Observations from the front lines of the Irvine housing market?
- Thread starter usctrojancpa
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usctrojancpa
Well-known member
I have 3 active buyers looking at $800k+ homes, none of them are cash buyers...anywhere from 25% to 50% down. The market for 4 bed/3 bath homes 2,300sf+ in and around Irvine is very tight right now with not a lot to pick from. There are some nice houses out there but the sellers are asking for crazy prices. The inventory of homes is pretty tight even past the $1m. Once you go above $1.5-$2M there is more to pick from as that segment doesn't have the strong sales that the segment under $1M has.ninja88 said:
usctrojancpa
Well-known member
Attached is the sales data through the end of July. July 2012 sales rose over 14% from July 2011 sales but were down from the level in June 2012. YOY sales increased for the 5th straight month but that may come to an end when we get into August not because there are a lack of buyers but rather a lack of inventory. Inventory levels in July kept bleeding lower and lower ending the month at 390 properties on the market....basically 2 months of inventory (a strong seller's market). What does this mean, well it means that there are some frustrated buyers who keep getting outbid on nice properties that are show well and are priced anywhere around comps. Three out of the last four offers went into multiple counters where my buyers bid above list and slightly above comps and still were not able to get the home (for fourth offer so for a home over $2M where there is more inventory to pick from). There's a lack of all kinds of inventory....standard sales, REOs, and even short sales. So the supply/demand dynamics come into effect with buyers beginning to bid up prices so they can get a home (we are in an artificially low inventory period in my opinion). Because of this ultra low re-sale inventory, homebuilders have benefited greatly with increased sales....Irvine Pacific, The New Home Company, Taylor Morrison, William Lyon, and even KB Homes. A few of the sales people told me that sales really began to pick for them in April/May. If you think inventory levels are bad in Irvine, Aliso Viejo has about 3 weeks of inventory (approx. 60 homes with over 80 sales per month).
So what's causing this low inventory...I think it's a combination of a few things. Things like low interest rates, the national mortgage settlement, HARP 2.0 refinance program, and steady to slightly increasing buyer's demand. Interest rates for a confirming $417k loan dipped down as low as 3.25% near par about 1-2 weeks ago. With the national mortgage settlement in Jan/Feb major lenders agreed to really go out of their to help homeowners modify their loans. The HARP 2.0 refinance program has provided homeowners who were significantly underwater to refinance their loans to these super low rates that we have now. As the sales numbers show that there are plenty of buyers out there. So do I think that prices are going be rising significantly? No, I think appraisal value issues will keep prices from going up too far too fast. The question is where will inventory levels be when we enter the slow selling season (after Labor Day)? :-\
So what's causing this low inventory...I think it's a combination of a few things. Things like low interest rates, the national mortgage settlement, HARP 2.0 refinance program, and steady to slightly increasing buyer's demand. Interest rates for a confirming $417k loan dipped down as low as 3.25% near par about 1-2 weeks ago. With the national mortgage settlement in Jan/Feb major lenders agreed to really go out of their to help homeowners modify their loans. The HARP 2.0 refinance program has provided homeowners who were significantly underwater to refinance their loans to these super low rates that we have now. As the sales numbers show that there are plenty of buyers out there. So do I think that prices are going be rising significantly? No, I think appraisal value issues will keep prices from going up too far too fast. The question is where will inventory levels be when we enter the slow selling season (after Labor Day)? :-\
usctrojancpa
Well-known member
First of all, dont go through the builder's lender....their rates tend to suck. Provident and Amerisave are the low price leaders. Really hard to say where rates will be by year end. My guess is that if things in Europe stay calm and quiet and the stock market keeps moving up and jobs continue to increase so will interest rates and vice versa.Jenita143 said:
Irvinecommuter
New member
USCTrojanCPA said:
Personally, I don't think anything will move until the beginning of the year. With the election coming up, no one wants to rock the boat economically.
usctrojancpa
Well-known member
Ok Irvine Real Estate fans, August was definitely an interesting month. We had a total of 246 sales in August over a 29% increase from the same time last year...the highest level since the bubble days back in 2005. Inventory levels continue to bleed lower and we are down to about 1.5 months of inventory. Inventory levels ranged between about 365 to 385 in August. Buyer demand is increasing while inventory levels shrink which is starting to translate to rising prices. It is getting kinda stupid out there, almost every offer on nice homes priced around comps that I made this last month either had multiple offers and/or the sellers already accepted an offer before I could submit an offer. To say that we are in a seller's market is an understatement. My Irvine listing got 4 offers within 2 days of being listed and my Aliso Viejo listing got 5 offers within 3-4 days. Anyone putting less than 20% or using an FHA loan will have difficultly being competitive in this market. I shutter to think where inventory levels will be once we get into the slow season (late Oct on). If you think Irvine is bad, Aliso Viejo is even work. Aliso had 100 sales in August with about active 60 listings....yes, about 2 WEEKS of inventory. You can almost sense the desperation/frustration of buyers out there...I see it first hand with my buyers. Because of this, some of them are considering buying a new home as the Plan B if they can't find a resale home. It's really anything from the $200s all the way up to $1.5m. Once you get above $1.5m there are a lot more homes to pick from and less competition to deal with. It's definitely a good time to be a seller/builder right now.
