Feeling like 2006...

Lallo

New member
Anyone else fee like it's 2006 all over again. Buyers seem to be bidding up houses like crazy today. Some houses don't even make it to the first open house before it goes into pending. I'm thinking of waiting out this madness. What's everyone's take on this?
 
Not even close.  Doesn't feel like 2006 at all.  I don't see no income no doc loans or people buying multiple homes with no $0 down with 100% leverage.  People lining up like lemmings.  Supply is so low for home priced below $800k.  Millenials (demographics that will surpass Baby Boomers) are just starting to jump in the home ownership.  Economy is still humming pretty nicely without any signs of overheating. 

 
It feels like 2002.  You guys got 4-5 years before the next peak.

1991 - peak - Japanese stock market takes a shit
15 years later
2006 - peak - Too many liar loans.  Banks selling junk investments.at A ratings.
15 years later
2021 - peak - Chinese stock market takes a shit?

something like that.

One should probably account for the internet age speeding up the cycle...so perhaps 2019 will be the peak.
 
zubs said:
It feels like 2002.  You guys got 4-5 years before the next peak.

1991 - peak - Japanese stock market takes a shit
15 years later
2006 - peak - Too many liar loans.  Banks selling junk investments.at A ratings.
15 years later
2021 - peak - Chinese stock market takes a shit?

something like that.

1989 was the local peak, not 1991 and it coincided with the savings and loan crisis.

One should probably account for the internet age speeding up the cycle...so perhaps 2019 will be the peak.
 
Nah, not quite like 2006.  Stricter lending standards are in place, so I don't think we're going to be surprised by mortgages defaulting by design.  But it does seem... expensive... 

Over $1M asking for an attached condo (Vista Scena Plan 3 model). 

The Dow, Nasdaq, and S&P continue to make new record highs. 

Non fast food meals for under $10 are getting rarer.  Most "half decent" sit-down meals with a server are costing me $20 per person w/o drinks.  Grocery prices continue to creep up. 

Interest rates are treading up, though that's debatable (which is odd since the fed is expected to continue raising short term rates and dial back it's long term bond purchases [less demand -> lower prices -> higher rates])

Just seems expensive out there, to me at least.  On the other hand, it seems like a substantial portion of the new Irvine home buyer demographic is not sensitive to the rising house/food/debt prices, so go figure ?\_(?)_/?
 
Having lived through OC's Crash of 79, the Boom of 1985, The crash of 1991, the Boom of 1998, the Crash of 2001 and subsequent Boom through 2007, there is absolutely a whiff of 2006 in the air. People forget that trees do not grow to the sky. We've become complacent again what with fattening 401k's, and property values stabilized. That said, with everything being artificially juiced with low rates, infinite bread, and ever more bizarre circuses, it's 100% impossible to tell when things will begin to correct - but like any cycle a correction will come. 

Plan accordingly.

My .02c

Soylent Green Is People.
 
The next crash will be a big drop in buyers demand. The real estate transactions volumes will craters.

With the lessons from the last crash, lenders will be hesitant to process their foreclosures quickly and flood the market with REO. Plus, most of the loans today are 30-year fixed-rate mortgages which historically have proven much more stable. In all likelihood, the next market deflation will be a long, slow grind as prices gently fall along with affordability limits.
 
Affordability is still really good. You can get into a $1M home for about $5k a month PITI+HOA and <$4k a month after taxes. Demand >>> supply at that level. Short of recession, hard to see prices falling back more than 5% and even in a mild recession doubt u go down more than 10% due to all the strong buyers post 2009.
 
i1 said:
Affordability is still really good. You can get into a $1M home for about $5k a month PITI+HOA

I'm curious about that statement, so I ran some numbers.  Detailed assumptions and calculations are listed in the attachment.  It's probably not perfectly precise, but the gist of it is:

ASSUMPTIONS: DINK, no car payments, employer subsidized health insurance, healthy, $200,000 down payment, $75k cash reserves, no other debt payments, saves 15% of gross for retirement.

RESULT: A household would need gross income of $178k to fit in to the "house payment should be no more than 35% of gross" rule of thumb.  They would have about $550 per month of positive cash flow after the necessities (taxes, house, food, insurance, transportation, retirement) are covered. 

