these rates above omit the up front costs besides points these rates will carry. Only suckers are buying right now.
irvinehomeowner
Well-known member
If I had a nickel for every time I heard that...
What about people who aren't financing? Is 9% down from peak still too high?