The recession is coming

Over the holidays a banker came to my office bearing gifts as bankers do when they want your business.  We got to talking about the economy and he said for 2016, they are getting ready to weather a recession.
 
Anyone also notice number of homes sold in Irvine has cratered? Looks like affordability is becoming an issue. Now that the chinese can't move their money out as easily we will see who can step in to buy these homes.

Year over year price of a sold house is down 6% and number of sales is now headed towards recessionary levels.  Listing price still hasn't reflect this new situation yet so you won't quite see the headlines but it looks like homes are not selling.

Not to mention the thousands of homes about to be built this year in Eastwood and BP and CV...
http://www.trulia.com/real_estate/Irvine-California/market-trends/
 
NewtoIrvine1 said:
Anyone also notice number of homes sold in Irvine has cratered? Looks like affordability is becoming an issue. Now that the chinese can't move their money out as easily we will see who can step in to buy these homes.

Year over year price of a sold house is down 6% and number of sales is now headed towards recessionary levels.  Listing price still hasn't reflect this new situation yet so you won't quite see the headlines but it looks like homes are not selling.

Not to mention the thousands of homes about to be built this year in Eastwood and BP and CV...
http://www.trulia.com/real_estate/Irvine-California/market-trends/
Click to expand...

Is  slowing sales due to the low inventory or is inventory increasing significantly and the sales are slowing at the same time?  There is a difference.
 
Sounds like recession is already here?
What's a better strategy, buy in a village popular with fcb or with local buyers to weather the storm?
 
Just Looked at your Trulia data.  Available listing catered/declined by 20-25% in the past 12 months. Obviously, the volume of sales will not increase as there isn't enough inventory for transactions to happen.
 
There seems to be a big discrepancy between Trulia and Redfin data

Judging by Redfin data

Homes for Sale Dec-15 vs. Prev. Month vs. Prev. Year
# Homes for Sale 566 -12.70% +31.60%
Median List Price $850K +1.30% +11.70%
Median List $/Sq Ft. $441 +0.20% +6.50%

Homes Sold Dec-15 vs. Prev. Month vs. Prev. Year
# Homes Sold 106 -36.90% -49.30%
Median Sold Price $676K -1.00% -8.70%
Median Sold $/Sq Ft. $419 +0.20% +5.80%
% Sale to List 97.50% -0.50% -0.10%

Scroll down to Home price in Irvine area and click Irvine stats and trends. The data above is from December 2015 and in the chart it's updated to 1/11/16 and it's only gotten worse in January

The January numbers shows that the number of homes for sale this year is 540 vs 375 last year this time  and if you look at number of homes sold last 90 days this year 342 homes sold vs 563 sold last year this time.  No abnormal weather trends or significant event this year unless you call the two days of rain a weather event.

Median sold price also decreased 1% MoM and 8.7% YoY which worries me too, List price is definately up and $/Sq ft is up which is good but it shows that people are willing to take a smaller place to pay a lower price and we already knew about the slowdown in the 1M+ priced homes but I think it might trickle down all the way to the 800M+ homes as well as the median sold price is 676k...

https://www.redfin.com/city/9361/CA/Irvine/real-estate#!region_id=9361&region_type=6&market=socal
 
Just FYI, Redfin data just started last month adding all the new homes and every single model homes that are 100+ homes in their listing sourcing from newhomesource.com, etc.  Thus, you are going to have a significant discrepancy of 100+ homes.  Trulia uses same Apple to Apple data in the past 12 months.  Although, it does a poor job on adequately capturing the listings.  Best is to probably look at differences in the MLS listings in the past 12 months.
 
True! but the one thing that still holds is the numbers of homes sold and the price trend.  I do know that the new rules on mortgages got implemented in September so maybe there is an effect there? but i'm not quite sure
 
Goriot said:
Just Looked at your Trulia data.  Available listing catered/declined by 20-25% in the past 12 months. Obviously, the volume of sales will not increase as there isn't enough inventory for transactions to happen.
Click to expand...


decreased sales volume secondary to decreased inventory should not drop sales price but rather increase them. 
 
