Author Topic: When would be next housing Bottom?  (Read 48652 times)

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Re: When would be next housing Bottom?
« Reply #315 on: April 19, 2019, 02:34:48 PM »
@kenkoko:

Again, you're focusing on Chinese economy.

I am still of the position that's it's not just Chinese FCBs who own quite a bit of real estate in Irvine.

It's like a diversified stock portfolio, if part of it tanks, the rest keeps it afloat.
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Re: When would be next housing Bottom?
« Reply #316 on: April 19, 2019, 02:35:39 PM »

Panda has always been a downer when it comes to Irvine real estate. On the other hand, he thinks Johns Creek will never go bad. :)

Some people can't wait... but it sound like you think Irvine real estate is going to drop even more from here? How much more 10%? 20%? Not even Panda has made that type of prediction.

Panda said he thinks a slow decline of 10-15% in the next 4 years is possible. I am in agreement with that. I see much more downside potential going forward than upside potential. Now is not the time to get in.

We will see. Ask him about his Dow prediction.

And that's not 20%.
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Re: When would be next housing Bottom?
« Reply #317 on: April 19, 2019, 02:37:01 PM »
How is it a talking point? Chinese FCB to me is a big factor to Irvine price stability, you disagree. I only said Chinese FCB did not matter in the context of homeonwership % (renter % vs owner %) I did not think it matter whether the investor is a Chinese FCB or a Persian FCB. Bottom line, it's an investor not a homeowner. Investor will more likely sell when the market tanks more than a homeowner.

Why is that? If rents are still good, ie cashflow positive, why would an investor sell?

Quote
Irvine is a young city with resident median age of 34. Irvine medium household income is below 100k. I brought up this point earlier in the thread. Irvine does not have the median household income to propel RE much further than current price level. FCBs helped prop up Irvine price to current level.

This has been said many times but you cannot rely on any census for Irvine's medium household income. Additionally the money that supports Irvine pricing isn't based on traditional income. You even said it yourself in the same paragraph... FCBs. There are also seniors, students, etc whose "income" will not be reflected properly.

Quote
I have the same outlook on Irvine RE as Panda. We are likely to trend down so people still on the sidelines should wait as long as possible. We are already 10 years into this recovery/expansion. Now is not the time to jump in. Plenty of signs of a slowdown / recession coming.

Panda has always been a downer when it comes to Irvine real estate. On the other hand, he thinks Johns Creek will never go bad. :)

Some people can't wait... but it sound like you think Irvine real estate is going to drop even more from here? How much more 10%? 20%? Not even Panda has made that type of prediction.

Why is that? If rents are still good, ie cashflow positive, why would an investor sell?

Vacancy rate is extremely low. Less than 3%. I would not sell any of my rentals. You literally have a dozen of good applicants to choose from. And these are top tier renters. A-class. High credit profiles with high income. Most renters that want to rent in Irvine are responsible individuals that I have come across.



Plus, if the economy is down and less people are buying and more people are renting... who's your daddy? :)
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Offline Irvinecommuter

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Re: When would be next housing Bottom?
« Reply #318 on: April 19, 2019, 02:37:38 PM »
How is it a talking point? Chinese FCB to me is a big factor to Irvine price stability, you disagree. I only said Chinese FCB did not matter in the context of homeonwership % (renter % vs owner %) I did not think it matter whether the investor is a Chinese FCB or a Persian FCB. Bottom line, it's an investor not a homeowner. Investor will more likely sell when the market tanks more than a homeowner.

Disagree...I don't know about Persian FCB but Chinese FCBs don't care about a 10-20% drop because they were not in the market for gains.  They just wanted to solidify their RMB in US real estate.  They are not looking for return. 

If prices fall 10-20%, they're more likely to just hold on it.

Here's something I've been saying that keeps flying over people's head when they talk about Chinese FCBs. The major driver for a lot of these Chinese FCBs is not US economy or the Irvine RE prices. It's the Chinese economy.  I agree with you that even if Irvine prices fall 10-20%, they are more likely to just hold on to their Irvine RE. Heck even if a 30% drop happens in Irvine, majority would not sell. But that's only IF the Chinese economy stays stable. I know this because my own parents are in this camp and a lot of people in their circle are like this as well. A lot of them bought Irvine RE with "cash" but that cash came from leveraging their financial holdings in China. ( Taiwan in my parent's case)

If the Chinese economy tanks another 30% (like it did from 2015-2018), a lot of them will have to sell US holdings to cover their leveraged positions in China.

