Orchard Hills Homes

[paperboyNC]

that's correct.  its getting close to the tipping point where well priced homes move significantly faster than the WTF priced homes.


i don't think anyone can just slap $500 / sq ft on their home and expect a windfall.  The pent up demand from the net zero building of 2008-2011 has been mostly satiated by the existing oversupply and now the new models currently on the market.


Anyone still on the sidelines wanting to jump in may have been waiting for the equity in their current situation to make them whole again (meaning its an all savings down payment), or to have their short sale finally approved (the bank will be taking far less of a haircut now than 3 years ago).  The last cohort is folks waiting on taxes to be settled.  Folks who went through foreclosures during the crash are still wearing the scarlet "F" around their necks... and they would still have a really tough time getting a loan at this point.  The group above also is less likely to have large amounts of money to put down than folks who already bought - or they would have jumped in when the pricing was better in 2012.


To me, the population above is going to be at the middle price point, as they are stretching to get into something - or they would have made moves when it was more advantageous.  They are price sensitive and are not going to be willing to buy at any price.  They will simply rent unless they can justify the additional pain to their life from purchase cost increases


So that leaves a small population of prospective buyers willing to pay the incrementally advancing current premiums (who aren't moving up from a premium priced home they are selling): net new residents - job relocations or FCBs.
This group is the only group that could continue to absorb any price increases above and beyond the cost of inflation. 


As open sky said, its not an infinite number.

Agreed that it's not an infinite number, but I think you don't consider enough ways people have the resources to buy. Most of home buyers or move up buyers that I know are motivated by an expanding family (or a job related move). Their money can be already there or come from various sources:

- Bought at the low points and are selling for a big profit now that they put down on the bigger home

Down Payment
- Parents are contributing to the down payment
- FHA loan (3%) down
- PMI loan (5-10% down)
- Piggyback loan (80/10/10)

Income
Many families have the stable income required to qualify for a loan and sit on the sidelines until family needs push them into buying. Other factors can contribute to suddenly being able to afford a home:
- Marriage. Two college grads make $60K/yr each and live with roommates. When they get married they make $120K/yr and can suddenly afford a home.
- New Job. Plenty of people get big raises with a new job and can suddenly afford a home (or a move-up home)
- Inheritance.
- Stock Options. I have friends whose employer got bought out and made a few hundred K from their stock options and bought a move up home.


The main factors triggering demand for homes are:
- Population increase (people moving to Irvine from elsewhere)
- Family formation

 

[irvinehomeowner]

As much as I agree with OpenSky and Tyler's summation of prospective buyers, the problem here is we are talking about a historically non-fundamental psychology when it comes to Irvine.

Back in 2008 when I first joined the IHB, I talked quite a bit about the Legend of the FCB and how it would be different in Irvine. If you strictly based it on fundamentals, it would be expected for Irvine to act like every other city, but if you looked at the data... it was not. Sure, there were some huge price drops, but at the same time, there were small ones too. Unlike many cities that saw a drop across every product and neighborhood, there were very resistant pockets in Irvine. I wanted to believe that areas where I wanted to buy would drop 40% but it didn't happen. It didn't even drop 20%. I even took a gamble that it would and sold for a loss... as it turns out, if I would have kept that house, I could have sold it for 10% more than I bought it in the mid-2000s. And now, homes that I was looking at hoping for even a 20% drop, are actually higher than the previous peak.

The same thing for new homes. When TIC decided to build 700 new homes in 2010, Larry/IrvineRenter didn't think they could sell them... and they did... in a year. When TIC decided to add even more homes (Stonegate and Laguna Altura), I had my doubts and while it went slow the first year, not only is one hood sold out, but it's resale prices are ridiculous only a few months later (Laguna Altura). Even Lambert Ranch sold quickly and you will barely see resale there.

Look at The Branches and Willow Bend. These homes were supposed to be high $700k to mid $800k, Lyon releases them at high $900k and they ended up selling out at over $1mil... for small lots, 2-car garages and the biggest model is less than 2600sft.

I didn't think Magnolia/Marigold/Mulberry were very good floorplans and I thought $900k+ for the bigger ones was obscene... but they sell. Maricopa in Stonegate was mid $700k to start and now it's like high $800k.

People didn't think PP would sell very well considering the location and the competition from TIC and I remember comments that they were a little pricey... but most of the tracts sold out their early release phases and while some of them are having issues, the ones with the more desirable floorplans, lots sizes and locations are selling fast.

