Who are all these buyers?

[IndieDev]

Yes yes.

But then maybe they're right. What do I know? I've only been doing business in China since the 1990s. All the wealthy Chinese in China are buying up all the Irvine real estate and decent SFRs with all cash so they can escape the political, economic, and religious terror in China. It's not like China has changed much since Tiananmen square. Soon Irvine will become "??", and the Irvine Spectrum will have a 20 foot statue of Mao right next to the PinkBerry, and the invasion of asian wealth will be unstoppable then.

Joseph McCarthy would be proud.

 

[qwerty]

IndieDev - just curious, when you are on business in china do they provide female entertainment as part of the trip?

 

[IndieDev]

IndieDev - just curious, when you are on business in china do they provide female entertainment as part of the trip?

I've actually never been offered a hooker, or escort before. However female "entertainment" is easily found in Shanghai if you've got money, and there is a lot of it in Shanghai. It you want hookers, just walk into any big business hotel (Galaxy Hotel and Hongqiao come to mind). Just sit at the bar, and most of the time a woman will sit next to you and ask you to buy her a drink, if you have around 75RMB, she'll go get both of you a drink and chat with you. A lot of women here can actually speak English, but sometimes you will run into ones that don't speak a lick, or speak very limited English, so make sure you have your 100 word Mandarin vocabulary ready. For instance "Jian dou ni hen gao xing" is a good one to start off with (nice to meet you), and if you're like me and have a horrible western accent, they'll laugh at you and find it cute.

You'll have more luck if you hang out at hotels where there are lots of westerners. Women, even non-hookers, here will dance with you if you've got that clean cut, westerner look, with a nice fitting suit, and they'll expect you to pay for everything. Shanghai to be honest is kind of tame, and not so fun in this respect. This isn't HK, or Singapore. Once you get a woman to hang out with you, it's either dinner, and a walk, or a little bit of karaoke and snacks. If you're especially charming, you might get lucky, but chances are you'll have to meet with this woman a few times before you get into bed with her.

These days I don't really look for that kind of entertainment. I'm just not interested anymore. A daughter, and ABC wife will do that to you.

 

[irvinehomeowner]

Can you guys let me know if this group starts playing the halftime show at the new UNI football stadium?  If so, I might move back.

[youtube]http://www.youtube.com/watch?v=hFGbHw5P6LU[/youtube]

Note to self: Start letter writing campaign to Korea to get P3 back to Irvine.

 

[CTNative]

IF...this all-cash buying/downpaying is keeping Irvine home prices elevated in comparison to surrounding cities (as someone on this thread suggested)...can an assumption be made that...

1) Irvine is sort of creating its own mini housing-bubble?

2) And if so...that whenever this all sorts out (let's say we hit bottom and move forward from there)...5, 10 years...whatever...the value of homes in surrounding cities will slowly rise as home prices in Irvine slowly decline, meeting somewhere in the middle (even if Irvine still ends up slightly higher)?

Thoughts?

 

[traceimage]

Can someone explain to me why all-cash buying keeps prices elevated in Irvine? Do cash buyers necessarily pay more than buyers who take out a bank loan? It would seem to me that it's the fundamental desirability of buying in Irvine keeping prices elevated, regardless of whether it's an all-cash or loan-funded purchase.

 

[irvinehomeowner]

Higher cash downs means less underwater mortgages. That means less foreclosures and less distressed inventory hitting the market driving prices down. Now, don't get me wrong, the numbers for distressed/shorts/REOs are higher in Irvine than previous years (at least that's what I've been told) but you need to compare that to other cities to get a true picture of why it's significant.

Prices *have* dropped in Irvine (moreso in some products/areas than others), just not as much as surrounding cities... and all-cash is only one of the factors.

 

[CTNative]

Can someone explain to me why all-cash buying keeps prices elevated in Irvine? Do cash buyers necessarily pay more than buyers who take out a bank loan? It would seem to me that it's the fundamental desirability of buying in Irvine keeping prices elevated, regardless of whether it's an all-cash or loan-funded purchase.

