Spring 2014 Pricing - Best Guess on the Resale Market?
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Except you're missing the primary driver of the Irvine market that is the only one that really matters. Income does support the current prices, they may be a bit foolish, but most people buying can really pay the mortgage on the property they're buying.
I still think the primary driver of Irvine is a structural supply shortage. People may want slightly different things but largely, families, and many foriegn born families are extended and the majority really are all looking for the most of large house, large yard, good school, convenient that they can get. And maybe a little 'we're better than you'.
It's like Orchard Hills, the design footprint is really the same through every community. There's a very limited number of homes on the biggest lots, then a slghtly bigger grouping on the next biggest lots and house size is porportionate. In Irvine, you're not really talking upper middle class, you're talking 2nd, 3rd, 4th and 5th percentiles of income on a national level.
Pricing is going on supply and demand to winnow the demand til just enough people pony up the money for the top properties. It's dominoes from there on down and each layer lower is competing with frustrated financially stronger buyers that are priced out of the tier above.
I dunno... I personally think prices are too high right now with no support.
Unemployment is high, like you said, wages have been flat.
Is it the stock market that's been helping?
I don't necessarily agree with paperboy's numbers as he doesn't take into account the higher down and LTV with an inflation adjusted price and based on the market I'm shopping, I see higher (non-inflation adjusted prices obv).
Citing inflation is nice, but tough to accept because in '06, a minivan cost about the same as a minivan today (and most things I consume too, except maybe gas). But a newer 3CWG closer to the 405 was about $900k back then, now they are $1m+ and even though I'm not an FCB, my down payment has to be higher.
paperboy also hasn't addressed the fact that while today's prices may not be to the scale (in his opinion) of 05-06, they could still be bubbly. If 05-06 was overpriced by 40% (so that $900k house should have been $640k) or even 20% ($720k), if you adjust for inflation, those prices should be $750k or $850k today... show me that house and I'll buy it.
I showed you in the other thread why I don't think real estate is overpriced. I also showed you that of recently closed sales in the 1-1.5m range this year prices only went up 0.2% since 2006. The market doesn't agree that homes were overpriced by 40% in 2006 so I wish you'd stop quoting that number.
If you had your downpayment in a combo of bonds/CDs/stocks/money market accounts, etc since 2006 you'd have quite a bit more in your downpayment account than you did in 2006. I know I did.
The point is, if a $900k house back then, costs about $1.2m now (I showed you those WPII closes), then you are looking at least $300k down ($120k more than your down in '06) to match mortgage payments of 6.5 vs 4.5. This also doesn't take into account that you will be paying a higher property tax.
But if you're paying cash, the interest rate doesn't matter, so the prices *look* higher.
Of closed homes this year from 1m-1.5m none of them had 33% price increases like you are talking about from 2005-06. They average a 0.2% price increase with half of them having price decreases. You found one exception that closed in 2013. It's hard to have a discussion with you when I take 30 minutes to research the facts and you completely ignore them. To re-iterate, here are homes that were re-sold with redfin listed closing prices both in 2005-06 and 2014 in the 1mm-1.5mm price range:
http://www.redfin.com/CA/Irvine/71-Festivo-92606/home/4628527
$1.05m to $1.09mhttp://www.redfin.com/CA/Irvine/12-Poway-92602/home/5813332
$1.25m to $1.19mhttp://www.redfin.com/CA/Irvine/27-Bel-Spgs-92602/home/5771448
$1.04m to $1.035mhttp://www.redfin.com/CA/Irvine/53-Fanlight-92620/home/5959080
$1.03m to $1.08mhttp://www.redfin.com/CA/Irvine/23-Calavera-92606/home/4628379
$963k to $1.08mhttp://www.redfin.com/CA/Irvine/11-Malibu-92602/home/5772830
$1.365m to $1.211mhttp://www.redfin.com/CA/Irvine/16-Bower-Tree-92603/home/5943083
$1.1m to $1.135m
So yes - if prices were 20% too high in 2006 and they are the same price now and we've had almost 20% inflation plus lower interest rates, houses are a lot more affordable today than they were in 2006.
