Poll

Assuming interest rates and conforming limits remain the same -- and new construction continues -- what is your best guess on pricing for the resale market?

Flat - no major change.
18 (30.5%)
Slight dip - revert back to spring 2013 levels.
7 (11.9%)
Measurable dip - revert back to fall/winter 2012 levels.
6 (10.2%)
Slight increase - 0-5% increase from today's levels.
22 (37.3%)
Measurable increase - 6-12% increase from today's levels.
6 (10.2%)

Total Members Voted: 57

Voting closed: February 22, 2014, 08:51:36 AM

Author Topic: Spring 2014 Pricing - Best Guess on the Resale Market?  (Read 139351 times)

0 Members and 1 Guest are viewing this topic.

Offline paperboyNC

  • Certified Irvine Addict
  • ****
  • Thanks
  • -Given: 367
  • -Received: 274
  • Posts: 1644
  • Gender: Male
  • Portola Springs
Re: Spring 2014 Pricing - Best Guess on the Resale Market?
« Reply #15 on: October 28, 2013, 10:12:13 AM »
Short of wider ranging job losses, I don't see any long term contraction in the market outside of seasonal fluctuations. 

In fact, even with new product entering, I continue to see highly constrained market that will continue to drive stiff competition and pricing for homes.

Counter to others, I think interest rate increases and price appreciation will actually exacerbate the problem initially continuing the 'priced in' phenomenon we've been experiencing.    Much like the downturn where the equity sellers wouldn't give it away and kept their house off market, they have been replaced with potential equity seller that now will not step up to the increased payments need to move to a better home.

A marginally better home (represented by a mere 10% difference in current home price to target home price) results in a 25% increase in PITA after rolling all acquired equity into the house. 

A noticeably better house (25% more expensive than their house's current value), represents a near 50% PITA increase and that's with nearly flat interest rates.

If interest rates rise, you'll see an even further contraction of owners not willing to sell.


Exactly right.  Because the effect of the interest rate increase decreases purchasing power (via the increased monthly mortgage payments).


Unfortunately FCBs are not subject to this, since they are not taking out mortgages.  So they may be the majority of the participants in the market may be FCBs.

You are forgetting:
 - There are homeowners that currently have a high interest rate (maybe they never refi'd or they refi'd back when rates were 4-5%
- There are plenty of homeowners that have paid off their homes. We have a neighbor who is looking to buy a home 100% more expensive (previously they didn't have a family and got a much smaller place than they could afford) and is paying cash for the new place.
 - If you get an adjustable rate mortgage you can get a rate of 3.5% or so which is very similar to the lowest rates anyone has. Adjustable rate mortgage won't go up as quickly as fixed rates.
 - I have neighbors that have sold their homes and gone to be renters just to lock in the appreciation they got. Some were renting out their underwater homes and renting larger homes themselves and can now sell their previously underwater homes.
 - If there isn't a lot of expected future price appreciation, investors may sell a lot of homes.

The point is that it's not the FCBs and everyone else. Each individual has their own unique situation. Personally here are some of the things that could trigger me to sell my home:

A) We end up with a larger family than planned (think twins)
B) I end up getting a job out of state
C) My wife starts working again and we can afford a nicer home
D) I get a large inheritance and can afford a nicer home

Yes - I do think about the higher interest rates when I think about moving up, but it's pretty minimal since I'd get a 5/5 ARM.

The following member(s) thanked this post:

Logik, Tyler Durden

Offline paperboyNC

  • Certified Irvine Addict
  • ****
  • Thanks
  • -Given: 367
  • -Received: 274
  • Posts: 1644
  • Gender: Male
  • Portola Springs
Re: Spring 2014 Pricing - Best Guess on the Resale Market?
« Reply #16 on: October 28, 2013, 02:06:41 PM »
The majority of buyers in this area are not suddenly making more money or suddenly flush with cash to provide a down payment.  So why would builders and equity sellers believe there are enough willing to buy at high prices?  There must be enough folks who feel that the timing is right to take on more risk (in the form of additional leverage from a mortgage) or that they will get priced out if they don't move quickly enough -  so they throw their hats into the ring.  There is also a segment of the population who are price inelastic.  These are the folks who are buying homes because they need to park their money somewhere - (the FCBs).