High end is almost selling at peak price as well. http://www.redfin.com/CA/Irvine/23-Trumpet-Vine-92603/home/5901271http://www.redfin.com/CA/Irvine/21-Highpoint-92603/home/5900893
Both properties ask for $2.6M and go pending quickly.
Both properties ask for $2.6M and go pending quickly.
Irvinecommuter
New member
USCTrojanCPA said:
I don't think anything will happen until early next year with the election and then lame duck. Also, QE3 is just around the corner.
usctrojancpa
Well-known member
The strong year-over-year sales continue while inventory levels along with interest rates continue to decline. Sept. 2012 sales were up over 20% from Sept. 2011 sales (189 vs 157). Inventory stood at 344 active listings at 9/30/12 or about 1.5 months of inventory (very strong seller's market). Homes that are prices even slightly over comps are flying into escrow with multiple offers and buyers continue to keep getting outbid. There is definitely a sense of frustration out there with buyers and they are beginning to consider if going with Plan B (buying a new home) is the way to go. As inventory levels have continued to decrease, so have interest rates. With the Fed's QE to infinite program 30-year mortgage rates have dipped to 3.125% to 3.25% for loans up to $417k. It is fairly clear now that prices have risen 5-10% since the beginning part of the year in Irvine from what I can tell. As inventory levels continue to dry up as we get into the slow selling season the volume of sales will probably begin to drop as well because of the lack of inventory. Both of the listings that I had (one in Irvine and one in Aliso Viejo) flew into escrow within a week with multiple offers. It is definitely a good time to be a seller and home builder (home builder stocks are up pretty big this year) but maybe increasing prices will bring some stubborn sellers off the fence....I guess we'll see.
usctrojancpa
Well-known member
We ended up 2012 with record low inventory levels in the recent past (last decade) while buyer demand/sales volume continued to increase as the year went one. Inventory levels at 12/31/12 drop above 70% from the level of inventory that we had at 12/31/11 while months of inventory went from 4.5 months to about 1 month over that time. Remember that anything under 3 months supply of inventory is a seller's market. Sales in the year increased to 2,327 from 1,980 in the previous year (avg month sales of 194 in 2012 compared to 165 in 2011) which represents an increase of approx. 17.5%. December 2012 sales increased almost 20% from December 2011 sales. Sales started to really pick up and inventory levels started to significantly fall in April, that's when home builders began to get a tailwind and their sales began to increase and buyer lists began to grow. Heck, we had 7 months in 2012 where YOY sales were up over 15% including a month where we save an increase of over 50%. So what's has been driving sales and the inventory drying up? Well, here are my theories....I believe that buyer demand increased due to a combination of mortgage rates dropping to historical lows (low-to-mid 3%), improving economy and job market, investors looking for yield due to low rates on their deposits, increasing rents, and signs of stabilization in the real estate market. In terms of the supply side, I believe that inventory levels came down due to increasing sales volume, continued bank foreclosure slowness, the HARP 2.0 refi program for underwater owners, sellers waiting for higher prices, and inability for many sellers to become move-up buyers. Unless we see some huge spike in interest rates or the economy has a huge hiccup (as well as China and/or Europe issues), real estate should continue to be strong in 2013 primarily due to a lack of inventory and backlog of buyer/investor demand and can see prices increasing moderately.
usctrojancpa
Well-known member
The first month of the year has been a continuation of what we saw in the 2nd half of last year, a strong seller's market. We had 171 sales in Jan. 2013 which is almost 27% higher than the number of sales we had last year in Jan. Inventory flipped up a bit from the lows that we saw around the holidays and year-end (176 was the low that I saw) to 215 active listings as the end of Jan so we remain in a very strong seller's market. Pretty much every single one of my buyers either keeps getting outbid or running into stubborn sellers who are looking for prices above even recent comps. Many of those buyers are throwing up their hands and getting tired of not having any luck with re-sale homes so I have been registering them at the new home developments. However, I can tell those buyer lists at the home builders are growing and growing. Demand is overwhelming supply because there aren't even enough homes out there for those super motivated buyers who are ready to buy today. I'm beginning to see seller's make the sale of their home contingency upon finding a replacement property and even those properties are going into escrow. This isn't just an Irvine phenomenon because the same demand/supply issue is almost everywhere in Orange County. For example, at the end of Jan. there were only about 30 active listings in all of Aliso Viejo which represents about a whopping 2 WEEKS of inventory given that there are about 70-75 sales in Aliso Viejo each month. Any home that looks nice and is priced within 5% of comps will fly into escrow with multiple offers and that is driving prices higher. I've spoken to several lenders out there asking about what's going on with the foreclosure front and I've been hearing that banks are bulk selling a good part of the foreclosed inventory to institutional investors so for anyone who was waiting for the foreclosure tidal wave might want to stop holding their breath for it to come. On the interest rate front, rates have risen about 1/4% to 3/8% in the past 6-8 weeks but it doesn't look like it's dampened the demand at all. Unless interest rates rise by some significant amount (1%+), I don't see slight to moderate increases to negatively affect buyer demand. It's looking like 2013 will be a seller's market unless something big happens to change it.
homer_simpson
Well-known member
I agree bud!
