When would be next housing Bottom?

[Irvinecommuter]

Higher earning/higher-educated families want to be in an area with like-minded families.

This is probably we have such extreme white flight out of Irvine since 1980.

White population % - 87.8% (1980) 77.9%(1990) 61.1% (2000) 50.5%(2010)

My mom recently showed me an article saying at the current pace, Irvine will be 65% Asian in 2030. That's higher than San Gabriel/ Monterey Park/ Temple City/Arcadia. Not saying it's good or bad. But Irvine will look completely different in 10 years.

I don't think it is white plight as it is Asian preference.  BA and Irvine have been the focus of recent Asian immigrants, those with high paying jobs or were already reach.  Pricing have driven out most of the buyers.

 

[usctrojancpa]

Unfortunately you can't have your cake and eat it too with residential investing in Orange County...either you accept a lower cap rate with more appreciation upside or you a higher cap rate with less appreciation.  Irvine has historically outperformed price appreciation over the years and will continue to do use into the future for many of the reasons IHO listed.  I'm not saying that Irvine prices can't drop, but they'll drop less than other cities in Orange County.  We are basically flat on prices in Irvine this year with the past 3-4 months having been a give back of the gains in the first half of the year. 

 

[panda]

The answer to the question of "when would be the next housing bottom can be answer from the chart below. The real estate market continues to shift in cycles from buyer, neutral, to seller market. Right now we are in a neutral market at 7.1 month nationally. If you are trying the time the bottom in Irvine, wait until you see the numbers reach 9-11 month supply.

Currently the median home price for Irvine SFRs sits at $1,200,000 from 1150 Irvine SFRs sold in the last 12 months.

Current Irvine SFR inventory is 2.8 months
Current Irvine Condo Inventory is 2.64 months
Current Irvine Townhouses Inventory is 2.20 months.

I project that Irvine's inventory will be half that of the national average. Once the national inventory levels reach 12 months, I will forecast that Irvine's inventory will reach 6 months Irvine which will be a good entry points for those in the sidelines. 

The inventory numbers look a bit higher but the pattern of the chart is correct.

The inventory numbers look correct on this chart.

 

[OCLuvr]

Probably, another year then... which I don?t think would be bottom.

 

[panda]

OCLuvr, watch the 800 Irvine inventory support level. There is strong support there which will be broken. Yes... usually these cycles can take 2-3 years. I also predict that that 10 year and 30 year treasury yield will be lower in the years ahead ( short terms forecast) before heading up higher long term. Deflationary pressures in the short term and inflationary longer term which is good for real assets including real estate. Irvine Renter taught me a valuable lesson back in 2008, that you can always change the mortgage rate by refinancing, but you cannot change your purchase price. Let the charts above be your guide.

Probably, another year then... which I don?t think would be bottom.

 

[meccos12]

We are basically flat on prices in Irvine this year with the past 3-4 months having been a give back of the gains in the first half of the year.

If we have given back price gains already from the first half of the year, that is pretty significant in my opinion.  I may be wrong but I thought we had about 5-6% price gains earlier this year.  So 5-6% drop in the past few months is pretty staggering in my opinion.

 

[meccos12]

OCLuvr, watch the 800 Irvine inventory support level. There is strong support there which will be broken.

I believe we already broke though 800 inventory in Irvine earlier this month.  Now we are sitting slightly below 800.  I suspect that Irvine will easily surpass 800 again as more homes begin to be listed starting in the new year. 

 

[Liar Loan]

This year has been a real dog if you are an investor ? literally no place to hide

Stocks ?
Government bonds ?
Corporate bonds ?
Junk bonds ?
Housing ?

Housing is very localized, even within Orange County.  Some cities have experienced surprisingly strong appreciation this year.  Based on the comments here, it sounds as if Irvine is not one of them.

That is because Irvine has been going strong for like 10 years now...some of the other markets are just catching up.  They are also usually the area of lesser desirability but better affordability.  Overall, the market is down and has been down for a few months.
https://www.forbes.com/sites/caroli...-its-not-just-the-winter-effect/#2903be1e172b

But how can this be if there is "literally no place to hide"?

It's just an example of how too much pro-Irvine bias clouds judgement on what constitutes a good investment.

Where do you think is a better investment in OC or nearby areas?

Still waiting for an answer.

At this point in the cycle, I would look for areas that have a shot at rapid gentrification due to an influx of capital or highly paid employees.  There are multiple cities in both NorCal and SoCal, as well as 2nd-tier cities across the US that are experiencing this type of growth. 

I would stay away from areas that are experiencing a peak in their unaffordability ratio (percent of residents that can't afford the median home) as those areas will experience the hardest hits from rising mortgage rates.  Unfortunately, Irvine (and most of OC) falls into this category.