Most people buy for family reasons rather than because they suddenly are  flush with cash. We have two friends that are buying $1mm+ homes in the great park and both are pregnant with their second child. Another is buying a similarly priced home in a nearby city and is also working on a second kid. I bought my house last year once we had a second kid even though I had a downpayment saved up back in 2005.

Demand for housing in family oriented communities like Irvine mostly comes:

A) Formation of families / having kids
B) Job Relocation (creation of jobs in Irvine that relocates families from other areas)
C) Irvine in particular gets demand from Asians:

I met a guy last week who works in the medical field from home and could live anywhere in the country he wanted. He picked Irvine because he liked the weather, the schools and the Asian community and just moved out here once he got his work from home job and bought a million dollar home.

Offline irvinehomeowner

  • The Unicorn Hunter
  • Certified Irvine Addict
  • ****
  • Thanks
  • -Given: 2652
  • -Received: 3995
  • Posts: 22944
  • 3CWG
Re: Spring 2014 Pricing - Best Guess on the Resale Market?
« Reply #17 on: October 28, 2013, 02:14:20 PM »
@paperboyNC:

While you are correct that many buy for the reasons you outlined, at this point, I have no idea if that's the minority or the majority.

Based on my observations in the last several years, there is a significant percentage of buyers who just have the money and want to put it in real estate in an area that has proven to be more stable than others. For every anecdote you have about a family expanding, I can give you one about a some FCB who is paying all cash and will either put his family in that house while he stays abroad or even have it sit there vacant (or rent it out).

My neighbor was one. Back when we sold our home a few years ago, at least 1 or 2 of the offers were all cash that was being held in a foreign bank.

And most of these people like to buy new because that's where they think the stability and appreciation is at, just hang out at Pavilion Park for a while and you will see them (not to say you won't see your type of buyers either).

I just don't think "most" are who you feel they are... maybe half?
Once you go 3-car garage... your junk can never go back.
3CWG: 3-Car Wide Garage
FCB: Foreign Cash Buyer
I recommend:
www.irvinerealtorsite.com
member: Soylent Green Is People (loans/refis)

Offline paperboyNC

  • Certified Irvine Addict
  • ****
  • Thanks
  • -Given: 367
  • -Received: 274
  • Posts: 1644
  • Gender: Male
  • Portola Springs
Re: Spring 2014 Pricing - Best Guess on the Resale Market?
« Reply #18 on: October 28, 2013, 02:27:02 PM »
OK - my point was that the price increases are not based on an increased ability to pay from the majority of buyers in the market (who has had pay increases that fall in line with the price increases over the last year?), but based on the fact that there are enough buyers that will still buy despite increased prices - which forces everyone else to play along because it is a big enough segment to move the market.  This is the whole "buy now or be priced out forever" game.  If you want into Irvine in 2013 or 2014, the prices will go up.  Either swallow the bitter pill and move on it or someone else will...

These buyers are still going to have to be subject to the higher prices that builders are charging.  The point being if they don't pay it, someone else will.  And we are not talking about a single sale, we are talking about the entire market.

Until that behavior in the market stops, the prices will not come down.  So to the original question, prices will not drop between now and spring.  The builders are continuing to raise prices because they are finding enough people willing to pay them.

And equity sellers would be foolish to not try to get as high a $/sq. ft as the builders are getting, since they often have an advantage of lower mello roos and HoA (if any at all) than the new developments.

Agreed. Prices will only fall significantly if we have a prolonged shortage of demand. That being said, prices around me have fallen since this spring of this year already plus houses that were flying into escrow in a week are now taking 3-5 months. Here's an example of almost identical houses near me:

Sold April 24th for $815K:
http://www.redfin.com/CA/Irvine/38-Prickly-Pear-92618/unit-39/home/45376497

Sold Sept 13th for $805K:
http://www.redfin.com/CA/Irvine/19-Sacred-Path-92618/home/39990922

There are many ways to measure prices. Median prices are sure to rise with the flood of $1mm homes in Pavilion Park, etc. However, the value of my home might decline as it ages and newer and newer homes pop up all around me unless demand remains strong.

