Woodbury East Opening July 11, 2009

NEW -> Contingent Buyer Assistance Program
[quote author="ABC123" date=1247778081]Now is the time to buy! Look at how much housing prices have dropped since 2006!</blockquote>


I hope you aren't talking about the video Graph posted. Since that was about household income.



Either way -



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[quote author="rickhunter" date=1247743336]TIC is probably trying to feel the market out and going the safe route by pricing these units conservatively.

It's a wait and see approach and from what they saw, they can plan accordingly after each phase.

Isnt that the approach every builder uses? In a down market, up market?



I think you're reading too much into this...



[quote author="IrvineRenter" date=1247729801]I was speaking with someone from work today, and he gave me the most plausible theory as to why TIC priced these units below comps.



By selling a very small phase very quickly at a below market cost, they generate a large amount of activity and "buzz." When the next phase is released, it too will be below market even though the prices will be higher. Thus they will have released two phases at increasing but below market prices generating "momentum" of price and sales. This surely looks like a bottom, and it allows them to raise prices in subsequent phases.



The theory is that when they reach the level of the current comps in phase 3 or 4, they have momentum to carry them through the project, even if that market is declining and the last phases may actually be priced over comps.</blockquote></blockquote>


I don't see builders price conservatively very often. The main reason you see a 10% premium on new versus resale is that builders generally overprice and lead the market higher. People willingly overpay for new (which of course makes it market price).



It is very important for a builder to have positive price and sales momentum. Buyers must believe that prices will not be lower in future phases or the rate of sales falls off a cliff (see 2008).
 
[quote author="IrvineRenter" date=1247729801]I was speaking with someone from work today, and he gave me the most plausible theory as to why TIC priced these units below comps.



By selling a very small phase very quickly at a below market cost, they generate a large amount of activity and "buzz." When the next phase is released, it too will be below market even though the prices will be higher. Thus they will have released two phases at increasing but below market prices generating "momentum" of price and sales. This surely looks like a bottom, and it allows them to raise prices in subsequent phases.



The theory is that when they reach the level of the current comps in phase 3 or 4, they have momentum to carry them through the project, even if that market is declining and the last phases may actually be priced over comps.</blockquote>


Your source from work agreed completely with my posts from several months ago that TIC would have a massive PR campaign on the buying frenzy. The evidents are clear in the news media as well several IHB trolls. I did not suspect that the pricing would be below the benchmark of $333/sf for attached products. It is obviously TIC has been following our posts closely for consumer reaction and acceptance and pulled out a landmark strategy that created the buying frenzy and momentum of buyers desperately seeking a new home.



Chinese buyers especially seeking for bargain recognized the new home pricing is lower than its resale predecessors. The frenzy publicity is what TIC needed the most and it was achieved effectively. Eventually TIC will raise prices to reach the Benchmark gauge.
 
How easily do you think those 13 buyers will be able to flip their property after the newer, pricier phases get released? Do you think they can make a 10 or 20% profit?
 
[quote author="ABC123" date=1247790217]How easily do you think those 13 buyers will be able to flip their property after the newer, pricier phases get released? Do you think they can make a 10 or 20% profit?</blockquote>


Most of the buyers were Chinese with a good chunk of down payment. The good chunk of down payment is also an indicator of a 1.0 generation not dependent on credit like the ABC generation. IHO's FCB theory is not exactly accurate. Chinese is very clever in hiding their income from the government. Their documented income would not allow them to qualify for a loan. This is the primary reason why Chinese buyers use a large cash down payment. If I do not have to give Uncle Sam 40% of my income I would have a big chunk of cash too under my mattress.



Chinese businesses outside of Irvine do most transactions on cash basis. Sam Woo BBQ's cash only policy in Irvine is one example in hiding its revenues. By offering pig kidneys and duck tongue on menu is a good way to turn away patrons who utilize credit cards to pay for their meals.



There is an agreement signed for at least a one year owner occupied as to protect the builders from resale competition.
 
Those agreements aren't worth the paper they are printed on. I don't know anyone, even during the boom years, who ever had one of those agreements upheld. Even if they tried, the builder risks the possibility of you hanging a big "I got screwed by the Irvine Company" sign on their garage door which builders really don't want.



I noticed new Irvine Company directional signs being put up on the 241 toll road near the Portola Exit. I doubt it's just for Woodbury East only, but also Portola Springs. Some of the areas around there appear to be sprucing up a bit so they might be starting some work in the coming months at PS as well.



My 02c



Soylent Green Is People.
 
[quote author="bkshopr" date=1247793477]If I do not have to give Uncle Sam 40% of my income I would have a big chunk of cash too under my mattress.



</blockquote>


Don't ever walk into Hing Wa Lee or Chong Hing with a credit card if you expect the special discount.
 
[quote author="High Gravity" date=1247794864][quote author="bkshopr" date=1247793477]If I do not have to give Uncle Sam 40% of my income I would have a big chunk of cash too under my mattress.



