Housing Analysis

[eyephone]

Not surprised by the big home improvement stocks. Lets look at the results.

Lowe?s LOWERS forecast for the year, Lowe?s adjusted earnings per share $1.22  vs estimate $1.33, revenue came lower than expected. However, same stores sales up.

Home Depot with $2.27 per share vs. estimate $2.18, however same stores sales lower than expected
https://www.google.com/amp/s/financ...ts-first-quarter-2019-earnings-100446443.html

Lowe?s https://www.cnbc.com/2019/05/22/lowes-shares-down-after-posting-mixed-first-quarter-earnings.html

 

[Loco_local]

will this have any impact in Irvine

H-1B visa: Government says work ban for H-4 spouses coming this month
After a series of delays, the federal government is now saying it will this month publish a long-promised rule to strip spouses of H-1B visa holders of their right to work.

The news came via an update to the federal government?s ?unified agenda.? The page dedicated to the planned work-ban has been changed to provide a new time-frame for the draft rule to be published, saying it will happen this month.

The prohibition would affect wives and husbands of H-1B visa holders on track for a green card. University of Tennessee researchers have estimated that 93 percent of the approximately 100,000 spouses, who are on the H-4 visa, are women from India.

https://www.ocregister.com/2019/05/23/h1b-visa-h4-spouses-work-ban/

 

[eyephone]

will this have any impact in Irvine

H-1B visa: Government says work ban for H-4 spouses coming this month
After a series of delays, the federal government is now saying it will this month publish a long-promised rule to strip spouses of H-1B visa holders of their right to work.

The news came via an update to the federal government?s ?unified agenda.? The page dedicated to the planned work-ban has been changed to provide a new time-frame for the draft rule to be published, saying it will happen this month.

The prohibition would affect wives and husbands of H-1B visa holders on track for a green card. University of Tennessee researchers have estimated that 93 percent of the approximately 100,000 spouses, who are on the H-4 visa, are women from India.

https://www.ocregister.com/2019/05/23/h1b-visa-h4-spouses-work-ban/

Maybe

 

[irvinehomeowner]

So summer is around the corner and prices are... going back up.

Seasonal?

 

[irvinehomeowner]

Here, since some prefer data anb news from other sites:

Amid housing slowdown, Southern California prices rise slightly in Aprilhttps://www.latimes.com/business/la-fi-southern-california-home-prices-20190529-story.html

In a report released Wednesday, real estate firm CoreLogic said the six-county median sales price climbed 1.4% from a year earlier to $527,500. Sales, meanwhile, were up nearly 12% from March ? far more than the average 2.2% month-to-month increase seen in April as the home-selling season heats up.

"Home-selling season"? What is that?

But sure, there was some "slowdown":

However, the annual gain in prices was far smaller than in recent years and the median ? the point where half the homes sold for more and half for less ? remains $7,500 below the all-time high reached in June.

$7500 difference so far. Is that large? So who wants to bet if it will be higher or lower than last year once June is over?

Overall, numbers say slightly increased or flat (similar to TI's poll:https://www.talkirvine.com/index.php/topic,16587.0.html):

Last month, the median increased or stayed flat in each corner of the Southland, with recorded gains smaller than in years past.

In Los Angeles County, the median rose 3% from a year earlier to $607,750, while sales fell 0.9%.
In Orange County, the median rose 2.8% to $735,000, while sales fell 8%.
In Riverside County, the median rose 3.6% to $390,000, while sales fell 3.3%.
In San Bernardino County, the median rose 1.5% to $335,000, while sales fell 4.7%.
In Ventura County, the median was flat at $585,000, while sales fell 0.2%.
In San Diego County, the median was flat at $570,000, while sales fell 3.4%.

But what does MLS data know? How about that Case-Shiller Index?

Other housing measures also show a slowdown. The S&P CoreLogic Case-Shiller index is considered the gold standard of price measurements, though it provides a delayed snapshot. On Tuesday, the latest data were released, showing prices in Los Angeles and Orange counties rose 1.3% in March from a year earlier.

Don't look at me... just reporting the data.

 

[irvinehomeowner]

So who is going to explain that even though volume was lower this last year than previous years, prices still went back up to where they were last year in Irvine (and SoCal actually)?

I believe the median high in Irvine last year was $850k in Sept 18 (not July 18 as some people called) and it has hit that high this year in May and again in July. Will it continue to go up or are we looking at another "slowdown"?

