Which Irvine village offers best value for investment property?

[panda]

ACF.
Sunday is my day off, but I will try to put some thought and put together an macro analysis about where I think Irvine housing is headed short term and long term. Irvine's charts and cycles are going be much more correlated with the Bay Area housing market than the Atlanta's housing market. Below are some charts I put together so that you can think about making your own conclusions.

San Francisco / Bay area housing cycle. Irvine's housing market cycle will be much more correlated to that of the bay area.

Inventory trend and chart in Irvine seems to be moving upwards. The key number to watch is to see if the inventory numbers shoots past 1000.

There is a strong correlation between unemployment numbers and the housing prices. Looks like we are towards of the unemployment % bottom and the next movement is upwards.

18 year Stock market cycle.

Just for comparison, this is the what the inventory trend looks like in metro Atlanta.
Inventory levels in metro Atlanta first bottomed on January 2nd, 2013. Just recently, on January 5th, 2016, inventory levels in metro Atlanta have just hit a new low. Currently, demand is far outpacing supply and inventory levels needs to increase to 120k or higher for home prices to equalize and have potential to fall. Current inventory levels today remain around 38k. 

 

[acf]

Some damn good information, thanks for taking the time Panda.

Based on this, and this is just a quick guess - within 1-3 years, the housing market will correct -10 to 15%. There could be a little more time for appreciation before this happens, but the upswing cycle is coming to it's end.

So why am I on the list for a Petaluma house again? lol

 

[panda]

Acf, You can see that the there is a strong correlation between unemployment numbers and the median home price in both LA and SF MSA. Somewhere around 2018, the 18 year bear market cycle will end in the DOW and S&P and a new 18 year bull market will emerge. We are already seeing a strong deleveraging taking place. I do believe that the US Dollar and Euro will hit parity either in 2016 or 2017.

Both Irvine and the Bay area housing market depend a lot from Overseas demand especially in China. The Bay area is much more dependent on the local tech jobs and if the NASDAQ crashes, the bay area housing market will be directly impacted.
When there is a global recession, the demand from foreign buyers and immigration will slow down.

Acf, your assessment is very good. Short term, I do see a correction coming due for both the bay area market as well as for Irvine according to the San Fancisco / Bay area housing market cycle aligning up with the current deflationary cycle. 

Acf, another metrics I look at for valuation for particular area or city is the HI ratio (median home price / median household income). This is sort of like evaluating the Price / Earning ratio on blue chip stock.

Below you can see the HI ratio for three major cities with a population greater that 70k, with demographics aligning up 10 years apart. Compare the census data for Cupertino, CA in 1990, Irvine, CA in 2000, and Johns Creek, GA in 2010 and you will see a very similar demographics.

Cupertino, CA - Northern California (Bay Area)
median income: $145,367
median home price : $1,768,700
HI ratio: 12.16

Johns Creek, GA - North Atlanta Suburb
median income: $125,044
median home price: $420,058
HI ratio : 3.35

Irvine, CA - Southern California (Orange County)
median income: $98,923
median home price: $733,100
HI ratio: 7.41

 

[aquabliss]

I know, OT but...

Panda just browsing Johns Creek homes on Redfin I see some of the nicer ones ($900k - $1.1M) have HOA between $1,500 and $2,000 per month.  Any idea why?

 

[panda]

Aquabliss,

Are you sure it is not $1500 - $2000 a year? $1500 to $2000 / month seems a bit off. Do you have the subdivision and address you are looking at? Even the gated and private golf course communities with a 24 hour guard would have an HOA between $2000 - $2500 a year.

 

[Cornflakes]

Acf, You can see that the there is a strong correlation between unemployment numbers and the median home price in both LA and SF MSA. Somewhere around 2018, the 18 year bear market cycle will end in the DOW and S&P and a new 18 year bull market will emerge. We are already seeing a strong deleveraging taking place. I do believe that the US Dollar and Euro will hit parity either in 2016 or 2017.

Both Irvine and the Bay area housing market depend a lot from Overseas demand especially in China. The Bay area is much more dependent on the local tech jobs and if the NASDAQ crashes, the bay area housing market will be directly impacted.
When there is a global recession, the demand from foreign buyers and immigration will slow down.

Acf, your assessment is very good. Short term, I do see a correction coming due for both the bay area market as well as for Irvine according to the San Fancisco / Bay area housing market cycle aligning up with the current deflationary cycle. 

Acf, another metrics I look at for valuation for particular area or city is the HI ratio (median home price / median household income). This is sort of like evaluating the Price / Earning ratio on blue chip stock.

Below you can see the HI ratio for three major cities with a population greater that 70k, with demographics aligning up 10 years apart. Compare the census data for Cupertino, CA in 1990, Irvine, CA in 2000, and Johns Creek, GA in 2010 and you will see a very similar demographics.