I looked at every home that closed in 2014 per Redfin so I have already completed the task for you.
I do trust that a home that closed for $900k in '05 then closed for $1.2m in '13. I am saying that houses like that are anomalies based on the data. It seems to me that you like to repeat over and over again that prices are higher now than they were in 2005-06 and you don't want the facts to get in the way of your narrative. The facts show that prices in Irvine are lower or the same now as they were in 2005-06 for the market as a whole. I have not seen any facts disputing this.
Look at the overall trends if you don't want to trust the individual houses:http://www.trulia.com/real_estate/Irvine-California/market-trends/
Price per sq foot is lower than 2006
Median price is lower than 2006
The increase from 2010-2012 had very little to do with inflation. I am comparing the price the market is setting for homes to the inflation adjusted value of a dollar.
Look... I think we are agreeing. Affordability may be at or lower than what it was back in 05-06 but you are kind of sullying that because what you had to pay in 05-06 was too high. While rental parity might be okay today, that doesn't mean prices are not too high. Let's put that aside, I'll even concede to you to get to this:
What is it that happened between 2012 and the end of 2013 that caused median prices to jump from $500k to $680k or $300/sft to $410/sft (based on your Trulia link)?
1. Interest rates rose (aren't prices supposed to go down when that happens?)
2. Inventory increased (aren't prices supposed to go down when that happens?)
Sounds good to agree. I am not saying houses are a great bargain right now - I am just saying that fundamentals do support current prices so I don't think it's a bubble. There were quite a few sales in 2013 and continue to be some sales in 2014 that close at WTF prices that were bubbly, but the overall market has cooled down. Back in 2013 homes in Portola Springs were all going pending in 2 weeks even at WTF prices whereas now homes are sitting for months when they are priced too high.
I cannot give you a definitive answer about the reasons behind the price increases. I can offer a lot of possible reasons so I'll to stick to a few:
1) Inventory had started falling back in August 2011 and continued to dive until April 2013 when prices rose enough to reach the "cloud" inventory.http://www.irvinehousingblog.com/inventory/.Inventory is still a lot lower than what it looks like because most homes are listed by sellers that are not motivated. The homes with motivated sellers are moving quickly enough (in under a week) that there are not listings sitting around with low prices.
2) Rising interest rates were actually predicted to cause a spike in demand. A lot of buyers have trouble committing to a home and they only make their decisions when they are forced to. Last year's buying frenzy caused buyers to make irrational decisions and "buy now or be priced out forever". It's the same reason why the casual investor jumps on stocks after a 20% run-up instead of before. People incorrectly assume that once rates start to rise they better buy before they go up even more.
3) And this might be the biggest reason of all. A lot of buyers didn't want to buy until they were sure we'd hit the bottom. No one wants to be sucker that buys after a 20% drop and then experiences another 20% drop since all of their friends and family will say "Doh, anyone could have seen that coming." And most buyers don't read TI or study redfin religiously. They watch the evening news and read the newspaper. Because homes close on a delay, it was several months after the bottom had been reached that the news declared the home prices were rising. By then it was a huge scramble to buy a home and buyers were stunned that they had missed their opportunity. They got on every new home waiting list, put an offer on every new listing and hoped and prayed they could get in on the run-up before it was too late.
Conclusion: Home Prices set by the market are not dictated by fundamentals, rental parity, interest rates, inflation, etc. They are set by supply and demand. Supply at low prices gradually evaporated (it took almost 2 years) while demand picked up once the general public knew for sure the bottom was behind us and interest rates would never be that low again.
nosuchreality
Well-known member
freedomcm said:
Except you're missing the primary driver of the Irvine market that is the only one that really matters. Income does support the current prices, they may be a bit foolish, but most people buying can really pay the mortgage on the property they're buying.