P.s. Irvinecommuter did you know that Yang's parents have a residence in Irvine? My mom read it in a recent Chinese newspaper article. They live in Taiwan now but does split time between US and Taiwan.

If Chinese economy tanks, you will see a mass exodus from China.  They wouldn't sell their assets in the US...it is their asset firewall.  That's why they already sent their families here.

I know that his dad went to Cal.  Irvine seems logical.

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Offline Mety

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Re: When would be next housing Bottom?
« Reply #319 on: April 19, 2019, 02:47:33 PM »
How is it a talking point? Chinese FCB to me is a big factor to Irvine price stability, you disagree. I only said Chinese FCB did not matter in the context of homeonwership % (renter % vs owner %) I did not think it matter whether the investor is a Chinese FCB or a Persian FCB. Bottom line, it's an investor not a homeowner. Investor will more likely sell when the market tanks more than a homeowner.

Disagree...I don't know about Persian FCB but Chinese FCBs don't care about a 10-20% drop because they were not in the market for gains.  They just wanted to solidify their RMB in US real estate.  They are not looking for return. 

If prices fall 10-20%, they're more likely to just hold on it.

Here's something I've been saying that keeps flying over people's head when they talk about Chinese FCBs. The major driver for a lot of these Chinese FCBs is not US economy or the Irvine RE prices. It's the Chinese economy.  I agree with you that even if Irvine prices fall 10-20%, they are more likely to just hold on to their Irvine RE. Heck even if a 30% drop happens in Irvine, majority would not sell. But that's only IF the Chinese economy stays stable. I know this because my own parents are in this camp and a lot of people in their circle are like this as well. A lot of them bought Irvine RE with "cash" but that cash came from leveraging their financial holdings in China. ( Taiwan in my parent's case)

If the Chinese economy tanks another 30% (like it did from 2015-2018), a lot of them will have to sell US holdings to cover their leveraged positions in China.

P.s. Irvinecommuter did you know that Yang's parents have a residence in Irvine? My mom read it in a recent Chinese newspaper article. They live in Taiwan now but does split time between US and Taiwan.

If Chinese economy tanks, you will see a mass exodus from China.  They wouldn't sell their assets in the US...it is their asset firewall.  That's why they already sent their families here.

I know that his dad went to Cal.  Irvine seems logical.

I don’t know, but if I was a wealthy Chinese who owns properties in Irvine and some hard time comes in China, I would sell Irvine properties to have more stable life in China, not the other way. If some massacres or something as bad happen, then I would flee to America, but if it’s just some economic problem, I would sell assets here to support my life in home country. For families and kids, I think they send them here to learn and eventually would have them come back. Isn’t that why they go back after college?

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Offline Kenkoko

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Re: When would be next housing Bottom?
« Reply #320 on: April 19, 2019, 03:21:16 PM »
If Chinese economy tanks, you will see a mass exodus from China.  They wouldn't sell their assets in the US...it is their asset firewall.  That's why they already sent their families here.

I know that his dad went to Cal.  Irvine seems logical.

There was actually an article in Chinese Business week or Fortune magazine about this last year on this very subject. I will find it and post here when I have time to look it up. Basically, they polled a bunch of wealthy Chinese businessmen and USA did not make their top 3 place to emigrant. I think US was 4th or 5th.

Top choices were

1) Singapore. because its culture is very similar and they speak Mandarin so no language barrier
2) Sydney. close proximity to China and lose financial regulation
3) Vancouver.

However, California RE did make #1 on their choice to stash money because it's very loosely regulated (unlike Singapore) and taxes are much lower compared to other places.


Offline Kenkoko

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Re: When would be next housing Bottom?
« Reply #321 on: April 19, 2019, 03:25:55 PM »
I don’t know, but if I was a wealthy Chinese who owns properties in Irvine and some hard time comes in China, I would sell Irvine properties to have more stable life in China, not the other way. If some massacres or something as bad happen, then I would flee to America, but if it’s just some economic problem, I would sell assets here to support my life in home country. For families and kids, I think they send them here to learn and eventually would have them come back. Isn’t that why they go back after college?

I agree. It baffles me that people think Chinese investors will sell their primary homes in China, abandon their live and business in China, leave their social circle behind and  come to USA where they don't speak the language. Instead of just selling their 2nd homes / vacation home / vacant home in Irvine. Seriously?