</blockquote>


Don't ever walk into Hing Wa Lee or Chong Hing with a credit card if you expect the special discount.</blockquote>


Hing Wa Lee is now David Lee to end the trail of the IRS.
 
As detached condo resales are coming down in value TIC researched the next notch up competition to make sure Ivy is priced below the resales of both Aldea and Wisteria to lock in the consumers decision to buy the lowest price product available and the novelty of "new" is a even a huge bonus for Chinese buyers.



Both Andover and Tamarisk homeowners with the exact Ivy Plans bought in the 500-600k are the huge losers. Their property value just went down 40%. I guess after all buying in Irvine is not a guarantee of value protection. I talked to a homeowner in Tamarisk and she was distraught from seeing Ivy's pricing and her equity just evaporated 40%. She regrets buying her property.
 
[quote author="bkshopr" date=1247797675]As detached condo resales are coming down in value TIC researched the next notch up competition to make sure Ivy is priced below the resales of both Aldea and Wisteria to lock in the consumers decision to buy the lowest price product available and the novelty of "new" is a even a huge bonus for Chinese buyers.



Both Andover and Tamarisk homeowners with the exact Ivy Plans bought in the 500-600k are the huge losers. Their property value just went down 40%. I guess after all buying in Irvine is not a guarantee of value protection. I talked to a homeowner in Tamarisk and she was distraught from seeing Ivy's pricing and her equity just evaporated 40%. She regrets buying her property.</blockquote>


<a href="http://www.irvinehousingblog.com/forums/viewthread/143/">like this one?</a>
 
Just because another plan with limited release in WB east (with the 133 as your neighbor, far from everythign) is being offered below market value does not mean that your place with the same floorplan in Northpark instantly lost value. I dont think someone would have a very hard time selling above the Ivy price/sq.ft. Granted, maybe not full price of what someone paid new, either; the truth is somewhere in between.
 
[quote author="MojoJD" date=1247799875]Just because another plan with limited release in WB east (with the 133 as your neighbor, far from everythign) is being offered below market value does not mean that your place with the same floorplan in Northpark instantly lost value. I dont think someone would have a very hard time selling above the Ivy price/sq.ft. Granted, maybe not full price of what someone paid new, either; the truth is somewhere in between.</blockquote>


Tamarisk is not in Northpark it is by Culver/ I-5. Andover is in Wisteria. Your thought would apply if tamarisk is on the view tier in Crystal Cove. Beware this product is a centipede. It can grow to a 6-7 plex to pick up more density to compensate the initial introductory pricings.
 
[quote author="bkshopr" date=1247797675]As detached condo resales are coming down in value TIC researched the next notch up competition to make sure Ivy is priced below the resales of both Aldea and Wisteria to lock in the consumers decision to buy the lowest price product available and the novelty of "new" is a even a huge bonus for Chinese buyers.



Both Andover and Tamarisk homeowners with the exact Ivy Plans bought in the 500-600k are the huge losers. Their property value just went down 40%. I guess after all buying in Irvine is not a guarantee of value protection. I talked to a homeowner in Tamarisk and she was distraught from seeing Ivy's pricing and her equity just evaporated 40%. She regrets buying her property.</blockquote>


This is a sobering reminder to Irvine homeowners that TIC's intererests are not always aligned with Irvine homeowners: TIC can just as easily lower home values in Irvine as raise them.
 
[quote author="High Gravity" date=1247803899][quote author="bkshopr" date=1247797675]As detached condo resales are coming down in value TIC researched the next notch up competition to make sure Ivy is priced below the resales of both Aldea and Wisteria to lock in the consumers decision to buy the lowest price product available and the novelty of "new" is a even a huge bonus for Chinese buyers.



Both Andover and Tamarisk homeowners with the exact Ivy Plans bought in the 500-600k are the huge losers. Their property value just went down 40%. I guess after all buying in Irvine is not a guarantee of value protection. I talked to a homeowner in Tamarisk and she was distraught from seeing Ivy's pricing and her equity just evaporated 40%. She regrets buying her property.</blockquote>


This is a sobering reminder to Irvine homeowners that TIC's intererests are not always aligned with Irvine homeowners: TIC can just as easily lower home values in Irvine as raise them.</blockquote>


Totally true but buying in Irvine is still by far the safest bet compared to other newer suburbs. The reuse of existing products is a double edge sword. It can raise prices as well as lowering prices as we have witnessed recently. Cal Pac remaining dormant in home building is helping the detached condos from falling prices. Detached condos are not ideal for BagOChip approach because it is extremely difficult to bulk up footage without hurting the Paseo walkway. The technical constraint layered with complex city code criteria made this product impossible for evolution.



