When would be next housing Bottom?

[Kenkoko]

If Chinese economy tanks, you will see a mass exodus from China.  They wouldn't sell their assets in the US...it is their asset firewall.  That's why they already sent their families here.

I know that his dad went to Cal.  Irvine seems logical.

There was actually an article in Chinese Business week or Fortune magazine about this last year on this very subject. I will find it and post here when I have time to look it up. Basically, they polled a bunch of wealthy Chinese businessmen and USA did not make their top 3 place to emigrant. I think US was 4th or 5th.

Top choices were

1) Singapore. because its culture is very similar and they speak Mandarin so no language barrier
2) Sydney. close proximity to China and lose financial regulation
3) Vancouver.

However, California RE did make #1 on their choice to stash money because it's very loosely regulated (unlike Singapore) and taxes are much lower compared to other places.

 

[Kenkoko]

I don?t know, but if I was a wealthy Chinese who owns properties in Irvine and some hard time comes in China, I would sell Irvine properties to have more stable life in China, not the other way. If some massacres or something as bad happen, then I would flee to America, but if it?s just some economic problem, I would sell assets here to support my life in home country. For families and kids, I think they send them here to learn and eventually would have them come back. Isn?t that why they go back after college?

I agree. It baffles me that people think Chinese investors will sell their primary homes in China, abandon their live and business in China, leave their social circle behind and  come to USA where they don't speak the language. Instead of just selling their 2nd homes / vacation home / vacant home in Irvine. Seriously?

Just ask yourself this. If you have a vacation home in China, and you become financially strapped. Are you going to sell your Irvine primary residence, quit your job, leave your friends and family, move to china and you don't even speak the language?

Why do you expect Chinese people to behave differently?

 

[Kenkoko]

@kenkoko:

Again, you're focusing on Chinese economy.

I am still of the position that's it's not just Chinese FCBs who own quite a bit of real estate in Irvine.

It's like a diversified stock portfolio, if part of it tanks, the rest keeps it afloat.

I focus on the Chinese economy when it's about Chinese FCBs.

Sure, I hear your point about having more than just Chinese FCBs. But that only adds to the point that Irvine has a lot of downward price resistance, which I agree with.

But downward price resistance is not enough to propel future Irvine home prices to outpace inflation. ( A point Mety keeps referring to but no bullish poster care to answer)

I have yet to see anyone point out what exactly they see in our economy that is going to propel Irvine home prices higher outpacing inflation.

 

[fortune11]

IC and others are correct . Look at Chinese buying of foreign assets ? they go to great lengths to siphon off money from the mainland into other ?safer? havens. I don?t think trump has yet changed that

Also ? cannot separate the US equity markets from the housing market . Prolonged decline in home prices will begin to affect consumer confidence and then the economy . This is why I have a hard time believe doomsday predictions in housing. Modest slowdown , yes.

 

[irvinehomeowner]

[quote author=Kenkoko]
But downward price resistance is not enough to propel future Irvine home prices to outpace inflation. ( A point Mety keeps referring to but no bullish poster care to answer)

I have yet to see anyone point out what exactly they see in our economy that is going to propel Irvine home prices higher outpacing inflation.
[/quote]

I never said Irvine would outpace inflation. Just that it would not see a significant and sustained drop and it would fare better than surrounding cities.

 

[Kenkoko]

IC and others are correct . Look at Chinese buying of foreign assets ? they go to great lengths to siphon off money from the mainland into other ?safer? havens. I don?t think trump has yet changed that

Also ? cannot separate the US equity markets from the housing market . Prolonged decline in home prices will begin to affect consumer confidence and then the economy . This is why I have a hard time believe doomsday predictions in housing. Modest slowdown , yes.

You are talking about Chinese institutional buying in US commercial real estate. That's not the same as residential real estate in Irvine.

And FYI, Chinese are exiting US Real Estate at a rapid paste. Chinese net purchases of U.S. commercial real estate last year dwindled to their lowest level since 2012.

