OC Pricing falling 24.8% more - Much of that drop, an 18.5% drop will come by this November!

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PANDA DREAMING OF IRVINE_IHB

PANDA DREAMING OF IRVINE_IHB

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http://lansner.freedomblogging.com/2008/05/21/traders-see-laoc-price-falling-248-more/



I read this article in OC Register that 18.5% of the drop can happen by this November? Is it possible that Irvine RE can also drop this fast?



With the oil prices up to $135 a gallon, (with our $dollar$ continuing to lose its value, I won't be suprised to see a $200/gallon within a year), and as our economy deepens into recession, it may be possible. Let's ask the expert:



Irvine Renter what do you think?



I am looking at your chart "Median Home Prices versus Rental Value Irvine, CA 2007 - 2013. I'm sure Irvine dropped more than 8% in 2007, and I'm sure Irvine will drop more than 12% this year. Does anyone know exactly YTD% of how much the median irvine home prices have dropped this year? What is exact percentage drop in 2007? In any case, your chart seems to be right on target. Are you still sticking to your guns on this forecast? Is there any out side factors that may change this forecast?



2008 Declne = 12%

2009 Decline = 16%

2010 Decline = 8%

2011 Decline = 4%



Panda wants Irvine Home Prices to Fall.
 
Prices will not drop by 18% from today through November... The rate of decline has been decreasing of late and that trend will likely continue for at least the next month or two.
 
IPO,



The article did say "Orange County", not specific to "Irvine".

Do you know how much Irvine has come down since 1/1/2008? Do you know exactly what percentage Irvine dropped in 2007?
 
[quote author="ipoplaya" date=1211444484]Prices will not drop by 18% from today through November... The rate of decline has been decreasing of late and that trend will likely continue for at least the next month or two.</blockquote>


What do you think the prices will decline by the end of the year? Also perhaps your forecast for this time next year?
 
This house in westminster is listed pretty high, 779K. But it's in the nicer part of westminster/fountain valley border.

They are taking back up offers...so that took like 7 or 8 days?



http://www.redfin.com/CA/Fountain-Valley/15955-Clarendon-St-92708/home/3727369



The funny thing is, on redfin it's active, yet on the flyer, it stated that it's taking backup offers. WHY?



So here, for a decent house like this one, people will pay. It leads me to believe that the decline will

be slow for houses that people like us want to purchase.
 
[quote author="ipoplaya" date=1211444484]Prices will not drop by 18% from today through November... The rate of decline has been decreasing of late and that trend will likely continue for at least the next month or two.</blockquote>


Is this because of the pent up demand? Any thoughts on how much of this pent up demand actually exists?
 
[quote author="PANDA DREAMING OF IRVINE" date=1211443421]http://lansner.freedomblogging.com/2008/05/21/traders-see-laoc-price-falling-248-more/



I read this article in OC Register that 18.5% of the drop can happen by this November? Is it possible that Irvine RE can also drop this fast?



With the oil prices up to $135 a gallon, (with our $dollar$ continuing to lose its value, I won't be suprised to see a $200/gallon within a year), and as our economy deepens into recession, it may be possible. Let's ask the expert:



Irvine Renter what do you think?



I am looking at your chart "Median Home Prices versus Rental Value Irvine, CA 2007 - 2013. I'm sure Irvine dropped more than 8% in 2007, and I'm sure Irvine will drop more than 12% this year. Does anyone know exactly YTD% of how much the median irvine home prices have dropped this year? What is exact percentage drop in 2007? In any case, your chart seems to be right on target. Are you still sticking to your guns on this forecast? Is there any out side factors that may change this forecast?



2008 Declne = 12%

2009 Decline = 16%

2010 Decline = 8%

2011 Decline = 4%



Panda wants Irvine Home Prices to Fall.</blockquote>


There was also the article recently saying that the foreclosures are selling for 20% less in OC and other stats showing large percentages of the available inventory being foreclosures. It varied by zip code. Does the OC projection come from these two things?
 
[quote author="PANDA DREAMING OF IRVINE" date=1211444586]IPO,



The article did say "Orange County", not specific to "Irvine".

Do you know how much Irvine has come down since 1/1/2008? Do you know exactly what percentage Irvine dropped in 2007?</blockquote>


Nope and nope.



While I'm pretty confident that prices on Irvine homes will not fall by 18% over the next six months, I think that will also holds true for all of OC. Why do I believe this? Because sales in the county are picking up relative to inventory. The same dynamic in Irvine, which is prices stuck around mid to late 2004 on average, I suspect will apply to much of the county as well. That I believe will slow the rate of decline such that it would be impossible to average 3% per month decline over the next six months.



