Did Irvine prices get "destroyed"?

So IHS' post today reminded me of something:

irvinehomeshopper said:

So buying is Irvine has it's risk because prices do not always go up. I got to think those affluent in laws and money laundering FCBs eventually will diminish. Then unicorn land will have to sync with realistic income and what a typical family could really afford without resorting to the weekend feast at the local Costcos.

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Back when I joined the IHB in 2008, there were many discussions about what was going to happen to Irvine real estate prices once the bubble pops.

I've pretty much held to my contention that while prices will drop in Irvine, they won't drop as fast or as far as surrounding cities due to multiple reasons (such as my half-joking FCB Theory). I've said that in the forums, I've said that on the blog. Each time I've been met with quite a bit of criticism.

Flash forward to 2009/10... and the excuse from the other side was the government intervention and credits... and while I understand that will have some effect... I still don't understand how they can use that as an excuse since it seemingly slowed down the drop in Irvine but not in the surrounding cities. And... for the most part, for the price point that Irvine SFRs were at (especially in the New Home Collection), some credits were not even applicable.

It's now 2012. Some areas, prices could be close to 40% or more down... other's are 20%... others are only 5%. But if you average them all together by categories, areas, etc... by and large... I'm not sure that Irvine as a whole is at 1999 pricing... or over 50% off. I'm thinking it's closer to 20%. Even Larry no longer thinks Irvine is going to see the big hit it was supposed to see (which I feel is partly why he had to expand outside of Irvine where the bubble effect is more noticeable).

So what happened? I understand where Irvine should be based on fundamentals... but as we know, real estate occasionally doesn't follow fundamental rules or bubbles wouldn't happen. There was even a long thread regarding homes in Turtle Rock and where they should be fundamentally priced yet they are still closing $100k over that.

Now... maybe this should be posted in OCReader where most of the detractors are... the problem is they are never there... and I'll put this out there... I HIGHLY DOUBT THEY WOULD RESPOND BECAUSE THEY CAN'T.

Sure... prices are lower... I know this because I'm actively house hunting. But I also know that in the range of homes that I'm looking at... many are not significantly lower than they were in 2005/6. Yet, in South County cities, prices there are lower by about $200k for similar homes in Irvine... when during the bubble... they were not that different in pricing.

So... for those who thought Irvine prices were supposed to drop "just like everywhere else"... why is it still so un-fundamentally overpriced here? It can't be the schools (supposedly they are just as good everywhere else), it can't be the safety (more icicle murders masked as suicides happen in Irvine than any of us know) and it can't be the FCBs (because Irvine doesn't have any more of an ethnic population than it had in the 80s, although the Census and every strip mall says otherwise). So we are sitting in the present-day reality of Irvine price-stickyness... there is no more loose credit, no more tax incentives, no more bubble... can all those people who bashed my opinions explain what is keeping prices relatively high now?

This thread was doomed from the start since it's a troll thread, so I'll just leave this here:

Patrick J. Star said:

IndieDev said:

This thread was doomed from the start since it's a troll thread, so I'll just leave this here:

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So you are saying I should have waited longer?

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Well it's hard to say. When someone overpays for something and calls it "good schools", they all have their reasons for doing it, none of which I fully understand myself. So I'm unqualified to answer the question.

IndieDev said:

This thread was doomed from the start since it's a troll thread, so I'll just leave this here:

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I'll add a little color to this chart.  The attached condo market has lead the majority of that drop since 2010.  There are several attached condos in Irvine now that are at or even slightly below rental parity.  The detached SFR segment has faired better than attached condos, especially in the more desirable villages with the more desirable floor plans.  That being said, even that segment has come down in price.

@Indie:

On your graph (which I've been told that Redfin is not accurate), listing prices still look high... and that drop from 2010 to 2012 is still only 11-12% and includes both condos and homes (my original contention was regarding SFR product). A 2005 to 2012 graph would probably show a better drop.

No one has said prices haven't dropped... but even you say they are still too high ("overpay") for fundamentals... so why are they still high in 2012?

There's no more tax credits... no more ninja lending... why is Irvine still priced higher relatively (as PStar says) when it has no beaches?

Patrick J. Star said:

The funny thing is, my schools now are just as *good* as Irvine.  Actually, even more so. 