Less than 8% of US households make at least $178k per the 2016 BLS Reports https://www.census.gov/data/tables/time-series/demo/income-poverty/cps-hinc/hinc-01.html
 

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You really can't compare the average US Household income numbers with Irvine and surrounding cities.  I don't know anyone with dual income that makes less than 200k a year. 
 
woodburyowner said:
You really can't compare the average US Household income numbers with Irvine and surrounding cities.  I don't know anyone with dual income that makes less than 200k a year.

Here's the best objective data I found with a quick google of Irvine's household income stats.

http://www.bestplaces.net/economy/city/california/irvine

I don't really know the data source and those bins are fairly wide, but it looks like around 20% of Irvine households make over $178k. 

The DINK assumption is there to make the payroll tax, retirement deferrals, and income tax calculations more straight forward.  If you ignore the DINK assumption (i.e. single earner household), it's a similar result. 
 
woodburyowner said:
You really can't compare the average US Household income numbers with Irvine and surrounding cities.  I don't know anyone with dual income that makes less than 200k a year.

Just taking a guess not everybody makes an average of $100K in Irvine.
 
No way you can find the average household income in Irvine.

Skewed by:

- Students
- Older families who paid much lower prices than current values
- FCBs who don't report income but have bought tons of real estate in Irvine

etc etc
 
someguy said:
i1 said:
Affordability is still really good. You can get into a $1M home for about $5k a month PITI+HOA

I'm curious about that statement, so I ran some numbers.  Detailed assumptions and calculations are listed in the attachment.  It's probably not perfectly precise, but the gist of it is:

ASSUMPTIONS: DINK, no car payments, employer subsidized health insurance, healthy, $200,000 down payment, $75k cash reserves, no other debt payments, saves 15% of gross for retirement.

RESULT: A household would need gross income of $178k to fit in to the "house payment should be no more than 35% of gross" rule of thumb.  They would have about $550 per month of positive cash flow after the necessities (taxes, house, food, insurance, transportation, retirement) are covered. 

Less than 8% of US households make at least $178k per the 2016 BLS Reports https://www.census.gov/data/tables/time-series/demo/income-poverty/cps-hinc/hinc-01.html
Well done. I'd only quibble that you'd be hard pressed to find people saving 15% of gross for retirement. People would rather raid their retirement allocation/savings to buy real estate. I'm not condoning or criticizing, but I think that's the reality these days.
 
What's better?
Maxing out 401K and IRA every year, or collecting rental properties throughout your life.
 
irvinehomeowner said:
No way you can find the average household income in Irvine.

Skewed by:

- Students
- Older families who paid much lower prices than current values
- FCBs who don't report income but have bought tons of real estate in Irvine

etc etc

Do you think company xyz pays its all employees $100k? (A person that answers phones, mails the package, drives the fork lift, fills the copier with paper makes 100k)
 
eyephone said:
irvinehomeowner said:
No way you can find the average household income in Irvine.

Skewed by:

- Students
- Older families who paid much lower prices than current values
- FCBs who don't report income but have bought tons of real estate in Irvine

etc etc

Do you think company xyz pays its all employees $100k? (A person that answers phones, mails the package, drives the fork lift, fills the copier with paper makes 100k)

those folks don't live in Irvine.  Neither can dual school teacher couples.
 
freedomcm said:
eyephone said:
irvinehomeowner said:
No way you can find the average household income in Irvine.

Skewed by:

- Students
- Older families who paid much lower prices than current values
- FCBs who don't report income but have bought tons of real estate in Irvine

etc etc

Do you think company xyz pays its all employees $100k? (A person that answers phones, mails the package, drives the fork lift, fills the copier with paper makes 100k)

those folks don't live in Irvine.  Neither can dual school teacher couples.

I was just replying to the previous posts.
 
those folks don't live in Irvine.  Neither can dual school teacher couples.
If you inherited a house from your aunt who lived outside of San Francisco, you can afford to live in Irvine on a teacher's salary.

You can also be an office worker if you have parents who pay a significant portion of your down payment.

You could be sixty-five and working at any of those professions and be a homeowner if you bought a house in thirty five or forty years ago.
 
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