Number of sales is over 25% less than it was a year ago (506 vs 700), yet prices are still high... why? Let's say price lags volume, volume was at its lowest in Feb/Mar of this year (361), the lowest it's been in 10 years, but prices went back up.

Fundamentals say that prices should be going lower because of the lower volume, but as I've said in the past, my time in Irvine has shown me that Irvine has too many non-fundamental factors that make it hard to figure out what is going to happen.

I've stated why i think Irvine is so stubborn, but people feel I'm biased so maybe someone else who isn't an Irvine proponent can give their opinions on what is going on here.

 

[zubs]

Housing volume goes up...prices remain flat. why?
Because lending standards became really tight after the last downturn and the owners don't have to sell.

Also, the dow has been around 26,000 since the end of 2017.  If we end the year 2019 at 26,000 then the stock market would have gone no where for the last 2 years.  Perhaps that will relieve the pressure of everyone thinking the market will drop.  If we can hold it flat I think it'll be a win.

 

[fortune11]

I have been saying on this forum like a broken record for quite some time - there is no recession and wont be a recession , in the conventional terms as we have historically known it. 

but that doesn't mean asset prices (whatever - stocks, bonds , homes) - cannot correct and move up or down. hence prudent risk management in line with your own personal needs is first and foremost importance

problems happens when we tie a "recessionary angle" to every analysis centered around any given asset price.  in this case say, "homes" . 

people have missed massive gains in equities in the last 10 years trying to protect against the next 5 percent down and based on misplaced fears of "fed pushing on a string" ..

think of it this way - we know a vast majority of stocks under perform the broad index , right ?

but there are superstar stocks which outperform by a wide margin to make up for the vast majority of laggards.  similar principle, but on a different scale , applies to real estate locations. I haven't lived here long enough to claim Irvine is a "superstar" , but certainly has non-replicable attributes compared to a vast majority of other suburban areas in CA. 

when it doubt, always think about "liquidity" in the system (availability of capital).  is it going up or down ? when supply floods the market but liquidity stretched , market has nowhere to go but down. 

when supply is increasing, but system liquidity is also increasing at the same time, then it is much tougher call and things can break either way, but unlikely to break in a big way .
 

 

[usctrojancpa]

My take is that the lower rates have stabilized prices for both the lower end and middle of the market (ever now and again I see multiple offer situations in these price segments).  I've had over half a dozen come off the sidelines this year because of the lower rates along with signs of price stabilization.  The higher end is a completely a different story with a lot of inventory, including substantial quick move-in builder inventory.  That being said, builders are beginning to slow down their construction pace so if sales volume continue to stay flat we'll begin clearing both the builder and resale inventory.  I just can't see how we can have big price declines if the job market is strong, rates stay low, and/or inventory levels don't significantly increase.

 

[irvinehomeowner]

I just can't see how we can have big price declines if the job market is strong, rates stay low, and/or inventory levels don't significantly increase.

But what about the Great Slowdown?

Other than volume, I have yet to see an overall marked drop in prices that is outside the range of seasonal drops. I've been told that a low volume/high prices environment is not sustainable so does that mean we will see prices go lower in the next year (as opposed to this past year like others were saying)?

Who is making the call for this year? Slowdown again? Are we at the top? Analysis time!!!

 

[irvinehomeowner]

Here, since some prefer data and news from other sites:

Amid housing slowdown, Southern California prices rise slightly in Aprilhttps://www.latimes.com/business/la-fi-southern-california-home-prices-20190529-story.html

Since I can't get past the OCReg paywall, here is the same article from LA Times for May (published June 26):

Southern California home prices are flat in May as sales fallhttps://www.latimes.com/business/la-fi-southern-california-home-prices-20190626-story.html

The Southern California median home price barely budged in May, a sign that the housing market remains soft despite a sustained drop in borrowing costs.

The six-county median ? the point where half the homes sold for more and half for less ? rose just 0.2% from May 2018 to reach $530,000, according to a report released Wednesday by CoreLogic.

Sales, meanwhile, dropped 2.7% from a year earlier.

So as I've said on the Housing Bottom thread, while volume is down, prices are almost the same or higher than last year.

But, the article does mention a prediction of future drops:

John Burns Real Estate Consulting predicts declines ahead, in part because it?s forecasting a slowdown in the economy, with slight job losses nationally in 2021. The Irvine researchers said prices this year in Los Angeles County should be essentially flat, while they?ll drop 2% in Orange County. In 2020, it said, prices are likely to fall 1% in Los Angeles County and 3% in Orange County.