The following member(s) thanked this post:


Offline irvinehomeowner

  • The Unicorn Hunter
  • Certified Irvine Addict
  • ****
  • Thanks
  • -Given: 2652
  • -Received: 3995
  • Posts: 22944
  • 3CWG
Re: Spring 2014 Pricing - Best Guess on the Resale Market?
« Reply #19 on: October 28, 2013, 02:28:39 PM »
@Tyler:

Yep.

That's why I hate real estate.

No matter how much you rely on fundamentals, there is always some non-fundamentals going on that bites you.

Are we in a bubble now? What is driving it? No easy credit. Is it a low rate/high stock market bubble?

Confession: As much as I hate the fact that Willow Bend (and The Branches) is so overpriced and basically making money on "lack of" Mello Roos, at one point in time... I was seriously considering them. The Kool Aid is strong in Irvine.
Once you go 3-car garage... your junk can never go back.
3CWG: 3-Car Wide Garage
FCB: Foreign Cash Buyer
I recommend:
www.irvinerealtorsite.com
member: Soylent Green Is People (loans/refis)

Offline paperboyNC

  • Certified Irvine Addict
  • ****
  • Thanks
  • -Given: 367
  • -Received: 274
  • Posts: 1644
  • Gender: Male
  • Portola Springs
Re: Spring 2014 Pricing - Best Guess on the Resale Market?
« Reply #20 on: October 28, 2013, 02:46:57 PM »
The trick here is these builders are very smart.  I wouldn't say they are colluding, but they have certainly done enough market research to ensure that many offerings in the market do not overlap each other at the same time window.  That way, they have less reason to offer incentives or other sweeteners to choose their product vs. another builder's.

For example, OH will likely beat Hidden Canyon to market, meaning they will be the only game in town at the high end (until HC opens).  So if you want a new construction SFR at that price point in this town, you have to play their game or wait it out.

With PP, five points is also doing this... i would be willing to bet that they slowly release the remaining tracts in the GP so they are not cannibalizing sales from their own neighborhoods.

That being said, once more units come on line (when baker ranch and GP are in full swing), i could see the pricing leveling off.  But the builders would obviously slow down production to keep them from having excess inventory.

Think about this... Enzo Ferrari was once asked how many vehicles his company decided to manufacture each year.  His response "One less than customers will buy".  In other words, he knew that to keep prices high, he would restrict supply.

Yup. That's why having a lot of new construction projects will actually stabilize prices over the next few years and likely keep them moving up slightly. The builders can build faster to keep up with demand or slower to avoid discounting heavily. They also often discount in the more hidden ways like higher broker commissions, closing cost credits, design credits, etc. that are not comp-killers.

Offline irvinehomeowner

  • The Unicorn Hunter
  • Certified Irvine Addict
  • ****
  • Thanks
  • -Given: 2652
  • -Received: 3995
  • Posts: 22944
  • 3CWG
Re: Spring 2014 Pricing - Best Guess on the Resale Market?
« Reply #21 on: October 28, 2013, 03:22:30 PM »
"Builders don't slow down or stop building... ever." - Anonymous
Once you go 3-car garage... your junk can never go back.
3CWG: 3-Car Wide Garage
FCB: Foreign Cash Buyer
I recommend:
www.irvinerealtorsite.com
member: Soylent Green Is People (loans/refis)

Offline paperboyNC

  • Certified Irvine Addict
  • ****
  • Thanks
  • -Given: 367
  • -Received: 274
  • Posts: 1644
  • Gender: Male
  • Portola Springs
Re: Spring 2014 Pricing - Best Guess on the Resale Market?
« Reply #22 on: October 28, 2013, 03:24:42 PM »
"Builders don't slow down or stop building... ever." - Anonymous

Maybe they all plan to build really really slowly and they speed up when customers show up?  :)

Offline irvinehomeowner

  • The Unicorn Hunter
  • Certified Irvine Addict
  • ****
  • Thanks
  • -Given: 2652
  • -Received: 3995
  • Posts: 22944
  • 3CWG
Re: Spring 2014 Pricing - Best Guess on the Resale Market?
« Reply #23 on: October 28, 2013, 03:28:38 PM »
"Builders don't slow down or stop building... ever." - Anonymous

Maybe they all plan to build really really slowly and they speed up when customers show up?  :)
Yeah.... Orchard Hills was building so slow they almost went back in time.
Once you go 3-car garage... your junk can never go back.
3CWG: 3-Car Wide Garage
FCB: Foreign Cash Buyer
I recommend:
www.irvinerealtorsite.com
member: Soylent Green Is People (loans/refis)