This mythology that Irvine is "safer" than other places to park your capital is betrayed by the facts - a 30% decline during the last downturn, and a 15-20% decline during the downturn before that. 

It's revisionist history to say that Irvine was safer, and is really a form of cognitive dissonance for those that want to convince themselves that prices can't go down.  If you really want safety, there are other places that will protect your "investment" much better.  Try CDM, NB, LB, etc.  Areas with long time owners and old money will weather the storm best. 

Irvine still has too many aspirational buyers that have stretched DTI's buying into a market that is barely within their reach.  During a downturn, job losses will affect these people and lead to some tough choices about what they can really afford.

So many of the items on IHO's list could also apply to Los Angeles, but nobody would argue that LA is immune to downturns.  Compton also has lots of courts for pickup basketball games.  There's no measurable effect on prices from having this amenity. 

And besides, all of the same amenities existed during Irvine's 30% decline that occurred just 10 short years ago.  The perma-bulls in '07 also believed Irvine was immune (much like many of the current posters on TI), but they lost boatloads of money. 

The reason is they couldn't overcome their internal biases to view things realistically.

 

[panda]

Appears to me that the top inventory chart is accurate. I currently see 692 homes listed for sale in Irvine.

OCLuvr, watch the 800 Irvine inventory support level. There is strong support there which will be broken.

I believe we already broke though 800 inventory in Irvine earlier this month.  Now we are sitting slightly below 800.  I suspect that Irvine will easily surpass 800 again as more homes begin to be listed starting in the new year. 

 

[Loco_local]

What cities outside of California would you recommend?

At this point in the cycle, I would look for areas that have a shot at rapid gentrification due to an influx of capital or highly paid employees.  There are multiple cities in both NorCal and SoCal, as well as 2nd-tier cities across the US that are experiencing this type of growth. 

I would stay away from areas that are experiencing a peak in their unaffordability ratio (percent of residents that can't afford the median home) as those areas will experience the hardest hits from rising mortgage rates.  Unfortunately, Irvine (and most of OC) falls into this category.

 

[usctrojancpa]

OCLuvr, watch the 800 Irvine inventory support level. There is strong support there which will be broken.

I believe we already broke though 800 inventory in Irvine earlier this month.  Now we are sitting slightly below 800.  I suspect that Irvine will easily surpass 800 again as more homes begin to be listed starting in the new year. 

We'll most likely be back above 800 homes on the market in Irvine in 1Q 2019.  The low point of inventory will be between Xmas and New Years Day.

 

[irvinehomeowner]

This year has been a real dog if you are an investor ? literally no place to hide

Stocks ?
Government bonds ?
Corporate bonds ?
Junk bonds ?
Housing ?

Housing is very localized, even within Orange County.  Some cities have experienced surprisingly strong appreciation this year.  Based on the comments here, it sounds as if Irvine is not one of them.

That is because Irvine has been going strong for like 10 years now...some of the other markets are just catching up.  They are also usually the area of lesser desirability but better affordability.  Overall, the market is down and has been down for a few months.
https://www.forbes.com/sites/caroli...-its-not-just-the-winter-effect/#2903be1e172b

But how can this be if there is "literally no place to hide"?

It's just an example of how too much pro-Irvine bias clouds judgement on what constitutes a good investment.

Where do you think is a better investment in OC or nearby areas?

Still waiting for an answer.

At this point in the cycle, I would look for areas that have a shot at rapid gentrification due to an influx of capital or highly paid employees.  There are multiple cities in both NorCal and SoCal, as well as 2nd-tier cities across the US that are experiencing this type of growth. 

I would stay away from areas that are experiencing a peak in their unaffordability ratio (percent of residents that can't afford the median home) as those areas will experience the hardest hits from rising mortgage rates.  Unfortunately, Irvine (and most of OC) falls into this category.

This mythology that Irvine is "safer" than other places to park your capital is betrayed by the facts - a 30% decline during the last downturn, and a 15-20% decline during the downturn before that. 

It's revisionist history to say that Irvine was safer, and is really a form of cognitive dissonance for those that want to convince themselves that prices can't go down.  If you really want safety, there are other places that will protect your "investment" much better.  Try CDM, NB, LB, etc.  Areas with long time owners and old money will weather the storm best. 

Irvine still has too many aspirational buyers that have stretched DTI's buying into a market that is barely within their reach.  During a downturn, job losses will affect these people and lead to some tough choices about what they can really afford.

So many of the items on IHO's list could also apply to Los Angeles, but nobody would argue that LA is immune to downturns.  Compton also has lots of courts for pickup basketball games.  There's no measurable effect on prices from having this amenity. 