Just ask yourself this. If you have a vacation home in China, and you become financially strapped. Are you going to sell your Irvine primary residence, quit your job, leave your friends and family, move to china and you don't even speak the language?

Why do you expect Chinese people to behave differently?

Offline Kenkoko

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Re: When would be next housing Bottom?
« Reply #322 on: April 19, 2019, 03:30:51 PM »
@kenkoko:

Again, you're focusing on Chinese economy.

I am still of the position that's it's not just Chinese FCBs who own quite a bit of real estate in Irvine.

It's like a diversified stock portfolio, if part of it tanks, the rest keeps it afloat.

I focus on the Chinese economy when it's about Chinese FCBs.

Sure, I hear your point about having more than just Chinese FCBs. But that only adds to the point that Irvine has a lot of downward price resistance, which I agree with.

But downward price resistance is not enough to propel future Irvine home prices to outpace inflation. ( A point Mety keeps referring to but no bullish poster care to answer)

I have yet to see anyone point out what exactly they see in our economy that is going to propel Irvine home prices higher outpacing inflation.

Offline fortune11

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Re: When would be next housing Bottom?
« Reply #323 on: April 19, 2019, 03:34:05 PM »
IC and others are correct . Look at Chinese buying of foreign assets — they go to great lengths to siphon off money from the mainland into other “safer” havens. I don’t think trump has yet changed that

Also — cannot separate the US equity markets from the housing market . Prolonged decline in home prices will begin to affect consumer confidence and then the economy . This is why I have a hard time believe doomsday predictions in housing. Modest slowdown , yes.

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Re: When would be next housing Bottom?
« Reply #324 on: April 19, 2019, 03:49:39 PM »
Quote from: Kenkoko
But downward price resistance is not enough to propel future Irvine home prices to outpace inflation. ( A point Mety keeps referring to but no bullish poster care to answer)

I have yet to see anyone point out what exactly they see in our economy that is going to propel Irvine home prices higher outpacing inflation.

I never said Irvine would outpace inflation. Just that it would not see a significant and sustained drop and it would fare better than surrounding cities.
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Offline Kenkoko

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Re: When would be next housing Bottom?
« Reply #325 on: April 19, 2019, 03:49:57 PM »
IC and others are correct . Look at Chinese buying of foreign assets — they go to great lengths to siphon off money from the mainland into other “safer” havens. I don’t think trump has yet changed that

Also — cannot separate the US equity markets from the housing market . Prolonged decline in home prices will begin to affect consumer confidence and then the economy . This is why I have a hard time believe doomsday predictions in housing. Modest slowdown , yes.

You are talking about Chinese institutional buying in US commercial real estate. That's not the same as residential real estate in Irvine.

And FYI, Chinese are exiting US Real Estate at a rapid paste. Chinese net purchases of U.S. commercial real estate last year dwindled to their lowest level since 2012.

Here is an article from the Wall Street Journal on this exact topic.

https://www.wsj.com/articles/chinese-exiting-u-s-real-estate-as-beijing-directs-money-back-to-shore-up-economy-11548757800


Offline Irvinecommuter

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Re: When would be next housing Bottom?
« Reply #326 on: April 19, 2019, 04:12:43 PM »
I don’t know, but if I was a wealthy Chinese who owns properties in Irvine and some hard time comes in China, I would sell Irvine properties to have more stable life in China, not the other way. If some massacres or something as bad happen, then I would flee to America, but if it’s just some economic problem, I would sell assets here to support my life in home country. For families and kids, I think they send them here to learn and eventually would have them come back. Isn’t that why they go back after college?

I agree. It baffles me that people think Chinese investors will sell their primary homes in China, abandon their live and business in China, leave their social circle behind and  come to USA where they don't speak the language. Instead of just selling their 2nd homes / vacation home / vacant home in Irvine. Seriously?

Just ask yourself this. If you have a vacation home in China, and you become financially strapped. Are you going to sell your Irvine primary residence, quit your job, leave your friends and family, move to china and you don't even speak the language?

Why do you expect Chinese people to behave differently?

Again..Chinese FCB don't buy houses in US as a backup investment, it's their escape hatch.  Why do you think all the Chinese people want green cards and send their women here to have kids in the US?  It's to escape from China if things go bad.  They are not buying financial stability, they are buying political and social stability.   