The following member(s) thanked this post:


Offline bones

  • Certified Irvine Addict
  • ****
  • Thanks
  • -Given: 212
  • -Received: 1177
  • Posts: 4760
Re: Spring 2014 Pricing - Best Guess on the Resale Market?
« Reply #24 on: October 28, 2013, 03:34:27 PM »
[q.
« Last Edit: September 01, 2014, 09:42:39 AM by WTTCMN »

Offline irvinehomeowner

  • The Unicorn Hunter
  • Certified Irvine Addict
  • ****
  • Thanks
  • -Given: 2652
  • -Received: 3995
  • Posts: 22944
  • 3CWG
Re: Spring 2014 Pricing - Best Guess on the Resale Market?
« Reply #25 on: October 28, 2013, 03:52:26 PM »
What can I say... I love hash browns. It was the guy who was smarter than all of us and then left town when things didn't go his way... like a certain home in Turtle Rock not selling for $650k.

My other favorite:

"FCBS are a myth, Irvine doesn't have any more Asians than it did 10 or 20 years ago." - #NotAccordingToThe2010Census
Once you go 3-car garage... your junk can never go back.
3CWG: 3-Car Wide Garage
FCB: Foreign Cash Buyer
I recommend:
www.irvinerealtorsite.com
member: Soylent Green Is People (loans/refis)

Offline bones

  • Certified Irvine Addict
  • ****
  • Thanks
  • -Given: 212
  • -Received: 1177
  • Posts: 4760
Re: Spring 2014 Pricing - Best Guess on the Resale Market?
« Reply #26 on: October 28, 2013, 04:27:48 PM »
.
« Last Edit: September 01, 2014, 09:45:24 AM by WTTCMN »

Offline 0$

  • Certified Irvine Addict
  • ****
  • Thanks
  • -Given: 537
  • -Received: 381
  • Posts: 1442
Re: Spring 2014 Pricing - Best Guess on the Resale Market?
« Reply #27 on: October 28, 2013, 04:49:42 PM »
 :P
« Last Edit: August 27, 2014, 11:55:14 AM by OpenToTheSky »

Offline irvinehomeowner

  • The Unicorn Hunter
  • Certified Irvine Addict
  • ****
  • Thanks
  • -Given: 2652
  • -Received: 3995
  • Posts: 22944
  • 3CWG
Re: Spring 2014 Pricing - Best Guess on the Resale Market?
« Reply #28 on: October 28, 2013, 05:09:05 PM »
I think less informed buyers will go with newer instead of weighing in everything like location, density, lot size, home size, home features, community, extra taxes etc.

Many buyers don't want to worry about resale, bidding, pre-existing conditions and prefer the "new home smell".

I know I love new homes... but I also prefer the older floorplans, no mello roos, and the location of the old hoods and not having to worry about extra costs like landscaping in the near future.
Once you go 3-car garage... your junk can never go back.
3CWG: 3-Car Wide Garage
FCB: Foreign Cash Buyer
I recommend:
www.irvinerealtorsite.com
member: Soylent Green Is People (loans/refis)

Offline bones

  • Certified Irvine Addict
  • ****
  • Thanks
  • -Given: 212
  • -Received: 1177
  • Posts: 4760
Re: Spring 2014 Pricing - Best Guess on the Resale Market?
« Reply #29 on: October 28, 2013, 05:11:32 PM »
.
« Last Edit: September 01, 2014, 09:45:20 AM by WTTCMN »

The following member(s) thanked this post:


 

Talk Irvine Links

[Recent Posts]
[FAQ / Rules]

Site Supporters


Recent Posts

Re: coronavirus by irvinehomeowner
[Yesterday at 09:23:26 PM]


Re: Work situation? by daedalus
[Yesterday at 05:51:35 PM]


Re: Fresco @ Eastwood Village by USCTrojanCPA
[Yesterday at 05:49:20 PM]


Re: Fresco @ Eastwood Village by USCTrojanCPA
[Yesterday at 05:47:10 PM]


Re: Fresco @ Eastwood Village by Irvinehomeseeker
[Yesterday at 04:26:03 PM]

SimplePortal 2.3.7 © 2008-2021, SimplePortal