I'm thinking that was sorta the mantra that was spoken a lot when the housing bubble was full rip. It wasn't the creative financing that was keeping home prices elevated (stratospherically) it was the demand and desire for home ownership, etc...

As it turned out, if you make something "affordable" through some type of short-lived or limited (non-organic perhaps) way, then it creates temporary price stability at that higher level.

If the same homes were all suddenly readjusted from $500,000 to $2M, we could all "afford" them if we could take out 1,000 year mortgages but that doesn't make them worth $2M.

I think there is a limited supply of cash down/all cash buyers and while they are making a $900,000 duplex "affordable" by putting down so much cash, that is in no way representative of most people and so it is only a temporary price stabilizer at this higher price.

I think?

 

[irvinehomeowner]

@ctnative:

If you look at the 90s bubble, Irvine was also slower in dropping than surrounding cities. And while you would think there would be some equilibrium point, by the time the market starts moving up, Irvine has already reacted so they don't reach the bottom that other cities have reached.

It's why I say it's like anti-gravity... it goes up faster than it comes down.

Disclaimer: I'm no expert... my opinion is based on personal observation, heresay, Redfin searches daily, looking at graphs etc etc.

 

[traceimage]

Can someone explain to me why all-cash buying keeps prices elevated in Irvine? Do cash buyers necessarily pay more than buyers who take out a bank loan? It would seem to me that it's the fundamental desirability of buying in Irvine keeping prices elevated, regardless of whether it's an all-cash or loan-funded purchase.

I'm thinking that was sorta the mantra that was spoken a lot when the housing bubble was full rip. It wasn't the creative financing that was keeping home prices elevated (stratospherically) it was the demand and desire for home ownership, etc...

As it turned out, if you make something "affordable" through some type of short-lived or limited (non-organic perhaps) way, then it creates temporary price stability at that higher level.

If the same homes were all suddenly readjusted from $500,000 to $2M, we could all "afford" them if we could take out 1,000 year mortgages but that doesn't make them worth $2M.

I think there is a limited supply of cash down/all cash buyers and while they are making a $900,000 duplex "affordable" by putting down so much cash, that is in no way representative of most people and so it is only a temporary price stabilizer at this higher price.

I think?

Thanks for this. But going along with what you're saying, even if a house becomes "affordable" at a higher prices, don't people still have to fundamentally *want* to pay those prices? I think you are saying that prices were artificially inflated all over due to kooky financing, but Irvine's prices have remained high now because of the all-cash buyers propping them up. But there still must be something more attractive about Irvine to those buyers to make them want to spend their all-cash in Irvine, rather than in some other city.

One thing I learned is that there is no "worth" for a home...just what a willing buyer will pay to a willing seller.

 

[IndieDev]

One thing I learned is that there is no "worth" for a home...just what a willing buyer will pay to a willing seller.

Is that not the very definition of worth?

 

[traceimage]

One thing I learned is that there is no "worth" for a home...just what a willing buyer will pay to a willing seller.

Is that not the very definition of worth?

Maybe, but I meant "worth" as in "having a value of, or equal in value to, as in money: This vase is worth 12 dollars" (dictionary.com), in response to this quote of CTNative's: "If the same homes were all suddenly readjusted from $500,000 to $2M, we could all "afford" them if we could take out 1,000 year mortgages but that doesn't make them worth $2M."

 

[CTNative]

One thing I learned is that there is no "worth" for a home...just what a willing buyer will pay to a willing seller.

Is that not the very definition of worth?

Maybe, but I meant "worth" as in "having a value of, or equal in value to, as in money: This vase is worth 12 dollars" (dictionary.com), in response to this quote of CTNative's: "If the same homes were all suddenly readjusted from $500,000 to $2M, we could all "afford" them if we could take out 1,000 year mortgages but that doesn't make them worth $2M."