NewtoIrvine1 said:
True! but the one thing that still holds is the numbers of homes sold and the price trend.  I do know that the new rules on mortgages got implemented in September so maybe there is an effect there? but i'm not quite sure
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TRID only delayed closing a couple weeks.  doesnt change demand, sales nor prices.
 
As I Chinese, I think the FCBs from China will not decreased.
The number of EB5 investors nearly trebled in 2015. As far as I concerned, this number will increased in 2016.
It is true that China Gov imposed more regulation from moving money from China to US. BUT, the goal of these regulations is anti-money laundry and control the foreign currency reserve in a stable level before SDR and IMF.

The bigger trend is that China goverment will allow the free flow of capital in the next 5-10 years, step by step, avoiding any systemic risks.
There is a theory of Impossible trinity in Economic: is a trilemma in international economics which states that it is impossible to have all three of the following at the same time:

A stable foreign exchange rate
Free capital movement (absence of capital controls)
An independent monetary policy

Currently, China government hold up "An independent monetary policy" and "A stable foreign exchange rate";
Hong Kong is Free capital movement (absence of capital controls) and A stable foreign exchange rate--------HKD is linked with USD.

The reform of monetary policy was the "must- to-do-list".

In the reality, China government give some funds and financial institution some special quote to do this, as an experiment.

I have bee living in Irvine for many times. I think this city is unique in the world. It is a ideal living place. The value of Irvine is unique. As there will be more demanding in futures, I am optimistic about the market.

I am sorry for my broken English... I am trying my best to talk from my knowledge and informations.

please feel free ask any question.

 
Oh I don't think the Chinese will stop but the flood that we've seen in the last few years will slow down dramatically as Chinese government's number priority must be to slow down the outflows
http://www.businessinsider.com/capital-flight-concern-in-china-2016-1

Let's face it China has burned through 700 Billion USD already of 4 Trillion in 8 months, unless they stop outflows they have no way of guiding the Yuan down slowly and will cause panic. How much more can they guide the currency at this burn rate and especially as panic sets in , we are potentially looking at a trillion to 1.5 Trillion a year in burn and they don't have the reserves to maintain that burn.

Not to mention to start this year looks like 47 Billion treasuries already sold in first two weeks of 2 weeks of the year...
http://www.zerohedge.com/news/2016-...-treasuries-record-47-billion-sold-first-two-

 
Have to adjust timeline a bit. Closed January Sales are for contracts in November/December. The number of homes going under contract does slow during these months, which translates into lower closings in Jan/Feb.

Yes, to the topic headline, I believe there is enough data to show a recession is coming. I learned however some time ago that when you want to go down stream safely, you row a bit from the right and a bit from the left....

http://www.calculatedriskblog.com/2016/01/update-predicting-next-recession.html

Hedge accordingly.

My .02c

SGIP
 
Soylent Green Is People said:
Have to adjust timeline a bit. Closed January Sales are for contracts in November/December. The number of homes going under contract does slow during these months, which translates into lower closings in Jan/Feb.

Yes, to the topic headline, I believe there is enough data to show a recession is coming. I learned however some time ago that when you want to go down stream safely, you row a bit from the right and a bit from the left....

http://www.calculatedriskblog.com/2016/01/update-predicting-next-recession.html

Hedge accordingly.

My .02c

SGIP
Click to expand...

If a recession does come, do you see newly built IR 2 bedroom condos dropping 20-30% from their current price? Example a attached condo sold for 550k now will be sold for 165k less =  385k?

Did such a drop happen in 2012-2013? Please share thoughts, i have been told by numerous realtors that IR market is insulated from recession due to international interests, cash buyers, safest city, award winning, best schools in USA etc.
 
image_zps3np7xguv.jpeg

 
In 2010, condo prices did drop.  From $650k to $380k for a moment but stabilized at around $475k.  Right now, these condos are going for $550k to $630k.  Go figure.

*These numbers are based on Northpark condos.
 
This is what I saw personally.  A Northpark condo just sold for $630,000 a few days ago after being on the market on and off for 6 months.  I didn't think it was going to sell, but it did.
 
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