So a combined 5% drop in the next year or so in Orange County? So again, I wouldn't wait for a 5% drop... but others might. And if you waited until now from when this slowdown call was first made, there was almost zero movement in prices, even if you timed the "bottom" right and bought in February 2019, the drop was just over 4%.

Sure, rates are lower now, so you can factor that in as cheaper to buy, but then again, you could also refinance now to capture that savings.

But maybe people should wait until December, when prices are usually lower. That's also a hedge because in December 2018, Irvine prices ticked slightly up, so if prices do their usual "seasonal" drop in December, the YOY comparison could show prices are down more than it normally does.

The remarkable thing about this is volume numbers are definitely down, it's just not having the effect on prices that it should... and that's my question. Is it really a lag (especially because volume has gone up recently) or is it Unicorn magic that's keeping these prices expensive?

Irvine is too expensive, so I do think we should see drops in prices, but unless some big event happens (which we seem to be due for), a sustained slowdown in volume just doesn't seem to have the effect on prices that it should.

 

[lnc]

The housing shortage in OC will keep Irvine price high for a long long time. 

https://www.ocregister.com/2019/07/...fall-projected-to-reach-114000-units-by-2045/

Orange County housing shortfall projected to reach 114,000 units by 2045

Orange County needs to build 58,000 new homes to meet the needs of its current residents and stem rising home prices, skyrocketing rents and growing homelessness, a new report says.

And if the pace of construction doesn?t pick up, that deficit will virtually double over the next quarter century.

 

[zubs]

What about rents?  Are rents going up, flat, or down?
From talking to renters, it feels like rents are going up.


How will real estate drop if rents are rising?


Anecdotally, back in 2016, I raised my rent from $2100 to $2700...and there were still 4 people interested, and that was only after 2 days on the rental market.

 

[irvinehomeowner]

On one of those sites I look at, it shows rents were rising.

That jives with less people buying.

 

[usctrojancpa]

On one of those sites I look at, it shows rents were rising.

That jives with less people buying.

Rents are flat to slightly up from what I see.

 

[paperboyNC]

On one of those sites I look at, it shows rents were rising.

That jives with less people buying.

If housing is overbuilt / housing demand drops, rents will fall as well. Back in 2009/2010 every single "expert" seemed to be predicting sky-rocketing rents with all of the foreclosures while I predicted falling rents.

What actually happened:
Foreclosures bought up by investors and rented out: increase in supply
Foreclosed young homeowners moved in with mom & dad: reduce in demand
Employed bunked up: reduce in demand
Entire condo towers were turned into apartments: increase in supply
(https://www.hechtsolberg.com/sale-of-vantage-pointe-the-largest-mixed-use-high-rise-condominium-project-in-san-diego-sold-to-equity-residential/)

 

[potsticker]

Anecdotes from the front lines this week working with my buyer client:

- Made a reasonable offer (backed by comps) on a detached condo in CV listed for 21 days at $1m+. Seller balked and wanted higher than market value.
- Made a reasonable offer (backed by comps) on a detached condo in EW listed for 30 days at $900k+. Seller balked and wanted higher than market value.
- Visited Reserve and viewed Verdi, Vivo, Lago - a wide selection of inventory and all around $1.2m. Irvine Pacific is motivated and willing to accept offers.

In summary (not just based off this example), resale supply is low and the sellers have significant equity and are willing to wait the market out for their desired price. If they don't get it, they'll hold on or rent.

For new construction, there is a lot of supply - ranging from quick move-ins to dirt lots. Builders are open to offers and are increasing broker co-ops, but at the same time, slowing the construction timeline. I've seen more than 2 developments with homes that should've been completed in the 1st quarter of the year, but still incomplete and construction stalled so that, "the buyer can select their own flooring." My guess is we will continue seeing builders control inventory by slowing of new phase releases until stagnant inventory has been moved.

 

[sell4u]

Recent OC reg article on rents.  Rents seem to be moving up fairly swiftly
https://www.ocregister.com/2019/07/...ent-inflation-up-5-8-biggest-hike-since-2008/

 

[irvinehomeowner]

LA Times article (since I can't get through the OCReg paywall):
https://www.latimes.com/business/st...-california-home-prices-barely-budged-in-june

Southern California home prices rose only 1.2% in June from a year earlier, while sales fell 8.8%, reflecting a broad slowdown in the region?s pricey housing market.