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Exactly... so why does your house cost less?

That's the point of this thread... troll-accusations aside.

irvinehomeowner said:

@Indie:

There's no more tax credits... no more ninja lending... why is Irvine still priced higher relatively (as PStar says) when it has no beaches?

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Glossary:

Market trend
A market trend is a putative tendency of a financial market to move in a particular direction over time. These trends are classified as secular for long time frames, primary for medium time frames, and secondary for short time frames.

Market Top
A market top (or market high) is usually not a dramatic event. The market has simply reached the highest point that it will, for some time (usually a few years). It is retroactively defined as market participants are not aware of it as it happens. A decline then follows, usually gradually at first and later with more rapidity.

Market Bottom
A market bottom is a trend reversal, the end of a market downturn, and precedes the beginning of an upward moving trend (bull market).
It is very difficult to identify a bottom (referred to by investors as "bottom picking") while it is occurring. The upturn following a decline is often short-lived and prices might resume their decline. This would bring a loss for the investor who purchased stock(s) during a misperceived or "false" market bottom.

Basically your original premise is flawed or misworded. "Did Irvine prices get destroyed?" really should be "Are Irvine prices getting destroyed?" because price correction is happening over time, not in one fell swoop. That's why there is such a thing as a market top, or a market bottom, unless of course you are calling the bottom in Irvine, in which case you'd be wrong for many reasons.

Also it's closer to a 12-14% drop since 2010, after a 20% to 25% drop from the peak in 2006, and that's in the face of much better rates for lending in 2012 compared to 2009-2010.

In the end, I think you should make a new thread titled, "Why isn't Quail Hill correcting fast enough so that Irvinehomeowner can actually afford a house there?"

That's what this thread will eventually boil down to in the end.

Patrick J. Star said:

irvinehomeowner said:

Why is Irvine still priced higher relatively (as PStar says) when it has no beaches?

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My guess here is the only real answer is "dumb money".  If I were a homeowner in Irvine, I'd be very happy with the way the city has weathered the storm, with the influx of well off people willing to sacrafice for the sake of living in Irvine.  If I were a homeowner in Irvine, I'd be the first person waiting to shake their hand as the moving truck arrived. 

If I were looking to buy, however, I'd probably think twice.  I'd rather go somewhere more up and coming, that had more upside potential, not already maxed out on affordability.  Somewhere that a family making double the median salary can have a home consistent with their hard work and success. Somewhere that resembles Irvine in 1990-95.  I wish that BK guy would come back here and talk about where the next emerging markets in Southern California will be.  Like Brea.  Maybe Chino Hills.

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I'd say changing perceptions (a very important factor when it comes to product like Irvine stucco boxes), and of course Irvine bubbled up a bit more than a lot of surrounding communities. More air to push out of the balloon since it popped, so it's taking longer to deflate, but there is no doubt that it is continuing to deflate.

Patrick J. Star said:

Patrick J. Star said:

My guess here is the only real answer is "dumb money". 

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Let me modify.  What is dumb to me is not to someone else.  Everyone has their own priorities, and can spend their money as they see fit.  So let's rephrase to say "an influx of people willing to sacrafice on the home in order to live in Irvine".

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QFT.

But... I do feel "dumb" spending so much on so little.

I just don't want to feel dumber.

Johns Creek is your best bet.

Patrick J. Star said:

irvinehomeowner said:

Why is Irvine still priced higher relatively (as PStar says) when it has no beaches?

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I'd rather go somewhere more up and coming, that had more upside potential, not already maxed out on affordability.  Somewhere that a family making double the median salary can have a home consistent with their hard work and success. Somewhere that resembles Irvine in 1990-95.

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IndieDev said:

Basically your original premise is flawed or misworded. "Did Irvine prices get destroyed?" really should be "Are Irvine prices getting destroyed?" because price correction is happening over time, not in one fell swoop. That's why there is such a thing as a market top, or a market bottom, unless of course you are calling the bottom in Irvine, in which case you'd be wrong for many reasons.

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That's fair... except that the detractors said 2010-2012 would be the years Irvine would feel the most pain. I understand prices are still dropping, and maybe the tax credits protracted that timeline...

Also it's closer to a 12-14% drop since 2010, after a 20% to 25% drop from the peak in 2006, and that's in the face of much better rates for lending in 2012 compared to 2009-2010.