And besides, all of the same amenities existed during Irvine's 30% decline that occurred just 10 short years ago.  The perma-bulls in '07 also believed Irvine was immune (much like many of the current posters on TI), but they lost boatloads of money. 

The reason is they couldn't overcome their internal biases to view things realistically.

Wow. You keep calling me out and now who is using revisionist history.

Show me the data when there was a sustained 30% downturn for Irvine. Then show me the same time frame data for cities surrounding Irvine.

Maybe USC or Panda can throw some charts and graphs in here to prove who is biased.

 

[Irvinecommuter]

This year has been a real dog if you are an investor ? literally no place to hide

Stocks ?
Government bonds ?
Corporate bonds ?
Junk bonds ?
Housing ?

Housing is very localized, even within Orange County.  Some cities have experienced surprisingly strong appreciation this year.  Based on the comments here, it sounds as if Irvine is not one of them.

That is because Irvine has been going strong for like 10 years now...some of the other markets are just catching up.  They are also usually the area of lesser desirability but better affordability.  Overall, the market is down and has been down for a few months.
https://www.forbes.com/sites/caroli...-its-not-just-the-winter-effect/#2903be1e172b

But how can this be if there is "literally no place to hide"?

It's just an example of how too much pro-Irvine bias clouds judgement on what constitutes a good investment.

Where do you think is a better investment in OC or nearby areas?

Still waiting for an answer.

At this point in the cycle, I would look for areas that have a shot at rapid gentrification due to an influx of capital or highly paid employees.  There are multiple cities in both NorCal and SoCal, as well as 2nd-tier cities across the US that are experiencing this type of growth. 

I would stay away from areas that are experiencing a peak in their unaffordability ratio (percent of residents that can't afford the median home) as those areas will experience the hardest hits from rising mortgage rates.  Unfortunately, Irvine (and most of OC) falls into this category.

This mythology that Irvine is "safer" than other places to park your capital is betrayed by the facts - a 30% decline during the last downturn, and a 15-20% decline during the downturn before that. 

It's revisionist history to say that Irvine was safer, and is really a form of cognitive dissonance for those that want to convince themselves that prices can't go down.  If you really want safety, there are other places that will protect your "investment" much better.  Try CDM, NB, LB, etc.  Areas with long time owners and old money will weather the storm best. 

Irvine still has too many aspirational buyers that have stretched DTI's buying into a market that is barely within their reach.  During a downturn, job losses will affect these people and lead to some tough choices about what they can really afford.

So many of the items on IHO's list could also apply to Los Angeles, but nobody would argue that LA is immune to downturns.  Compton also has lots of courts for pickup basketball games.  There's no measurable effect on prices from having this amenity. 

And besides, all of the same amenities existed during Irvine's 30% decline that occurred just 10 short years ago.  The perma-bulls in '07 also believed Irvine was immune (much like many of the current posters on TI), but they lost boatloads of money. 

The reason is they couldn't overcome their internal biases to view things realistically.

That's just cherry picking of stats.  Irvine may have been down 30% after 2007 but that's is excellent compared to the 50-60% drop in other places like Ladera.  Newport and Laguna also fell by 30-40%. 

No housing market is immuned to nearly collapse of global economy...we are talking about relative safety...not absolute safety.

 

[sgip]

Truth:

No housing market is immune to nearly collapse of global economy...we are talking about relative safety...not absolute safety.

Good schools, diverse employment base, attractive weather are the plusses. That said, should Sacramento go tax berserk, or if IUSD ratings begin to soften, a recovery off the bottom might be slower than past recoveries.

My .02c

 

[irvinehomeowner]

Since hyperbole is in full effect...

Not only did I say Irvine was totally immune to any price drops... but I actually said prices went up during the crash*.

*Not

 

[Mety]

At this point in the cycle, I would look for areas that have a shot at rapid gentrification due to an influx of capital or highly paid employees.  There are multiple cities in both NorCal and SoCal, as well as 2nd-tier cities across the US that are experiencing this type of growth. 

I would stay away from areas that are experiencing a peak in their unaffordability ratio (percent of residents that can't afford the median home) as those areas will experience the hardest hits from rising mortgage rates.  Unfortunately, Irvine (and most of OC) falls into this category.

This mythology that Irvine is "safer" than other places to park your capital is betrayed by the facts - a 30% decline during the last downturn, and a 15-20% decline during the downturn before that. 

It's revisionist history to say that Irvine was safer, and is really a form of cognitive dissonance for those that want to convince themselves that prices can't go down.  If you really want safety, there are other places that will protect your "investment" much better.  Try CDM, NB, LB, etc.  Areas with long time owners and old money will weather the storm best. 