The six-county region?s median price ? the point at which half the homes sold for more and half for less ? clocked in at $541,250 last month, according to a report Friday from CoreLogic.

Although that price is a record, the modest rise indicates buyers aren?t willing or able to aggressively bid up homes after years of sharp price increases that have sparked renewed concerns over the lack of affordable housing in the Golden State.

So YOY, prices were slightly higher in June than last June. So, yes, slowdown in volume but prices did not go down significantly.

Here is a breakdown of prices and sales in each county:

In Los Angeles County, the median price rose 0.5% to $618,000 in June and sales fell 12.1%.
In Orange County, the median price slipped 0.3% to $738,000 and sales fell 9.4%.
In Riverside County, the median price climbed 5.3% to $399,000 and sales fell 4%.
In San Bernardino County, the median price rose 1.5% to $340,000 and sales fell 11.4%.
In Ventura County, the median price dropped 5.7% to $580,000 and sales rose 1.6%.
In San Diego County, the median price rose 2.6% to $590,000 and sales fell 7.4%.

Although the market has slowed, many economists say a crash in values is unlikely. The economy may not be strong enough to support steep price increases, they say, but a low rate of home building and continued job growth mean enough people will probably be willing to buy a home at, or at least near, today?s prices.

The California Assn. of Realtors recently revised its 2019 sales forecast, in large part because of falling mortgage rates. It still predicts the smallest annual price appreciation of the current real estate upswing, but the group now forecasts a 4% gain in the statewide median price for a previously owned single-family home. Before, it was predicting a 0.2% decline.

Richard Green, director of the USC Lusk Center for Real Estate, said today?s tight lending standards will provide a barrier against a wave of foreclosures similar to the one last decade that helped crash the market.

So again, back to my original premise, while there may be a slowing in volume, if that doesn't reflect in pricing, what were people waiting for?

There were a few in this thread who claimed that prices would drop enough to wait, as far as I can tell, that didn't happen. So now what? Wait for December? Wait for 2020?

 

[Mety]

LA Times article (since I can't get through the OCReg paywall):
https://www.latimes.com/business/st...-california-home-prices-barely-budged-in-june

Southern California home prices rose only 1.2% in June from a year earlier, while sales fell 8.8%, reflecting a broad slowdown in the region?s pricey housing market.

The six-county region?s median price ? the point at which half the homes sold for more and half for less ? clocked in at $541,250 last month, according to a report Friday from CoreLogic.

Although that price is a record, the modest rise indicates buyers aren?t willing or able to aggressively bid up homes after years of sharp price increases that have sparked renewed concerns over the lack of affordable housing in the Golden State.

So YOY, prices were slightly higher in June than last June. So, yes, slowdown in volume but prices did not go down significantly.

Here is a breakdown of prices and sales in each county:

In Los Angeles County, the median price rose 0.5% to $618,000 in June and sales fell 12.1%.
In Orange County, the median price slipped 0.3% to $738,000 and sales fell 9.4%.
In Riverside County, the median price climbed 5.3% to $399,000 and sales fell 4%.
In San Bernardino County, the median price rose 1.5% to $340,000 and sales fell 11.4%.
In Ventura County, the median price dropped 5.7% to $580,000 and sales rose 1.6%.
In San Diego County, the median price rose 2.6% to $590,000 and sales fell 7.4%.

Although the market has slowed, many economists say a crash in values is unlikely. The economy may not be strong enough to support steep price increases, they say, but a low rate of home building and continued job growth mean enough people will probably be willing to buy a home at, or at least near, today?s prices.

The California Assn. of Realtors recently revised its 2019 sales forecast, in large part because of falling mortgage rates. It still predicts the smallest annual price appreciation of the current real estate upswing, but the group now forecasts a 4% gain in the statewide median price for a previously owned single-family home. Before, it was predicting a 0.2% decline.

Richard Green, director of the USC Lusk Center for Real Estate, said today?s tight lending standards will provide a barrier against a wave of foreclosures similar to the one last decade that helped crash the market.

So again, back to my original premise, while there may be a slowing in volume, if that doesn't reflect in pricing, what were people waiting for?

There were a few in this thread who claimed that prices would drop enough to wait, as far as I can tell, that didn't happen. So now what? Wait for December? Wait for 2020?

Man, who waited? What a waste of time, huh?