If you take the month-end inventory and sales figures for the country for the past four months to compute a crude/rough months inventory number you get the following:



Jan: 16616/1286 = 12.92

Feb: 17063/1471 = 11.59

Mar: 17447/1663 = 10.49

Apr: 17784/2166 = 8.21



See the trend? This is just not seasonality due it being Spring. Normally in the Spring and Summer, inventory spikes considerably along with sales to smooth out variation in the months inventory figure. That hasn't happened as yet this year. In Jan and Feb, when months inventory was 11-12, prices in the county fell by 3-4% per month. As the inventory glut has lessened recently, I'd say there is no way to sustain 3-4% declines per month in the short-term.



I expect May's number to be around 18,000 in inventory with sales of around perhaps 2300-2400. That would put this same months inventory calc to around 7.75 or so. With less on the market relative to sales, pricing pressure is less on sellers and the rate of decline in prices should slow.
 
[quote author="stepping_up" date=1211497488][quote author="ipoplaya" date=1211444484]Prices will not drop by 18% from today through November... The rate of decline has been decreasing of late and that trend will likely continue for at least the next month or two.</blockquote>


Is this because of the pent up demand? Any thoughts on how much of this pent up demand actually exists?</blockquote>


As the Awesome Awgeenator so nicely put it, there is no such thing as pent up demand. There is just demand.
 
[quote author="escrowbear" date=1211494488][quote author="ipoplaya" date=1211444484]Prices will not drop by 18% from today through November... The rate of decline has been decreasing of late and that trend will likely continue for at least the next month or two.</blockquote>


What do you think the prices will decline by the end of the year? Also perhaps your forecast for this time next year?</blockquote>


I really have no idea as I think much depends on the volume of foreclosures hitting the market and where interest rates go.



If you put a gun to my head and forced me to guess, I'd say prices will be relatively flat (as compared to recent price history), i.e. 0-1.5% declines on average over the next few months with accelerating prices declines (1-3% per month) beginning in the Fall through the end of the year.



That would likely put us down around another 10-12% by year-end.



Guessing the amount/level of declines over such a short period is a crap shoot though. So many variables to consider...
 
Actually, IPO is in a spot that many of us are in. He owns a starter home and wants to move up. So it would be ideal if the starter home held value and the move up lost value, but the trend currently shows the opposite. For him, and me, it doesn't really matter if the starters lose value, but it would need to be on an equal basis with move-ups. So (presuming I can speak for him), no, he doesn't have the vested interest you might think.
 
[quote author="PANDA DREAMING OF IRVINE" date=1211504410]IPO,



Don't you own a condo in Irvine? It wouldn't be to your best interest for Irvine homes to fall 18% within 6 months. C'mon, let's get some Irvine RE bears out here!</blockquote>


Of course I own. I'm also sitting on a large liquid down payment fund to put on a larger place and pretty much need to move within 1-2 years. The more rapidly prices decline in real estate, the better off I am... Just because I wish for and want prices to tank by 20% by year-end, that isn't going to change my read of the data.
 
[quote author="ipoplaya" date=1211501992][quote author="stepping_up" date=1211497488][quote author="ipoplaya" date=1211444484]Prices will not drop by 18% from today through November... The rate of decline has been decreasing of late and that trend will likely continue for at least the next month or two.</blockquote>


Is this because of the pent up demand? Any thoughts on how much of this pent up demand actually exists?</blockquote>


As the Awesome Awgeenator so nicely put it, there is no such thing as pent up demand. There is just demand.</blockquote>


What do you call the people who felt prices were to high or flat out unaffordable without an exotice loan between 2005-200 , but with the recent signficant declines finding themselves eager to buy? Just regular demand with a caveat explaining why there might be higher demand today than there was a year ago?
 
[quote author="ipoplaya" date=1211502388][quote author="escrowbear" date=1211494488][quote author="ipoplaya" date=1211444484]Prices will not drop by 18% from today through November... The rate of decline has been decreasing of late and that trend will likely continue for at least the next month or two.</blockquote>


What do you think the prices will decline by the end of the year? Also perhaps your forecast for this time next year?</blockquote>


I really have no idea as I think much depends on the volume of foreclosures hitting the market and where interest rates go.



If you put a gun to my head and forced me to guess, I'd say prices will be relatively flat (as compared to recent price history), i.e. 0-1.5% declines on average over the next few months with accelerating prices declines (1-3% per month) beginning in the Fall through the end of the year.



That would likely put us down around another 10-12% by year-end.



Guessing the amount/level of declines over such a short period is a crap shoot though. So many variables to consider...</blockquote>


I've been hearing a lot of people saying that they are going to start looking later in the year or early next year. They seem to be in two camps. 1). they think prices will be even lower then or 2). they are not in the financial position to buy today and are getting/intending to get their ducks in a row. It would be really interesting to see the slopes of the supply and demand curve to see how much demand increases with each 1% decline in prices. Although I would think it would be very difficult to create the supply curve as it would need to be adjusted for seasonality as well as the supply of foreclosures. The data changes so rapidly and you can't really predict the future, need to consider expecations, etc...
 