Irvine still has too many aspirational buyers that have stretched DTI's buying into a market that is barely within their reach.  During a downturn, job losses will affect these people and lead to some tough choices about what they can really afford.

So many of the items on IHO's list could also apply to Los Angeles, but nobody would argue that LA is immune to downturns.  Compton also has lots of courts for pickup basketball games.  There's no measurable effect on prices from having this amenity. 

And besides, all of the same amenities existed during Irvine's 30% decline that occurred just 10 short years ago.  The perma-bulls in '07 also believed Irvine was immune (much like many of the current posters on TI), but they lost boatloads of money. 

The reason is they couldn't overcome their internal biases to view things realistically.

I agree that Newport or Laguna Beach could be "better" investment or resident areas to put your money into. Who wouldn't want to live near the coast? The issue is those areas are A LOT more expensive than Irvine. Yes, Irvine could seem overpriced, but it still is sort of affordable compare to places you listed. You can still find pretty good deals under $1m in Irvine whereas that price range would only give you 600sq with 1 bathroom and no parking spot in Laguna Beach. If you have money, NB and LB are the places to be. But for ordinary folks with regular W2 without stealing in-laws' money, Irvine comes reasonable in OC.

Maybe you have the affordability to buy in those areas, but for our family, Irvine is still the playground in our budget that could give best bang for the buck. Tustin or Baker Ranch could be reasonable also. I'm not talking about the cycle or the timing the market. I'm just asking to see if there are better places to buy in OC that are reasonably priced for reasonable homes.

 

[panda]

SoCal is a great place to live for your primary residence, but you are not going to see the 3X appreciation growth you are saw from 1994 - 2006. You want to look at where the population is growing 10+%. New York, LA, and Chicago are developed cities, whereas Atlanta, Houston, and Dallas are emerging cities with a lot upside growth.

For example the population size of LA metro is more than 2 twice the size of metro Atlanta 13.3M vs 5.8M but the population growth in numbers in Atlanta exceeded that of Los Angeles. You have to study and observe where the population is moving.

What cities outside of California would you recommend?

At this point in the cycle, I would look for areas that have a shot at rapid gentrification due to an influx of capital or highly paid employees.  There are multiple cities in both NorCal and SoCal, as well as 2nd-tier cities across the US that are experiencing this type of growth. 

I would stay away from areas that are experiencing a peak in their unaffordability ratio (percent of residents that can't afford the median home) as those areas will experience the hardest hits from rising mortgage rates.  Unfortunately, Irvine (and most of OC) falls into this category.

 

[momopi]

If you shop along inland regions along I-15 (Riverside/SB County), it's possible to invest during market lows and make 3x appreciation during market highs.  For coastal areas like LA you might make 2x.

In parts of Sacramento, East of 99, it's possible to make 4x appreciation if you invest in older 2 bed 1 bath SFR's.  The ones that are selling for $200-$250K now was priced at $50K-$65K during market lows.  However the area is not that great.  Back when I went looking around 2008-2009 those SFR's rented for $850/month and the neighborhood had significant number of boarded up businesses and homeless.  Rancho Cordova further North was much nicer.

 

[sgip]

Bear in mind that so few of the "smart guys in the room" saw the 2007-2008 housing turn and an equally small number of folks saw the market bottom in 2010. It's nice to speculate as we are doing now, but by the time someone can firmly plant the flag into the turn or the bottom, opportunity has more than likely passed.


My .02c

SGIP

 

[Irvinecommuter]

SoCal is a great place to live for your primary residence, but you are not going to see the 3X appreciation growth you are saw from 1994 - 2006. You want to look at where the population is growing 10+%. New York, LA, and Chicago are developed cities, whereas Atlanta, Houston, and Dallas are emerging cities with a lot upside growth.

For example the population size of LA metro is more than 2 twice the size of metro Atlanta 13.3M vs 5.8M but the population growth in numbers in Atlanta exceeded that of Los Angeles. You have to study and observe where the population is moving.

That's a false comparison.  LA Metro is a mature population with high and ever increasing housing prices.  Atlanta is an up and coming town with relatively low prices as compared to the mature population centers (NYC, Boston, etc.)  or collapse of local economies (i.e. Detroit or Cleveland).  Comparing growth rates of places like NYC and LA with Las Vegas/Arizona and Atlanta would be like comparing the GDP growth of the US with that of BRIC nations.

LA and California are expensive to buy and live in...people are being driven to Las Vegas and Arizona not because they don't like California (mostly) but because they cannot afford to live there.  For a state like California with 8 to 9% growth in major population areas (i.e. Bay Area and Riverside) is actually quite impressive.