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So it's been a 40% drop for most of Irvine? That's were "median" is like fuzzy math. For homes I'm looking at... it's probably not even 10%. There are few homes which are only 5% off from 2005/6 (I recall a thread I posted about that).

But you bring up a good point... record low interest rates are also a factor... but why is that not working for cities outside of Irvine?

In the end, I think you should make a new thread titled, "Why isn't Quail Hill correcting fast enough so that Irvinehomeowner can actually afford a house there?"

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You bring up another thing... what keeps QH higher than the rest of Irvine? You still think you'll be able to buy one for $150k? You thought Antioch would go for $600k. But I guess your caveat is "eventually it will".

You're kind of like Jekyll and Hyde... you have all this great knowledge but you like to let the beast out, go lazy and drop a RedFin graph when your follow-up explanations are much better.

The Motor Court Company said:

Johns Creek is your best bet.

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Shhh... don't wake the sleeping baby Panda.

irvinehomeowner said:

You're kind of like Jekyll and Hyde... you have all this great knowledge but you like to let the beast out, go lazy and drop a RedFin graph when your follow-up explanations are much better.

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Panda's going to flip his lid when he finds out that IHO and Indie are the same person...

That's fair... except that the detractors said 2010-2012 would be the years Irvine would feel the most pain. I understand prices are still dropping, and maybe the tax credits protracted that timeline...

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I'm not sure who these detractors are, but 2010-2012 was fairly painful. If you bought a median home ($500,000+ dollars) in 2010 and lost 10-15%, you're looking at $50,000 lost equity or more. That's painful for a lot of people.

So it's been a 40% drop for most of Irvine? That's were "median" is like fuzzy math. For homes I'm looking at... it's probably not even 10%. There are few homes which are only 5% off from 2005/6 (I recall a thread I posted about that).

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Not all neighborhoods will correct at the same rate, nor will all neighborhoods correct at the same percentage. That's why I suggested you start a thread about Quail Hill, or other hoods you're looking to buy within. Talking about Irvine as a whole and then bringing up Quail Hill prices isn't a valid premise just like bringing up "Los Angeles" and using West Hollywood, or Santa Monica as your neighborhood of contention isn't a valid premise.

But you bring up a good point... record low interest rates are also a factor... but why is that not working for cities outside of Irvine?

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Other cities are correcting faster than Irvine, some slower. If you were to compare CDM, or San Marino's correction to Irvine's, you would think why is Irvine correcting so much faster? It's difficult to apply a blanket premise to a specific city.

Patrick J. Star said:

Patrick J. Star said:

My guess here is the only real answer is "dumb money". 

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Let me modify.  What is dumb to me is not to someone else.  Everyone has their own priorities, and can spend their money as they see fit.  So let's rephrase to say "an influx of people willing to sacrafice on the home in order to live in Irvine".

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i don't feel like i'm sacrificing on my home in order to live in irvine.  you might feel that way, but not all feel that way. to each their own, right?

kalbi said:

Patrick J. Star said:

Patrick J. Star said:

My guess here is the only real answer is "dumb money". 

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Let me modify.  What is dumb to me is not to someone else.  Everyone has their own priorities, and can spend their money as they see fit.  So let's rephrase to say "an influx of people willing to sacrafice on the home in order to live in Irvine".

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i don't feel like i'm sacrificing on my home in order to live in irvine.  you might feel that way, but not all feel that way. to each their own, right?

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I agree and we feel the same way.

@Indie:

I think we all know different cities and different areas within cities correct at different rates... the question here is why is it like that in Irvine?

The places you name like CDM which is a beach city, and San Marino, which is a highly sought after NorCal area, have factors that we are readily aware of. You and other people claim that Irvine has no such redeeming qualities... (as do all those blog commenters who often bashed Irvine for its boringness, stucco boxes and lack of anything of value)... but yet... Irvine corrects slower than surrounding cities that have the same features and maybe even superior locales.

C'mon... admit it... Irvine is a unicorn and you can't explain why.

Is Pat Star purposefully misspelling sacrifice? Is there some inside joke I am missing?

If you have PS9's all-cash briefcase... I guess you really aren't sacrificing.

What did someone mention me?  I'm still depressed...