Every time they build a new neighborhood in Irvine, I always wonder where these buyers are coming from. And it's not like it's existing Irvine residents are all moving up because resale inventory is still very low... the numbers seem to point to quite a few new out of Irvine buyers.

And yes, there will probably be a softening due to all this new product... but just like Stonegate/Laguna Altura/Lambert Ranch/The Branches/Willow Bend showed us, they will eventually sell.

So since I've been so wrong in the past, I wouldn't bet against the Unicorn... you might get the horn.

 

[jmoney74]

When will people realize that it is crazy to buy a 800K condo.. I haven't.  lol

 

[homer_simpson]

When will people realize that it is crazy   stupid to buy a 800K condo.. I haven't.  lol

8)

 

[Irvinecommuter]

When will people realize that it is crazy to buy a 800K condo.. I haven't.  lol

I think there is certainly a price limit as to each type of homes.  I think one thing that TIC did well was to "diversify" their offerings...It used to be attached condos and SFRs...then attached condo, detached condos, and SFRs...now there are attached condos, detach condos, motorcourt condos, and SFRs.  The diversification allows various price points that people can reach.

Also, with OH...the people who can afford that type of homes are on a different scale all together.  I think the trick is to convince people that OH is somehow different and unique.  If TIC and builders can do that, I don't see any problems them selling houses at a premium.  If PP is going for $1-1.5 M...I don't see how OH can't get $1.5 to 2 M.

 

[paperboyNC]

As much as I agree with OpenSky and Tyler's summation of prospective buyers, the problem here is we are talking about a historically non-fundamental psychology when it comes to Irvine.

Back in 2008 when I first joined the IHB, I talked quite a bit about the Legend of the FCB and how it would be different in Irvine. If you strictly based it on fundamentals, it would be expected for Irvine to act like every other city, but if you looked at the data... it was not. Sure, there were some huge price drops, but at the same time, there were small ones too. Unlike many cities that saw a drop across every product and neighborhood, there were very resistant pockets in Irvine. I wanted to believe that areas where I wanted to buy would drop 40% but it didn't happen. It didn't even drop 20%. I even took a gamble that it would and sold for a loss... as it turns out, if I would have kept that house, I could have sold it for 10% more than I bought it in the mid-2000s. And now, homes that I was looking at hoping for even a 20% drop, are actually higher than the previous peak.

The same thing for new homes. When TIC decided to build 700 new homes in 2010, Larry/IrvineRenter didn't think they could sell them... and they did... in a year. When TIC decided to add even more homes (Stonegate and Laguna Altura), I had my doubts and while it went slow the first year, not only is one hood sold out, but it's resale prices are ridiculous only a few months later (Laguna Altura). Even Lambert Ranch sold quickly and you will barely see resale there.

Look at The Branches and Willow Bend. These homes were supposed to be high $700k to mid $800k, Lyon releases them at high $900k and they ended up selling out at over $1mil... for small lots, 2-car garages and the biggest model is less than 2600sft.

I didn't think Magnolia/Marigold/Mulberry were very good floorplans and I thought $900k+ for the bigger ones was obscene... but they sell. Maricopa in Stonegate was mid $700k to start and now it's like high $800k.

People didn't think PP would sell very well considering the location and the competition from TIC and I remember comments that they were a little pricey... but most of the tracts sold out their early release phases and while some of them are having issues, the ones with the more desirable floorplans, lots sizes and locations are selling fast.

Every time they build a new neighborhood in Irvine, I always wonder where these buyers are coming from. And it's not like it's existing Irvine residents are all moving up because resale inventory is still very low... the numbers seem to point to quite a few new out of Irvine buyers.

And yes, there will probably be a softening due to all this new product... but just like Stonegate/Laguna Altura/Lambert Ranch/The Branches/Willow Bend showed us, they will eventually sell.

So since I've been so wrong in the past, I wouldn't bet against the Unicorn... you might get the horn.

I'm a good example of where the buyers come from. I moved here a few years ago from out of town and was a first time home buyer with the earnest money already in the bank.

 

[bones]

.

 

[irvinehomeowner]

@bones:

That's a good point. A large bulk is probably coming from renters.

There are quite a few people who went to the sidelines during the bubble burst.

Squatters alone should give you a good set of buyers who have tons of money to put down.

EDIT:

Maybe there is an infinite number of people who want to live in Irvine. In addition to new homes, there are new apartments still being built in Irvine... even non TIC builders are in-building rental units in places like the Irvine Business Center. Look at that Central Park West area... all those homes/rentals being built right next to Boomers.

Irvine is the Field of Dreams.