I think the variable I didn't include would be...that 1,000 year mortgages were only available to home buyers for...let's say...a year. So once all those readjusted homes had buyers using these 1,000 year mortgages....

....who would they sell to now that 1,000 year mortgages were no longer available? In other words, the cash-buyer pool will eventually dry up...I think.

So with cash buyers, I feel that there is a small pool of people with enough cash to buy a $900,000 duplex because as mentioned earlier, it's the mortgage loan, not the price, that matters. So if someone puts $500,000 down on a $900,000 place, the note is only $400,000...well...that's affordable, right? But once all those cash buyers are gone...and some time goes by...

Who are the next set of buyers from those same home owners?

The next set of buyers doesn't have the cash to buy at that price and make it "affordable" so...?

Are we saying that these homes will only change hands between buyers with large cash downpayments because nobody, perhaps even the original large-cash buyers themselves, can afford a $900,000 mortgage note, but they can afford a $400,000 one?

That's why it seems...that it would be temporary. Eventually, we run out of cash buyers...and then what? Who is left to buy any remaining homes once the cash-buyer pool dries up? And who is left to buy the homes from the cash buyers themselves years from now?

(I know eventually inflation and salaries would catch up, but aside from that, since that is a helluva long way out...)

 

[test]

If the same homes were all suddenly readjusted from $500,000 to $2M, we could all "afford" them if we could take out 1,000 year mortgages but that doesn't make them worth $2M.

There's a flip side to that coin.  Just because you can't "afford" a 500k home and can only "afford" a 250k home doesn't make that home worth 250k.

 

[irvinehomeowner]

It's flight to quality.

Because prices have dropped less here... more people would rather buy here. So it's not just the FCBs, but people who are afraid to lose "value" in their property so they buy in the place they think will hold its "value" better.

The choice is bigger house but could still lose 20%, or smaller house and could lose 10%. Sometimes it's just math.

That's one of the reasons why I'm hesitant to buy in South County and why I don't want to put a big payment down... sure I'll probably be there for 5 or more years, but if everything stays flat or drops a little more, would I have lost more there or here in Irvine?

 

[CTNative]

Can someone explain to me why all-cash buying keeps prices elevated in Irvine? Do cash buyers necessarily pay more than buyers who take out a bank loan? It would seem to me that it's the fundamental desirability of buying in Irvine keeping prices elevated, regardless of whether it's an all-cash or loan-funded purchase.

I'm thinking that was sorta the mantra that was spoken a lot when the housing bubble was full rip. It wasn't the creative financing that was keeping home prices elevated (stratospherically) it was the demand and desire for home ownership, etc...

As it turned out, if you make something "affordable" through some type of short-lived or limited (non-organic perhaps) way, then it creates temporary price stability at that higher level.

If the same homes were all suddenly readjusted from $500,000 to $2M, we could all "afford" them if we could take out 1,000 year mortgages but that doesn't make them worth $2M.

I think there is a limited supply of cash down/all cash buyers and while they are making a $900,000 duplex "affordable" by putting down so much cash, that is in no way representative of most people and so it is only a temporary price stabilizer at this higher price.

I think?

Thanks for this. But going along with what you're saying, even if a house becomes "affordable" at a higher prices, don't people still have to fundamentally *want* to pay those prices? I think you are saying that prices were artificially inflated all over due to kooky financing, but Irvine's prices have remained high now because of the all-cash buyers propping them up. But there still must be something more attractive about Irvine to those buyers to make them want to spend their all-cash in Irvine, rather than in some other city.

One thing I learned is that there is no "worth" for a home...just what a willing buyer will pay to a willing seller.

I definitely think there is something fundamentally attractive about Irvine, I mean, it is nice to live here...I get that. But something else I've been considering is a theory I jokingly call, "a crowd draws a crowd."

Like at the checkout line when one lane is empty and the other has 20 people, so everyone assumes something is wrong with the second lane and stands in the 20 person one...

We assume that the 20 people in front of us have already done all the work and figured out all the pros and cons of each potential line, so we just defer and join them.