Chinese political situation is dynamic and ever-fluid, both on a national and international level.  People who can afford to send their family out of the China are doing so.  The breadwinners stay in China for as long as they can so that they can keep the money flowing but they are setting up a backup plan in the US if things go south.  If Chinese economy collapses/falls, the government is coming after rich people/private industry.   

https://www.scmp.com/economy/china-economy/article/2167731/desperate-chinese-middle-class-take-big-risks-move-money-and-themselves

Commercial property is purchased not by individuals, but corporations.  Those corporations are beholdened to the Chinese government, who basically dictated what and how much money goes in and out of the country.   China government is basically mandating that the Chinese corporation bring back foreign assets to prop up the Chinese economy.   

This article talks about it but think of China as a banana republic that could topple at any moment..then you understand the mentality.

https://www.businessinsider.com/middle-class-chinese-buyers-us-real-estate-investment-2019-1
« Last Edit: April 19, 2019, 04:18:35 PM by Irvinecommuter »

Offline Irvinecommuter

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Re: When would be next housing Bottom?
« Reply #327 on: April 19, 2019, 04:16:25 PM »

I don’t know, but if I was a wealthy Chinese who owns properties in Irvine and some hard time comes in China, I would sell Irvine properties to have more stable life in China, not the other way. If some massacres or something as bad happen, then I would flee to America, but if it’s just some economic problem, I would sell assets here to support my life in home country. For families and kids, I think they send them here to learn and eventually would have them come back. Isn’t that why they go back after college?

They don't want go back...they stay here.  Jobs are better here and a lot less competition.  People who go back are not the top tier people. 
Trend has been changing in part to changes in US immigration policy.  This of course goes back to the stupid policies we have in the US to make it harder for US company to retain foreign students...but that goes with another thread.

https://www.axios.com/foreign-student-visas-dropping-china-india-trump-81e70609-9fa7-43eb-8f40-ccfef9fe3fa5.html

Offline Kenkoko

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Re: When would be next housing Bottom?
« Reply #328 on: April 19, 2019, 04:41:24 PM »
IC, you are talking about the total collapse of the Chinese economy. It is very unlikely but in that scenario, yes, people will flee China.

The much more likely scenario is China avoids a total meltdown, but economy takes a fairly large hit. Most Chinese FCB families still have the breadwinner making $$$ in China.  In a non-melt down scenario, majority will sell their offshore holdings to keep their business in China afloat. When the margin calls come, they are not going to just drop their life and escape. That's the doomsday scenario.

Even when you look at doomsday scenario, US is not even in the top 3 escape hatch among Chinese. 1) Singapore 2) Sydney Austrilia 3) Vancuver Canada. USA is 4th or 5th preferred.

The reason why California is #1 place for Chinese to stash money even tho it is not their top 3 escape choice is that California RE regulation is very loose. Anyone can buy, anonymity as you can hold RE in corporation, LLCs, and property tax rate is actually lowest among other top escape hatch destinations. And Irvine RE is very stable and liquid. One can quickly cash out of Irvine and buy an escape hatch in Singapore when shit really hits the fan. There's a reason why almost every Chinese Realtor in Irvine touts the liquidity in Irvine RE in their Ads. They know Chinese investor cares about this.

Offline fortune11

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Re: When would be next housing Bottom?
« Reply #329 on: April 19, 2019, 05:20:31 PM »
IC and others are correct . Look at Chinese buying of foreign assets — they go to great lengths to siphon off money from the mainland into other “safer” havens. I don’t think trump has yet changed that

Also — cannot separate the US equity markets from the housing market . Prolonged decline in home prices will begin to affect consumer confidence and then the economy . This is why I have a hard time believe doomsday predictions in housing. Modest slowdown , yes.

You are talking about Chinese institutional buying in US commercial real estate. That's not the same as residential real estate in Irvine.

And FYI, Chinese are exiting US Real Estate at a rapid paste. Chinese net purchases of U.S. commercial real estate last year dwindled to their lowest level since 2012.

Here is an article from the Wall Street Journal on this exact topic.

https://www.wsj.com/articles/chinese-exiting-u-s-real-estate-as-beijing-directs-money-back-to-shore-up-economy-11548757800

No I am actually referring to residential real estate . CRE has been overvalued for some time now with all time low cap rates , very few ppl have the wherewithal (like blackstone etc ) to make any money from CRE . 

I would not count on FCBs as the source of collapse in Irvine. As a reduction in marginal buying power, yes. And so we are back to mortgage availability and rates as the driving force as opposed to the crazy all cash bidding price wars, which is not necessarily a bad thing .

 

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