Unless someone can mastermind an improved version of detached condo with full backyards and better density I see this product becoming extinct because in todays market SF is needed to support land residual. Cobblestone in Oakcreek may be the ideal solution for developer's financial equation. This product the front doors are off the greasy motorcourt instead of a dedicated landscape pedestrian paseo.
 
[quote author="ABC123" date=1247790217]How easily do you think those 13 buyers will be able to flip their property after the newer, pricier phases get released? Do you think they can make a 10 or 20% profit?</blockquote>


Your kidding right. They will have very small increase in the next phase or maybe none at all. It does not matter as they will not get the appraisals to match the 1st phase prices let alone further phases. They are overpriced as is and combine that with the cost of reselling these homes after purchase, stagnate values will be the name of the game for a long time so seeing 10 or 20 percent profit then you are living in the summer of 2006 and drinking lots of kool-aid;)
 
[quote author="bkshopr" date=1247797675]As detached condo resales are coming down in value TIC researched the next notch up competition to make sure Ivy is priced below the resales of both Aldea and Wisteria to lock in the consumers decision to buy the lowest price product available and the novelty of "new" is a even a huge bonus for Chinese buyers.



Both Andover and Tamarisk homeowners with the exact Ivy Plans bought in the 500-600k are the huge losers. Their property value just went down 40%. I guess after all buying in Irvine is not a guarantee of value protection. I talked to a homeowner in Tamarisk and she was distraught from seeing Ivy's pricing and her equity just evaporated 40%. She regrets buying her property.</blockquote>
Was she a Chinese buyer who used a big downpayment to purchase the property?
 
[quote author="bkshopr" date=1247793477][quote author="ABC123" date=1247790217]How easily do you think those 13 buyers will be able to flip their property after the newer, pricier phases get released? Do you think they can make a 10 or 20% profit?</blockquote>


Most of the buyers were Chinese with a good chunk of down payment. The good chunk of down payment is also an indicator of a 1.0 generation not dependent on credit like the ABC generation. IHO's FCB theory is not exactly accurate. Chinese is very clever in hiding their income from the government. Their documented income would not allow them to qualify for a loan. This is the primary reason why Chinese buyers use a large cash down payment. If I do not have to give Uncle Sam 40% of my income I would have a big chunk of cash too under my mattress.



Chinese businesses outside of Irvine do most transactions on cash basis. Sam Woo BBQ's cash only policy in Irvine is one example in hiding its revenues. By offering pig kidneys and duck tongue on menu is a good way to turn away patrons who utilize credit cards to pay for their meals.



There is an agreement signed for at least a one year owner occupied as to protect the builders from resale competition.</blockquote>


Bk, is it safe to say that most 1st gen Chinese tend to be entrepreneurial and business owners. Partly because of their lack or education, language and cultural barriers, they don?t come here trying to break into corporate America. Some are blue collar as plumbers, contractors, mechanics or electricians. Others are white collar in some sort of retail, restaurant owner, factory operation/manufacturer/distribution or import export business. As you mentioned, they are good at evading the IRS; thus coming up with the larger down?



Now 2nd gen, or ABCs tend to be better educated, and more likely to be in corporate; it?s much harder to evade the IRS; thus they might be able to afford a large monthly payment but tend to have a much smaller down. Couple that with their hunger for credit and immediate gratification; most have very little down, the only except is for the large down that their 1st gen parents give them.



The only other exception is the 2nd gen doctors or lawyers who own their own practice; other than that most of my 2nd gen peers find it very hard to in our 30s to have more than a couple of hundred thousands in the bank? well except for those who sold at the peak with equity money?
 
So has anyone been back to Ivy since the initial frenzy? I was planning to stop by last weekend to check it out but couldn't make the time.



By the way... has Villa Rosa in Woodbury sold through all their phases already?
 
Did anyone else read the headlines today?



<a href="http://sbk.online.wsj.com/article/SB124870175008183715.html">New-Home Sales Jumped 11% in June From May</a>



Ivy opened.. early this month.. I wonder what July numbers are going to be?
 
[quote author="roundcorners" date=1248756924]Did anyone else read the headlines today?



<a href="http://sbk.online.wsj.com/article/SB124870175008183715.html">New-Home Sales Jumped 11% in June From May</a>



Ivy opened.. early this month.. I wonder what July numbers are going to be?</blockquote>


Uh... yes... I think most of us around here read the MSM, but we also read <a href="http://www.calculatedriskblog.com/2009/07/new-home-sales-increase-in-june-highest.html">Calculated Risk</a> and <a href="http://www.ritholtz.com/blog/2009/07/new-home-sales-fall-213/">The Big Picture</a>, which remind everyone it is the YOY numbers that matter and not the MOM.



Does this chart look like they jumped up in June? Especially when the margin of error is +/-13.2%?



http://i27.tinypic.com/2ai3215.jpg



The real headline should be: "Despite the 13 sales in Woodbury, new home sales continued their death spiral, dropping <strong>21.3%</strong> year over year."
 
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