Sometimes I wonder if everyone starts moving into Irvine, and with the IC and developer marketing machines at full throttle...that the buying crowd draws an ever larger crowd of buyers and it feeds on itself. I'm taking about human behavior so it's not like I can quantify it.

I am not fully convinced that these large cash buyers have really done all the due diligence on the market or have considered future price declines and of course if they listen to the NAR the bottom is every 59 minutes....so there is still a lot of pressure to buy, and a lot of pent up demand, surely...and if this is a "cultural" group of buyers, as I suggest....maybe there is a lot of talking and pressure and discussion within that circle, fueling the buying a bit...

I do think there is a role in the "crowd draws a crowd" pattern of human behavior. Not saying it's the only thing, but I think it's a part of it.

Nobody likes to get left behind.

 

[CTNative]

If the same homes were all suddenly readjusted from $500,000 to $2M, we could all "afford" them if we could take out 1,000 year mortgages but that doesn't make them worth $2M.

There's a flip side to that coin.  Just because you can't "afford" a 500k home and can only "afford" a 250k home doesn't make that home worth 250k.

Completely agree. But if there are 10,000 people that can only afford a specific style of home at $250k and 10 people that can afford the same homes at $500k then that makes the 11th home and every home after that, worth $250k.

Since I don't think this cash-buyer pool is limitless, I'm curious to see if there would be an 11th home.

 

[waitin4ever]

IHO,

just a curious question. Considering all your arguments towards the stability of Irvine housing
what is really preventing you from putting a big chunk down for a irvine home. Like Montecito or Sonoma
etc. It seems to me that you really are not convinced about Irvine housing stability although you claim that
it is only people like IR who are not convinced.

Not to question you openly but I'm just trying to understand peoples perspective. For example I'm still not convinced
about the housing stability but i still bought into the 2010 collection. Mostly because of timing with family needs etc.
And if you are deciding to buy I think buying with as much down as you can afford and paying off as quickly is better
long term unless you want to be the person who takes the system for a ride by suatting or walking away.

It's flight to quality.

Because prices have dropped less here... more people would rather buy here. So it's not just the FCBs, but people who are afraid to lose "value" in their property so they buy in the place they think will hold its "value" better.

The choice is bigger house but could still lose 20%, or smaller house and could lose 10%. Sometimes it's just math.

That's one of the reasons why I'm hesitant to buy in South County and why I don't want to put a big payment down... sure I'll probably be there for 5 or more years, but if everything stays flat or drops a little more, would I have lost more there or here in Irvine?

 

[test]

Prices are determined by supply/demand.  The effect of cash buyers is twofold.  Not only do they add to the demand, but they also detract from the supply since they won't be under pressure to sell.  Mortgage buyers only add to the demand.  Subprime buyers add the to supply, hence areas with lots of subprime buyers had prices drop more.

 

[The I-R-V]

First of all CTNative, I appreciate your well written positions.  You clearly have well thought out opinions.

The problem I have with the whole "Asian buyer" theory is that we're seeing just as many Korean buyers as we are Chinese.  As you guys are well aware, these are two entirely different cultures with different mentalities.  We're seeing the Persians as well as the Indian buyers too.  All different.  Some are savers, some are gamblers.  Some pool money from the family, others don't have money to pool so they take risk on their own.  Some want the comfort of their churches, others have never set foot in one.  Some work for big companies, others open retail shops selling junk.  Bottom line is, this is the mix of "Asian buyers" in Irvine.  Pretty much the same mix we'd see for any other race in Irvine.

BTW, many of these Asians HATE other Asians races (competitive history) and would rather live among "white" neighbors.  (living in a white neighborhood is perceived as successful and also safer from an investment standpoint)

I'm not entirely convinced about the influx of cash buyers but a stronger $ may reverse the trend.  Interesting thing is that Irvine doesn't seem to have many buyers from Japan and the European nations despite their home currency strength vs. the $.