[quote author="stepping_up" date=1211505756][quote author="ipoplaya" date=1211501992][quote author="stepping_up" date=1211497488][quote author="ipoplaya" date=1211444484]Prices will not drop by 18% from today through November... The rate of decline has been decreasing of late and that trend will likely continue for at least the next month or two.</blockquote>


Is this because of the pent up demand? Any thoughts on how much of this pent up demand actually exists?</blockquote>


As the Awesome Awgeenator so nicely put it, there is no such thing as pent up demand. There is just demand.</blockquote>


What do you call the people who felt prices were to high or flat out unaffordable without an exotice loan between 2005-200 , but with the recent signficant declines finding themselves eager to buy? Just regular demand with a caveat explaining why there might be higher demand today than there was a year ago?</blockquote>


No caveat is necessary. Demand is always higher at lower prices:



<img src="http://www.ipoplaya.com/supdem.jpg" alt="" />



Notice that Q (quantity demanded) increases as P (prices) decline. That's just plain ole Econ 101. When a store has a sale on something, it expects to sell more units at lower prices, because demand is higher at lower prices... It's the same with houses.
 
[quote author="ipoplaya" date=1211506666][quote author="stepping_up" date=1211505756][quote author="ipoplaya" date=1211501992][quote author="stepping_up" date=1211497488][quote author="ipoplaya" date=1211444484]Prices will not drop by 18% from today through November... The rate of decline has been decreasing of late and that trend will likely continue for at least the next month or two.</blockquote>


Is this because of the pent up demand? Any thoughts on how much of this pent up demand actually exists?</blockquote>


As the Awesome Awgeenator so nicely put it, there is no such thing as pent up demand. There is just demand.</blockquote>


What do you call the people who felt prices were to high or flat out unaffordable without an exotice loan between 2005-200 , but with the recent signficant declines finding themselves eager to buy? Just regular demand with a caveat explaining why there might be higher demand today than there was a year ago?</blockquote>


No caveat is necessary. Demand is always higher at lower prices:



<img src="http://www.ipoplaya.com/supdem.jpg" alt="" />



Notice that Q (quantity demanded) increases as P (prices) decline. That's just plain ole Econ 101. When a store has a sale on something, it expects to sell more units at lower prices, because demand is higher at lower prices... It's the same with houses.</blockquote>


That's an econ 101 supply and demand graph. The econ 201 graph will have different slopes for each. The econ 301 graph will have even more precise formulas for the slope. Quantity of buyers may be higher today than it was three years ago as prices prevented many from buying, population increase and people who had more time to build reserves and credit. A higher quantity of demand doesn't change the demand curve, but it moves it up. A lower quantity of demand moves the curve down.
 
[quote author="stepping_up" date=1211507102]That's an econ 101 supply and demand graph. The econ 201 graph will have different slopes for each. The econ 301 graph will have even more precise formulas for the slope. Quantity of buyers may be higher today than it was three years ago as prices prevented many from buying, population increase and people who had more time to build reserves and credit. A higher quantity of demand doesn't change the demand curve, but it moves it up. A lower quantity of demand moves the curve down.</blockquote>


You are referring to a shift in the demand curve. A shift in the demand curve occurs when a variable OTHER THAN PRICE changes. Yes, population increase would likely shift the demand curve. Expectations re: home prices falling could/would shift it as well.



Your contention that there has been a demand curve shift because prices went down is unfortunately wrong. Ceteris paribus, and for a normal good (there are goods for which quantity demanded could rise as price rises, i.e. an upward sloping demand curve), when prices go down, quantity demanded goes up as a result of movement along the same demand curve NOT a curve shift...
 
IPO,



I am now convinced that you are an Irvine Bear like me, but at the same time, you want to realistic about the situation with demand/current inventory. If i were to ask you for your best educated guess, do you think the Irvine housing market decline will happen like shown below or do you have a different forecast in your mind? All four years don't have to show a "Decline", you can also put "Appreciation" there too if that is what you think will happen?



2008 Declne = 12%

2009 Decline = 16%

2010 Decline = 8%

2011 Decline = 4%



Pandaman
 
[quote author="PANDA DREAMING OF IRVINE" date=1211509522]IPO,



I am now convinced that you are an Irvine Bear like me, but at the same time, you want to realistic about the situation with demand/current inventory. If i were to ask you for your best educated guess, do you think the Irvine housing market decline will happen like shown below or do you have a different forecast in your mind? All four years don't have to show a "Decline", you can also put "Appreciation" there too if that is what you think will happen?



2008 Declne = 12%

2009 Decline = 16%

2010 Decline = 8%

2011 Decline = 4%



Pandaman</blockquote>


Tough, and this is all coming totally out of my arse mind you, but here's a go at it:



2008 decline = 23% (full year figures, Jan through April 2008 was probably 16%)

2009 decline = 15% (hopefully concentrated in the early part of the year as I'd like to buy next summer)

2010 decline = 5-10%

2011 decline = flat
 
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