Here is an article from the Wall Street Journal on this exact topic.
https://www.wsj.com/articles/chines...ts-money-back-to-shore-up-economy-11548757800

 

[Irvinecommuter]

I don?t know, but if I was a wealthy Chinese who owns properties in Irvine and some hard time comes in China, I would sell Irvine properties to have more stable life in China, not the other way. If some massacres or something as bad happen, then I would flee to America, but if it?s just some economic problem, I would sell assets here to support my life in home country. For families and kids, I think they send them here to learn and eventually would have them come back. Isn?t that why they go back after college?

I agree. It baffles me that people think Chinese investors will sell their primary homes in China, abandon their live and business in China, leave their social circle behind and  come to USA where they don't speak the language. Instead of just selling their 2nd homes / vacation home / vacant home in Irvine. Seriously?

Just ask yourself this. If you have a vacation home in China, and you become financially strapped. Are you going to sell your Irvine primary residence, quit your job, leave your friends and family, move to china and you don't even speak the language?

Why do you expect Chinese people to behave differently?

Again..Chinese FCB don't buy houses in US as a backup investment, it's their escape hatch.  Why do you think all the Chinese people want green cards and send their women here to have kids in the US?  It's to escape from China if things go bad.  They are not buying financial stability, they are buying political and social stability. 

Chinese political situation is dynamic and ever-fluid, both on a national and international level.  People who can afford to send their family out of the China are doing so.  The breadwinners stay in China for as long as they can so that they can keep the money flowing but they are setting up a backup plan in the US if things go south.  If Chinese economy collapses/falls, the government is coming after rich people/private industry. 
https://www.scmp.com/economy/china-...lass-take-big-risks-move-money-and-themselves

Commercial property is purchased not by individuals, but corporations.  Those corporations are beholdened to the Chinese government, who basically dictated what and how much money goes in and out of the country.  China government is basically mandating that the Chinese corporation bring back foreign assets to prop up the Chinese economy. 

This article talks about it but think of China as a banana republic that could topple at any moment..then you understand the mentality.
https://www.businessinsider.com/middle-class-chinese-buyers-us-real-estate-investment-2019-1

 

[Irvinecommuter]

I don?t know, but if I was a wealthy Chinese who owns properties in Irvine and some hard time comes in China, I would sell Irvine properties to have more stable life in China, not the other way. If some massacres or something as bad happen, then I would flee to America, but if it?s just some economic problem, I would sell assets here to support my life in home country. For families and kids, I think they send them here to learn and eventually would have them come back. Isn?t that why they go back after college?

They don't want go back...they stay here.  Jobs are better here and a lot less competition.  People who go back are not the top tier people. 
Trend has been changing in part to changes in US immigration policy.  This of course goes back to the stupid policies we have in the US to make it harder for US company to retain foreign students...but that goes with another thread.
https://www.axios.com/foreign-stude...ump-81e70609-9fa7-43eb-8f40-ccfef9fe3fa5.html

 

[Kenkoko]

IC, you are talking about the total collapse of the Chinese economy. It is very unlikely but in that scenario, yes, people will flee China.

The much more likely scenario is China avoids a total meltdown, but economy takes a fairly large hit. Most Chinese FCB families still have the breadwinner making $$$ in China.  In a non-melt down scenario, majority will sell their offshore holdings to keep their business in China afloat. When the margin calls come, they are not going to just drop their life and escape. That's the doomsday scenario.

Even when you look at doomsday scenario, US is not even in the top 3 escape hatch among Chinese. 1) Singapore 2) Sydney Austrilia 3) Vancuver Canada. USA is 4th or 5th preferred.

The reason why California is #1 place for Chinese to stash money even tho it is not their top 3 escape choice is that California RE regulation is very loose. Anyone can buy, anonymity as you can hold RE in corporation, LLCs, and property tax rate is actually lowest among other top escape hatch destinations. And Irvine RE is very stable and liquid. One can quickly cash out of Irvine and buy an escape hatch in Singapore when shit really hits the fan. There's a reason why almost every Chinese Realtor in Irvine touts the liquidity in Irvine RE in their Ads. They know Chinese investor cares about this.

 

[fortune11]

IC and others are correct . Look at Chinese buying of foreign assets ? they go to great lengths to siphon off money from the mainland into other ?safer? havens. I don?t think trump has yet changed that

Also ? cannot separate the US equity markets from the housing market . Prolonged decline in home prices will begin to affect consumer confidence and then the economy . This is why I have a hard time believe doomsday predictions in housing. Modest slowdown , yes.