I still think the primary driver of Irvine is a structural supply shortage. People may want slightly different things but largely, families, and many foriegn born families are extended and the majority really are all looking for the most of large house, large yard, good school, convenient that they can get. And maybe a little 'we're better than you'.
It's like Orchard Hills, the design footprint is really the same through every community. There's a very limited number of homes on the biggest lots, then a slghtly bigger grouping on the next biggest lots and house size is porportionate. In Irvine, you're not really talking upper middle class, you're talking 2nd, 3rd, 4th and 5th percentiles of income on a national level.
Pricing is going on supply and demand to winnow the demand til just enough people pony up the money for the top properties. It's dominoes from there on down and each layer lower is competing with frustrated financially stronger buyers that are priced out of the tier above.
irvinehomeowner
Well-known member
We 2.5% fixed ARMs.freedomcm said:
I dunno... I personally think prices are too high right now with no support.
Unemployment is high, like you said, wages have been flat.
Is it the stock market that's been helping?
I don't necessarily agree with paperboy's numbers as he doesn't take into account the higher down and LTV with an inflation adjusted price and based on the market I'm shopping, I see higher (non-inflation adjusted prices obv).
Citing inflation is nice, but tough to accept because in '06, a minivan cost about the same as a minivan today (and most things I consume too, except maybe gas). But a newer 3CWG closer to the 405 was about $900k back then, now they are $1m+ and even though I'm not an FCB, my down payment has to be higher.
paperboy also hasn't addressed the fact that while today's prices may not be to the scale (in his opinion) of 05-06, they could still be bubbly. If 05-06 was overpriced by 40% (so that $900k house should have been $640k) or even 20% ($720k), if you adjust for inflation, those prices should be $750k or $850k today... show me that house and I'll buy it.
paperboyNC
New member
irvinehomeowner said:We 2.5% fixed ARMs.freedomcm said:
I dunno... I personally think prices are too high right now with no support.
Unemployment is high, like you said, wages have been flat.
Is it the stock market that's been helping?
I don't necessarily agree with paperboy's numbers as he doesn't take into account the higher down and LTV with an inflation adjusted price and based on the market I'm shopping, I see higher (non-inflation adjusted prices obv).
Citing inflation is nice, but tough to accept because in '06, a minivan cost about the same as a minivan today (and most things I consume too, except maybe gas). But a newer 3CWG closer to the 405 was about $900k back then, now they are $1m+ and even though I'm not an FCB, my down payment has to be higher.
paperboy also hasn't addressed the fact that while today's prices may not be to the scale (in his opinion) of 05-06, they could still be bubbly. If 05-06 was overpriced by 40% (so that $900k house should have been $640k) or even 20% ($720k), if you adjust for inflation, those prices should be $750k or $850k today... show me that house and I'll buy it.
I showed you in the other thread why I don't think real estate is overpriced. I also showed you that of recently closed sales in the 1-1.5m range this year prices only went up 0.2% since 2006. The market doesn't agree that homes were overpriced by 40% in 2006 so I wish you'd stop quoting that number.
If you had your downpayment in a combo of bonds/CDs/stocks/money market accounts, etc since 2006 you'd have quite a bit more in your downpayment account than you did in 2006. I know I did.
irvinehomeowner
Well-known member
Yes, but you flipped it from inflation to rental parity.paperboyNC said:
Using inflation and interest rate manipulation. Just comparing prices, they are higher than 2%, and in my mind (as with most buyers), I just see today's prices compared to back then.
The market NOW doesn't agree, but back then, that's what everyone was saying so why can't I use that number? Heck, the market NOW doesn't agree that they were overpriced by 20%. So what were they overpriced by back then?
In a perfect scenario, yes. Tell that to all the people who pulled money out when the market crashed in 08, or mistimed it and lost a huge percentage of their portfolio. It's easy now to use your hindsight glasses and say if you just kept it in there since 06, but in 08... there was a panic (disclosure: I had no money directly in the stock market, it was in savings and 401k/IRA).