I think small increases in interest rates will fuel buying activity. They may serve to convince people rates have bottomed and will only rise, and people will fear they need to buy now or be financed out forever. Couple this with tight inventories and we might actually see a marked blip in both prices and sales. Eventually, per economic theory, any sustained higher rates should lead to lower prices, all else being equal.
usctrojancpa
Well-known member
Feb. 2013 was a continuance of what we saw in Jan. 2013, a very strong seller's market with increase prices. Feb. 2013 sales increased about 18% from the same period last year and I would argue that sales would have been higher if not for the ultra low inventory levels. During the month, inventory levels came back under 200 after they peaked around 218 listings in the early part of the month. The number of active listings has increased back up to 215 in the past few days as we begin to enter the spring selling season. The multiple counter offer situation continues for buyers. I'm beginning to see more new listings come onto the market being contingent upon the seller finding a replacement property and even those homes are flying into escrow. Also, many of the new listings that are hitting the market have very lofty asking prices as sellers sense the buyer desperation. New home builder buyer lists continue to grow and developments like The Branches in Woodbridge are commanding beyond premium prices. On the interest rate front, interest rates have ticked back up by about .25% as the economy continues to improve and the stock market keeps grinding higher.
usctrojancpa
Well-known member
The market is white hot. March 2013 sales volume increase over 21% from March 2012 and over 66% from last month. The month had the second highest volume of sales since the bubble days. Every offer that I have made for my clients in March to buy an Irvine re-sale property anywhere near comps have either been responded with a "best and final" multiple counter offer or the seller has just rejected the offer (even offers where my clients submitted an offer at or above list price). There's almost a buyer panic to buy a home because they sense that prices are only going up from here (the way that things are going I would agree with that sentiment).
Inventory levels continue to bound around 200 or one month's worth of inventory. New inventory that comes onto the market keeps getting listed higher and higher with more WTF listing prices popping up everyday. Unfortunately some of those sellers are getting those prices because desperate cash buyers are willing to pay the asking price. Waiting listings at new home builders are 3-6 months long (I have several buyers who have been on the list at San Mateo and Mendocino for 3-4+ months without getting a call) and prices continue to go higher for each new phase (those homes are bought up instantly). I am seeing more and more recently listings pop up and many of them are homes that were bought only a week or two ago which tells me a lot of the buyers are investors. To put things into perspective, there are about 2x as many active rental listings in Irvine than active for-sale listings and as a rental you have several rentals to pick from when looking for a nice place.
Interest rates actually took a drip back down towards the lows at the end of March and early April by about .25%. The weak March employment report put a strong bid into the bond market which helped to bring rates down. Conforming rates have ranged between 3.25% and 3.50% and Jumbo Conforming rates have ranged between 3.50% and 3.75% during the year. My gutt tells me that we'll probably stay around those ranges this year as the economy is in the "not too hot and not to cold" sweet spot.
Inventory levels continue to bound around 200 or one month's worth of inventory. New inventory that comes onto the market keeps getting listed higher and higher with more WTF listing prices popping up everyday. Unfortunately some of those sellers are getting those prices because desperate cash buyers are willing to pay the asking price. Waiting listings at new home builders are 3-6 months long (I have several buyers who have been on the list at San Mateo and Mendocino for 3-4+ months without getting a call) and prices continue to go higher for each new phase (those homes are bought up instantly). I am seeing more and more recently listings pop up and many of them are homes that were bought only a week or two ago which tells me a lot of the buyers are investors. To put things into perspective, there are about 2x as many active rental listings in Irvine than active for-sale listings and as a rental you have several rentals to pick from when looking for a nice place.
Interest rates actually took a drip back down towards the lows at the end of March and early April by about .25%. The weak March employment report put a strong bid into the bond market which helped to bring rates down. Conforming rates have ranged between 3.25% and 3.50% and Jumbo Conforming rates have ranged between 3.50% and 3.75% during the year. My gutt tells me that we'll probably stay around those ranges this year as the economy is in the "not too hot and not to cold" sweet spot.
irvinehomeowner
Well-known member
According to Larry, the demand is being driven by investors... not homeowners:
http://ochousingnews.com/news/the-only-increase-in-housing-demand-is-coming-from-investors
And while USC does think there are more investors buying, I do think that actual owner-occupants are fueling the demand as well.
http://ochousingnews.com/news/the-only-increase-in-housing-demand-is-coming-from-investors
And while USC does think there are more investors buying, I do think that actual owner-occupants are fueling the demand as well.