 

[test]

EDIT:

Maybe there is an infinite number of people who want to live in Irvine. In addition to new homes, there are new apartments still being built in Irvine... even non TIC builders are in-building rental units in places like the Irvine Business Center. Look at that Central Park West area... all those homes/rentals being built right next to Boomers.

Irvine is the Field of Dreams.

That's TIC.  981 apartment units. http://www.rental-living.com/Communities/Park-Place/?s=qs

With 1,950 more apartments coming to Los Olivos II, south of the 405 is the place to be for renters.

 

[paperboyNC]

You're right, there are certainly many more factors... but i didn't mean that list to be exhaustive. It was meant to be illustrative.  Its certainly possible that any number of things has happened... but major shifts such as a population explosion in only a short period of time would be well documented based on impacts (overcrowding in schools, slow response times by PD and FD, traffic issues, etc).

Folks jumping into the market now as new players would seem to make up a smaller amount of the total population. 

There is overcrowding in Irvine schools (look at the 5th high school thread or the Stonegate Elementary thread)

What i was trying to show is that folks who wanted to buy who were not constrained by trying to unload a prior home or tainted by poor credit would have bought when pricing was more advantageous to them. 

A lot of home buyers didn't realize prices were shooting up until it was too late. They may have even made offers on home before the run up that didn't get accepted. Most buyers aren't reading TI and as informed as you'd think. They read in the paper that home prices went up 20% and interest rates went up 1% and they think "I better buy before I get priced out forever."

As you pointed out - you were a relocation due to job with money on hand.  How many non-FCB prospective buyers have it like that?  I can't think of anyone i know who was able to buy at that price point right off the bat - anyone gaining that kind of loot usually had to trade up homes a few times to sock away that kind of money for a down payment.

Its damn tough to come here from lower cost of living states and cough up 20% of $1M just to play the game (in terms of SFRs).  Most of those folks get sticker shock and rent - telling themselves they will be here short term, because their jobs cannot make them whole compared to the way they had it wherever they came from.

You can buy homes with only 3% down with an FHA loan (lending limit of $625,600). These buyers can buy a $645,000 home with only $20k down which is easy to get from family / credit cards. If you're married you can each take $10K out of an IRA to buy a first home penalty free. The seller of the $645K home can then move up and buy a large home, etc. Right now 168 out of 439 listings on Redfin in Irvine are $650K and under. (Another 33 $650-700k that might sell for under $650k).

I have a co-worker that is married and living with her in-laws saving up money. Her in-laws don't charge rent/utilities etc and both spouses parents plan to give them as much as they need to help with the down payment when they decide to buy a condo.

 

[bones]

.

 

[paperboyNC]

Most of those folks get sticker shock and rent.

Yup.  And that's what TIC wants.  You move here, rent (either stick shock or just want to check it out first), fall in love and either continue to rent or decide to buy (preferably one of their products).

They give you extra motivation to buy one of their products with a % of your rent going towards the purchase of a TIC home.

 

[OpenSky]

 

[Irvinecommuter]

Most of those folks get sticker shock and rent.

Yup.  And that's what TIC wants.  You move here, rent (either stick shock or just want to check it out first), fall in love and either continue to rent or decide to buy (preferably one of their products).

They give you extra motivation to buy one of their products with a % of your rent going towards the purchase of a TIC home.

Have you looked at the program specifics? It amounts to peanuts.

Yup...it's not much but it's better than nothing.  It's not enough to influence a purchase but something nice to get if it happens to line up right.

 

[paperboyNC]

Have you looked at the program specifics? It amounts to peanuts.

No. But people feel like they earned the money and don't want to "throw it away" and may make irrational decisions. I believe you can't use the program if you have a realtor and you probably get less than you would splitting the broker co-op.

 

[ps99472]

The Google-Fu is strong in this one

 

[OpenSky]

 

[usctrojancpa]

Have you looked at the program specifics? It amounts to peanuts.

No. But people feel like they earned the money and don't want to "throw it away" and may make irrational decisions. I believe you can't use the program if you have a realtor and you probably get less than you would splitting the broker co-op.

Not true....I had a few buyers that bought new Irvine Pac homes that I represented.  They can definitely be represented by an agent and still get the TIC credit from renting.

 

[ps99472]

Huh, Irvine Pacific is dominating on the IUSD side.. suprise

Targeting Strada.. cmon vaulted ceilings/living room/dining room/loft

 

[ps99472]

These price ranges are ridiculous!  I would never buy here in Orchard Hills!  Hello Pavilion Park!