The point is, if a $900k house back then, costs about $1.2m now (I showed you those WPII closes), then you are looking at least $300k down ($120k more than your down in '06) to match mortgage payments of 6.5 vs 4.5. This also doesn't take into account that you will be paying a higher property tax.
But if you're paying cash, the interest rate doesn't matter, so the prices *look* higher.
paperboyNC
New member
irvinehomeowner said:
Of closed homes this year from 1m-1.5m none of them had 33% price increases like you are talking about from 2005-06. They average a 0.2% price increase with half of them having price decreases. You found one exception that closed in 2013. It's hard to have a discussion with you when I take 30 minutes to research the facts and you completely ignore them. To re-iterate, here are homes that were re-sold with redfin listed closing prices both in 2005-06 and 2014 in the 1mm-1.5mm price range:
http://www.redfin.com/CA/Irvine/71-Festivo-92606/home/4628527
$1.05m to $1.09mhttp://www.redfin.com/CA/Irvine/12-Poway-92602/home/5813332
$1.25m to $1.19mhttp://www.redfin.com/CA/Irvine/27-Bel-Spgs-92602/home/5771448
$1.04m to $1.035mhttp://www.redfin.com/CA/Irvine/53-Fanlight-92620/home/5959080
$1.03m to $1.08mhttp://www.redfin.com/CA/Irvine/23-Calavera-92606/home/4628379
$963k to $1.08mhttp://www.redfin.com/CA/Irvine/11-Malibu-92602/home/5772830
$1.365m to $1.211mhttp://www.redfin.com/CA/Irvine/16-Bower-Tree-92603/home/5943083
$1.1m to $1.135m
So yes - if prices were 20% too high in 2006 and they are the same price now and we've had almost 20% inflation plus lower interest rates, houses are a lot more affordable today than they were in 2006.
irvinehomeowner
Well-known member
I've shown you others but you are looking for exact homes that sold in 2005-06 and have closed in only 2.5 months in 2014, that's not a simple task.
You won't trust me when I give you examples homes in an area that have traded for $900k in 05-06 now closed in 2013 for $1.2m.
One other thing, while inflation applies to the value of a dollar, it doesn't necessarily apply to the value of a home. So back in 2010-2012, when housing values "normalized" to what we NOW consider the low (back then, people still thought values were going to drop), compared to what they are now, is a higher jump than inflation. So when you use a time frame like 05-06 and then apply inflation to 14, that's not entirely accurate because that same comparison won't work when you compare 2012 to 2013.
Maybe that's a comparison you should do, from 2010-2012 to 2014.
You won't trust me when I give you examples homes in an area that have traded for $900k in 05-06 now closed in 2013 for $1.2m.
One other thing, while inflation applies to the value of a dollar, it doesn't necessarily apply to the value of a home. So back in 2010-2012, when housing values "normalized" to what we NOW consider the low (back then, people still thought values were going to drop), compared to what they are now, is a higher jump than inflation. So when you use a time frame like 05-06 and then apply inflation to 14, that's not entirely accurate because that same comparison won't work when you compare 2012 to 2013.
Maybe that's a comparison you should do, from 2010-2012 to 2014.
paperboyNC
New member
irvinehomeowner said:
I looked at every home that closed in 2014 per Redfin so I have already completed the task for you.
I do trust that a home that closed for $900k in '05 then closed for $1.2m in '13. I am saying that houses like that are anomalies based on the data. It seems to me that you like to repeat over and over again that prices are higher now than they were in 2005-06 and you don't want the facts to get in the way of your narrative. The facts show that prices in Irvine are lower or the same now as they were in 2005-06 for the market as a whole. I have not seen any facts disputing this.