Cupertino, CA - Northern California (Bay Area)
median income: $145,367
median home price : $1,768,700
HI ratio: 12.16

Johns Creek, GA - North Atlanta Suburb
median income: $125,044
median home price: $420,058
HI ratio : 3.35

Irvine, CA - Southern California (Orange County)
median income: $98,923
median home price: $733,100
HI ratio: 7.41

Panda,
These are good metrics to look at. However, I was bit surprised to see that Irvine median income is much lower than Johns Creek. Looking at top employers list, Irvine definitely has many more higher paying tech employers. Do you think it is the bigger base of UCI and IUSD salaries that is bringing down the average for median income in Irvine? 

 

[irvinehomeowner]

Median income in Irvine is lower because FCBs don't report true income.

 

[panda]

Source:http://quickfacts.census.gov/qfd/states/06/0636770.html

Cornflake, I would say that you are correct. Most of residents in Johns Creek are homeowners and the average age of Johns Creek residents is closer to 40. In Johns Creek, there are not too many apartment complexes like there are in Irvine. I would agree with you that UCI and IUSD salaries would also bring down the average. If 80% of Irvine's population were homeowners and median salary was calculated by this assumption, I would think that the median income would be much higher than $90k. Also keep in mind that Johns Creek's population is only 1/3 of that of Irvine. Cupertino's population is much more similar to that of Johns Creek and there is no question that Cupertino residents are a wealthier demographic.

Acf, You can see that the there is a strong correlation between unemployment numbers and the median home price in both LA and SF MSA. Somewhere around 2018, the 18 year bear market cycle will end in the DOW and S&P and a new 18 year bull market will emerge. We are already seeing a strong deleveraging taking place. I do believe that the US Dollar and Euro will hit parity either in 2016 or 2017.

Both Irvine and the Bay area housing market depend a lot from Overseas demand especially in China. The Bay area is much more dependent on the local tech jobs and if the NASDAQ crashes, the bay area housing market will be directly impacted.
When there is a global recession, the demand from foreign buyers and immigration will slow down.

Acf, your assessment is very good. Short term, I do see a correction coming due for both the bay area market as well as for Irvine according to the San Fancisco / Bay area housing market cycle aligning up with the current deflationary cycle. 

Acf, another metrics I look at for valuation for particular area or city is the HI ratio (median home price / median household income). This is sort of like evaluating the Price / Earning ratio on blue chip stock.

Below you can see the HI ratio for three major cities with a population greater that 70k, with demographics aligning up 10 years apart. Compare the census data for Cupertino, CA in 1990, Irvine, CA in 2000, and Johns Creek, GA in 2010 and you will see a very similar demographics.

Cupertino, CA - Northern California (Bay Area)
median income: $145,367
median home price : $1,768,700
HI ratio: 12.16

Johns Creek, GA - North Atlanta Suburb
median income: $125,044
median home price: $420,058
HI ratio : 3.35

Irvine, CA - Southern California (Orange County)
median income: $98,923
median home price: $733,100
HI ratio: 7.41

Panda,
These are good metrics to look at. However, I was bit surprised to see that Irvine median income is much lower than Johns Creek. Looking at top employers list, Irvine definitely has many more higher paying tech employers. Do you think it is the bigger base of UCI and IUSD salaries that is bringing down the average for median income in Irvine? 

 

[panda]

Acf,

If you see the pattern of the bay area housing market cycle chart that I posted above, you can sort of predict that another 3 year correction is coming between 2017 and bottoming in 2020. This maybe an indication that a similar correction in Irvine is coming during that same time period. You have to watch the employment numbers very closely as the housing prices are very much correlated with the job numbers.

Some damn good information, thanks for taking the time Panda.

Based on this, and this is just a quick guess - within 1-3 years, the housing market will correct -10 to 15%. There could be a little more time for appreciation before this happens, but the upswing cycle is coming to it's end.

So why am I on the list for a Petaluma house again? lol

 

[acf]

thanks panda. One wild card for you. Do you feel that foreign cash will distort/keep things more stable in Irvine seeing as how much of the housing bought here seems to be purchased this way?

 

[frank303]

I guess numbers of FCB will also decrease from now on.
Here is a few factors affect China FCB:
1. China economy is not that good and show a sign of decline. (GDP fell below 7%)
2. Government restrict money flow out of China.
3. Stock market crush.
4. When is the golden time for corrupt money enter USA for investment?
    The last few years when a Chairman hold his postion.

thanks panda. One wild card for you. Do you feel that foreign cash will distort/keep things more stable in Irvine seeing as how much of the housing bought here seems to be purchased this way?

 

[aquabliss]

Aquabliss,

Are you sure it is not $1500 - $2000 a year? $1500 to $2000 / month seems a bit off. Do you have the subdivision and address you are looking at? Even the gated and private golf course communities with a 24 hour guard would have an HOA between $2000 - $2500 a year.