You are talking about Chinese institutional buying in US commercial real estate. That's not the same as residential real estate in Irvine.

And FYI, Chinese are exiting US Real Estate at a rapid paste. Chinese net purchases of U.S. commercial real estate last year dwindled to their lowest level since 2012.

Here is an article from the Wall Street Journal on this exact topic.
https://www.wsj.com/articles/chines...ts-money-back-to-shore-up-economy-11548757800

No I am actually referring to residential real estate . CRE has been overvalued for some time now with all time low cap rates , very few ppl have the wherewithal (like blackstone etc ) to make any money from CRE . 

I would not count on FCBs as the source of collapse in Irvine. As a reduction in marginal buying power, yes. And so we are back to mortgage availability and rates as the driving force as opposed to the crazy all cash bidding price wars, which is not necessarily a bad thing .

 

[panda]

Attached is the latest inventory chart of Irvine. Just watch to see if the Irvine inventory surpasses 1000 and watch the Orange County unemployment chart I posted earlier. Actually, it may be very healthy for the home prices in Irvine to cool down a bit so that new long waiting buyers can start entering the market at better prices than 2018. I agree with Kenkoko that there is no rush for buyers and the longer they can wait, the sweeter the deal will be.

OCLuvr, Are you asking me about Micro (zip codes in OC?) or Macro (across the U.S)

The unemployment in the OC will be a leading indicator. Once you see OC unemployment reach 5%, even "AAA" grade real estate assets like Irvine will start to correct. 

Which places do you expect the crash to be in?

Panda has always been a downer when it comes to Irvine real estate. On the other hand, he thinks Johns Creek will never go bad.

Some people can't wait... but it sound like you think Irvine real estate is going to drop even more from here? How much more 10%? 20%? Not even Panda has made that type of prediction.

Panda said he thinks a slow decline of 10-15% in the next 4 years is possible. I am in agreement with that. I see much more downside potential going forward than upside potential. Now is not the time to get in.

 

[irvinehomeowner]

Why is over 1000 something to watch for?

It looks like by your chart that in the summer of 2014, it went over 1000 but what were prices at?

 

[fortune11]

Why is over 1000 something to watch for?

It looks like by your chart that in the summer of 2014, it went over 1000 but what were prices at?

Yes ... and also ,

what has been the population change in the last 6 years ?  Doesn?t that have a bearing also ?

What?s the marginal income change in last 6 years  (top quartile of buyer pool) ? Forget median income, that?s meaningless when it comes to coastal states .

Absolute stats are not as meaningful as ?months of inventory ? which accounts for changes in the velocity of the market . I think USC had some good posts on that metric .

 

[usctrojancpa]

Why is over 1000 something to watch for?

It looks like by your chart that in the summer of 2014, it went over 1000 but what were prices at?

Yes ... and also ,

what has been the population change in the last 6 years ?  Doesn?t that have a bearing also ?

What?s the marginal income change in last 6 years  (top quartile of buyer pool) ? Forget median income, that?s meaningless when it comes to coastal states .

Absolute stats are not as meaningful as ?months of inventory ? which accounts for changes in the velocity of the market . I think USC had some good posts on that metric .

I'd have to check the data but I'm pretty sure that total sales volume increased since 2014 so using a static 1,000 inventory figure as a bench mark becomes less relevant as time moves on.  I believe that months of inventory is the key figure to watch because it tracks both the supply and demand side.

 

[Kenkoko]

what has been the population change in the last 6 years ?  Doesn?t that have a bearing also ?

What?s the marginal income change in last 6 years  (top quartile of buyer pool) ? Forget median income, that?s meaningless when it comes to coastal states .

Absolute stats are not as meaningful as ?months of inventory ? which accounts for changes in the velocity of the market . I think USC had some good posts on that metric .