Look at the overall trends if you don't want to trust the individual houses:http://www.trulia.com/real_estate/Irvine-California/market-trends/
Price per sq foot is lower than 2006
Median price is lower than 2006
The increase from 2010-2012 had very little to do with inflation. I am comparing the price the market is setting for homes to the inflation adjusted value of a dollar.
irvinehomeowner
Well-known member
Hold. You are generalizing my statements. I've said on multiple occasions that the homes *I'm* shopping for seem higher. So, yes, MY anomalies.paperboyNC said:
Hold again. For my generalization for all products, I think I've said the prices are the same as 2005-06, but then you brought in inflation and interest adjustments. The "fact" that they are lower are based on your subset of data and equations.
Maybe it's my eyes but they look pretty close give or take if you average out the span from 05-06 (instead of just the spike in 06).
Yes... and if you apply your inflation adjustment to prices in 10-12 to now, you'll see it's not the same as your inflation adjustment from 05-06 to now. What I'm getting at, is trying to use math for point in time calculations has more variables to account for.
Look... I think we are agreeing. Affordability may be at or lower than what it was back in 05-06 but you are kind of sullying that because what you had to pay in 05-06 was too high. While rental parity might be okay today, that doesn't mean prices are not too high. Let's put that aside, I'll even concede to you to get to this:
What is it that happened between 2012 and the end of 2013 that caused median prices to jump from $500k to $680k or $300/sft to $410/sft (based on your Trulia link)?
1. Interest rates rose (aren't prices supposed to go down when that happens?)
2. Inventory increased (aren't prices supposed to go down when that happens?)
MediaArtist
New member
I don't live in Irvine, but I get realtors coming to my door pretty much every week asking if I want to sell my house. I have to remember to lock the gate...
I'd say prices will climb during the Spring and Summer but not as fast as last year.
I'd say prices will climb during the Spring and Summer but not as fast as last year.
paperboyNC
New member
irvinehomeowner said:
Sounds good to agree. I am not saying houses are a great bargain right now - I am just saying that fundamentals do support current prices so I don't think it's a bubble. There were quite a few sales in 2013 and continue to be some sales in 2014 that close at WTF prices that were bubbly, but the overall market has cooled down. Back in 2013 homes in Portola Springs were all going pending in 2 weeks even at WTF prices whereas now homes are sitting for months when they are priced too high.
I cannot give you a definitive answer about the reasons behind the price increases. I can offer a lot of possible reasons so I'll to stick to a few:
1) Inventory had started falling back in August 2011 and continued to dive until April 2013 when prices rose enough to reach the "cloud" inventory.http://www.irvinehousingblog.com/inventory/.Inventory is still a lot lower than what it looks like because most homes are listed by sellers that are not motivated. The homes with motivated sellers are moving quickly enough (in under a week) that there are not listings sitting around with low prices.
2) Rising interest rates were actually predicted to cause a spike in demand. A lot of buyers have trouble committing to a home and they only make their decisions when they are forced to. Last year's buying frenzy caused buyers to make irrational decisions and "buy now or be priced out forever". It's the same reason why the casual investor jumps on stocks after a 20% run-up instead of before. People incorrectly assume that once rates start to rise they better buy before they go up even more.
3) And this might be the biggest reason of all. A lot of buyers didn't want to buy until they were sure we'd hit the bottom. No one wants to be sucker that buys after a 20% drop and then experiences another 20% drop since all of their friends and family will say "Doh, anyone could have seen that coming." And most buyers don't read TI or study redfin religiously. They watch the evening news and read the newspaper. Because homes close on a delay, it was several months after the bottom had been reached that the news declared the home prices were rising. By then it was a huge scramble to buy a home and buyers were stunned that they had missed their opportunity. They got on every new home waiting list, put an offer on every new listing and hoped and prayed they could get in on the run-up before it was too late.
Conclusion: Home Prices set by the market are not dictated by fundamentals, rental parity, interest rates, inflation, etc. They are set by supply and demand. Supply at low prices gradually evaporated (it took almost 2 years) while demand picked up once the general public knew for sure the bottom was behind us and interest rates would never be that low again.