Oops, looks like Redfins screw up.  Here's one example:https://www.redfin.com/GA/Johns-Creek/2200-Ascott-Valley-Trce-30097/home/24815183

Says HOA is $167/mo paid annually but if you look at the same listing on the Redfin mobile app, shows the following:

 

[Paris167]

Aquabliss,

Are you sure it is not $1500 - $2000 a year? $1500 to $2000 / month seems a bit off. Do you have the subdivision and address you are looking at? Even the gated and private golf course communities with a 24 hour guard would have an HOA between $2000 - $2500 a year.

Oops, looks like Redfins screw up.  Here's one example:https://www.redfin.com/GA/Johns-Creek/2200-Ascott-Valley-Trce-30097/home/24815183

Says HOA is $167/mo paid annually but if you look at the same listing on the Redfin mobile app, shows the following:

OMG you could get a mansion in JC for $900k!  And with so much character, mouldings, tray ceilings. Those look like million dollar homes vs our match box cookie cutter Irvine homes that are way over priced. Why is the market driving up Irvine home prices again?? Damn you FCBs and TIC...

 

[acf]

Frank,

this would make sense to me, but I've heard from some people that it's actually having the opposite effect. FCB's want to get their money out even more now so it's safe and the purchasing will continue. Judging from how busy the sales offices at Petaluma are, it's hard to argue with this?

I guess numbers of FCB will also decrease from now on.
Here is a few factors affect China FCB:
1. China economy is not that good and show a sign of decline. (GDP fell below 7%)
2. Government restrict money flow out of China.
3. Stock market crush.
4. When is the golden time for corrupt money enter USA for investment?
    The last few years when a Chairman hold his postion.

thanks panda. One wild card for you. Do you feel that foreign cash will distort/keep things more stable in Irvine seeing as how much of the housing bought here seems to be purchased this way?

 

[The Motor Court Company]

how is Atlanta's real estate even relevant here? that market is thousands miles way.  why Panda is still soliciting for his business?

 

[zubs]

Once again, the harder Xi squeezes the higher US real estate goes....gotta get all that toothpaste out of the tube.

Panda is a long time poster who spends his time posting data, charts and graphs here.  He does solicit business for his Atlanta housing investments, but I don't take offense to it.  His contributions here makes this forum better.

The positive/negative thing about soliciting business on an internet forum is there's no where to hide.

 

[paydawg]

Aquabliss,

Are you sure it is not $1500 - $2000 a year? $1500 to $2000 / month seems a bit off. Do you have the subdivision and address you are looking at? Even the gated and private golf course communities with a 24 hour guard would have an HOA between $2000 - $2500 a year.

Oops, looks like Redfins screw up.  Here's one example:https://www.redfin.com/GA/Johns-Creek/2200-Ascott-Valley-Trce-30097/home/24815183

Says HOA is $167/mo paid annually but if you look at the same listing on the Redfin mobile app, shows the following:

OMG you could get a mansion in JC for $900k!  And with so much character, mouldings, tray ceilings. Those look like million dollar homes vs our match box cookie cutter Irvine homes that are way over priced. Why is the market driving up Irvine home prices again?? Damn you FCBs and TIC...

What's up with the schools in JC?  The high school (per the Redfin site) got a 2-star rating. 

 

[Cornflakes]

Panda is one of those few who puts good info here and stays clears of the non-sense crap that some members put out. We love you here Panda.

 

[AW]

Agree, I rather see numbers relating to real estate than how much money you can get from a Chinese wedding (entertaining but not as relevant)

 

[frank303]

Well, that depends.
However, I think part of you said maybe correct.

First of all, I think all of you know what happened to China stock market(so called "A shares") in 2015. A small group of people with inside trading information make a lot of money. Then I could guess, well, they need transfer their money to safe place. Buying home in USA is a good choice for them.

Secondly, whether FCB will keep investing in future depend on Mr. Xi's policy. This is hard to predict.  However, as Panda said, economy depression will be a negative factor here.

Acf, don't worry about it. No matter what happened in the next few months or few years. A resale home price or popularity depends on whether it's popular in grand opening. From this point, I think Petaluma will be very hot in next few years, no matter numbers of FCB increase or not.

Frank,

this would make sense to me, but I've heard from some people that it's actually having the opposite effect. FCB's want to get their money out even more now so it's safe and the purchasing will continue. Judging from how busy the sales offices at Petaluma are, it's hard to argue with this?

I guess numbers of FCB will also decrease from now on.
Here is a few factors affect China FCB:
1. China economy is not that good and show a sign of decline. (GDP fell below 7%)
2. Government restrict money flow out of China.
3. Stock market crush.
4. When is the golden time for corrupt money enter USA for investment?
    The last few years when a Chairman hold his postion.

thanks panda. One wild card for you. Do you feel that foreign cash will distort/keep things more stable in Irvine seeing as how much of the housing bought here seems to be purchased this way?