We should definitely pay attention to potential change in the velocity of the market. Which is why I bring up Chinese FCBs because a mass selling in a short period of time will cause market disruption. This happened to Taipei RE (Taiwan) when Chinese pulled money out at rapid pace. RE value dropped 40% in a 5-6 years period. (during a bull market too)

If we are going to talk about population change, we should also mention the rapid change in Irvine demographics. The huge surge of Asian population is unseen in any other coastal area in LA or Orange county.

Irvine is not a wealth concentrated area like real coastal cities like Newport or even Mission Viejo. Look at the age discrepancy of the median Native-born age(25.9) to the median Foreign-born age (42.7) in Irvine. This kind of large gap is no where to be seen at any other city in LA or OC.

Also never hear anyone mention the poverty rate in Irvine is really high at 12.7%.  Yorba Linda is 3.83%, Mission Viejo is 4.75%, Newport is 6.5%.

Median income is probably meaningless for Newport Beach but I don't entirely agree with the notion that median income is meaningless to Irvine.

 

[fortune11]

what has been the population change in the last 6 years ?  Doesn?t that have a bearing also ?

What?s the marginal income change in last 6 years  (top quartile of buyer pool) ? Forget median income, that?s meaningless when it comes to coastal states .

Absolute stats are not as meaningful as ?months of inventory ? which accounts for changes in the velocity of the market . I think USC had some good posts on that metric .

We should definitely pay attention to potential change in the velocity of the market. Which is why I bring up Chinese FCBs because a mass selling in a short period of time will cause market disruption. This happened to Taipei RE (Taiwan) when Chinese pulled money out at rapid pace. RE value dropped 40% in a 5-6 years period. (during a bull market too)

If we are going to talk about population change, we should also mention the rapid change in Irvine demographics. The huge surge of Asian population is unseen in any other coastal area in LA or Orange county.

Irvine is not a wealth concentrated area like real coastal cities like Newport or even Mission Viejo. Look at the age discrepancy of the median Native-born age(25.9) to the median Foreign-born age (42.7) in Irvine. This kind of large gap is no where to be seen at any other city in LA or OC.

Also never hear anyone mention the poverty rate in Irvine is really high at 12.7%.  Yorba Linda is 3.83%, Mission Viejo is 4.75%, Newport is 6.5%.

Median income is probably meaningless for Newport Beach but I don't entirely agree with the notion that median income is meaningless to Irvine.

That?s a pretty high poverty rate for Irvine ! How does it compare to the national average

As to median vs marginal  ... so many 3 , 4 and 5 plus million homes have sold in Irvine in last 5 years (and not just in shady canyon, I am talking new construction) , that this forum is littered w posts like ?for that price I would rather buy in Newport Beach etc etc .... ? .

So, someone is willing  to pay top dollar to live in Irvine (not just FCBs , as was my misperception before I talked to actual people who did the buying in the 3 plus million zone .

 

[misme]

what has been the population change in the last 6 years ?  Doesn?t that have a bearing also ?

What?s the marginal income change in last 6 years  (top quartile of buyer pool) ? Forget median income, that?s meaningless when it comes to coastal states .

Absolute stats are not as meaningful as ?months of inventory ? which accounts for changes in the velocity of the market . I think USC had some good posts on that metric .

We should definitely pay attention to potential change in the velocity of the market. Which is why I bring up Chinese FCBs because a mass selling in a short period of time will cause market disruption. This happened to Taipei RE (Taiwan) when Chinese pulled money out at rapid pace. RE value dropped 40% in a 5-6 years period. (during a bull market too)

If we are going to talk about population change, we should also mention the rapid change in Irvine demographics. The huge surge of Asian population is unseen in any other coastal area in LA or Orange county.

Irvine is not a wealth concentrated area like real coastal cities like Newport or even Mission Viejo. Look at the age discrepancy of the median Native-born age(25.9) to the median Foreign-born age (42.7) in Irvine. This kind of large gap is no where to be seen at any other city in LA or OC.

Also never hear anyone mention the poverty rate in Irvine is really high at 12.7%.  Yorba Linda is 3.83%, Mission Viejo is 4.75%, Newport is 6.5%.

Median income is probably meaningless for Newport Beach but I don't entirely agree with the notion that median income is meaningless to Irvine.

That?s a pretty high poverty rate for Irvine ! How does it compare to the national average

As to median vs marginal  ... so many 3 , 4 and 5 plus million homes have sold in Irvine in last 5 years (and not just in shady canyon, I am talking new construction) , that this forum is littered w posts like ?for that price I would rather buy in Newport Beach etc etc .... ? .

So, someone is willing  to pay top dollar to live in Irvine (not just FCBs , as was my misperception before I talked to actual people who did the buying in the 3 plus million zone .

Irvine has a central location and convenience factor as a major job center that can not be beat for everyday life. Realistically, how often do you go to the beach? Do you want to deal with the AirBnBs and beach going traffic everyday getting to and from your house?

 

[zubs]

I know a rich Chinese family that owns a rental in Irvine, and a "vacation" home in Newport Coast.  The money they used to buy these 2 properties among other things was difficult to get out of China.  It's hard to believe they would sell these 2 properties after all the shit they went through to get it here in the first place.  Think of all the transaction costs that come up when uncle pooh bear puts a $50,000 annual limit per person.


They already have tons of property in China....the property in the US is additional.  It's a Swiss bank account that can be lived in or rented out.

 

[Kenkoko]

I know a rich Chinese family that owns a rental in Irvine, and a "vacation" home in Newport Coast.  The money they used to buy these 2 properties among other things was difficult to get out of China.  It's hard to believe they would sell these 2 properties after all the shit they went through to get it here in the first place.  Think of all the transaction costs that come up when uncle pooh bear puts a $50,000 annual limit per person.


They already have tons of property in China....the property in the US is additional.  It's a Swiss bank account that can be lived in or rented out.

Many people are unfamiliar with how wealthy Chinese people got money out of China. Prior to the new capital outflow regulation (2018), Chinese people could get funds out of China as long the funds were tied to their financial holdings in China (used as collateral). What happened was that wealthy Chinese people would pay the bankers to come up with fake appraisals that would allow them to take out 150%, 200%, some even 300% of their actual equity. (Chinese banks are a mixture of private/public business. Very corrupted)

This is one of the top issues that the Chinese government is currently cracking down on. This is also the reason why many of these wealthy Chinese pay money laundering service insane fees like 20% just to get money out. This is also why you see many FCBs, being price insensitive, just throw cash overbidding everyone else.

There?s no point for them to sell their holdings in China because the loan is already way bigger than its real worth.

also FYI, Swiss banks already bowed to pressure and have started to work with the IRS and the Chinese government. It's not the same safe heaven as it was.

 

[irvinehomeowner]

what has been the population change in the last 6 years ?  Doesn?t that have a bearing also ?

What?s the marginal income change in last 6 years  (top quartile of buyer pool) ? Forget median income, that?s meaningless when it comes to coastal states .

Absolute stats are not as meaningful as ?months of inventory ? which accounts for changes in the velocity of the market . I think USC had some good posts on that metric .

We should definitely pay attention to potential change in the velocity of the market. Which is why I bring up Chinese FCBs because a mass selling in a short period of time will cause market disruption. This happened to Taipei RE (Taiwan) when Chinese pulled money out at rapid pace. RE value dropped 40% in a 5-6 years period. (during a bull market too)

If we are going to talk about population change, we should also mention the rapid change in Irvine demographics. The huge surge of Asian population is unseen in any other coastal area in LA or Orange county.

Irvine is not a wealth concentrated area like real coastal cities like Newport or even Mission Viejo. Look at the age discrepancy of the median Native-born age(25.9) to the median Foreign-born age (42.7) in Irvine. This kind of large gap is no where to be seen at any other city in LA or OC.

Also never hear anyone mention the poverty rate in Irvine is really high at 12.7%.  Yorba Linda is 3.83%, Mission Viejo is 4.75%, Newport is 6.5%.

Median income is probably meaningless for Newport Beach but I don't entirely agree with the notion that median income is meaningless to Irvine.

Yet despite these stats, irvine still fared better during the last downturn and still has premium pricing and demand compared to Yorba Linda and Mission Viejo. Newport Beach is a different animal yet as other posters have mentioned, people still spend as much in Irvine.

There have been quite a few chiming in on why there won't be a major selloff in Irvine by investors/FCBs/etc which seems to hold true based on past experience.