ALL CASH OFFERS IN IRVINE

[quote author="Strom" date=1248875809]I know several FCBs and FNCBs that are all trying to convince me that housing in Irvine has bottomed. NOW IS THE TIME TO BUY!!! I just can't see what would drive a housing recovery. Rental parity? No. Job growth? No. Wage growth? No. Increasing rental rates? No. Interest rates dropping further? How could they?



The only thing I can think of is that if EVERYONE thinks that housing prices are going up soon in Irvine, and tries to buy a house, we could see a short-term bump in prices before the bottom falls out again.</blockquote>
We are seeing panic buying due to the lack of "non-short sale" inventory, if this inventory would increase prices would soften a bit. All that being said, there are several back up offers with the Irvine home I got into escrow on, including an all cash offer.
 
[quote author="roundcorners" date=1248694070][quote author="ABC123" date=1248686336]Since we're talking predictions, I've been wondering about this one for awhile. If gold goes to $15,000/oz, how much will it cost to rent a typical 3 bedroom house/condo in Orange County?</blockquote>


I've been wondering about that too... so the USD is totally inflated; interest rates are 15%+,, so homes being a commodity should also increase in price? Because a lot of dollars are chasing few goods,, right? Even though interest rates are high, housing would still be high? Rents will also go up; tracking the value of homes... your savings will be worthless, your income will increase but buying power be down...</blockquote>


The mistake folks make when considering price inflation is that they think all prices and wages will go up the same.
 
How much of the money out there is speculative right now? I have talked to several people whose "parents are entrepreneurs" (i.e. - they made a lot of money holding RRE during the bubble and think they're RE moguls). They have told me that their parents are buying in Irvine as an "investment", and have made and continue to make offers on houses. Obviously, the only "investment" in Irvine SFHs is "speculation" at this point. How much of that is out there?
 
[quote author="Strom" date=1248951326]How much of the money out there is speculative right now? I have talked to several people whose "parents are entrepreneurs" (i.e. - they made a lot of money holding RRE during the bubble and think they're RE moguls). They have told me that their parents are buying in Irvine as an "investment", and have made and continue to make offers on houses. Obviously, the only "investment" in Irvine SFHs is "speculation" at this point. How much of that is out there?</blockquote>
It's hard to say really. I know the buyers that I'm working with are looking to occupy their Irvine home as their primary residence.
 
[quote author="Strom" date=1248875809]I know several FCBs and FNCBs that are all trying to convince me that housing in Irvine has bottomed. NOW IS THE TIME TO BUY!!! I just can't see what would drive a housing recovery. Rental parity? No. Job growth? No. Wage growth? No. Increasing rental rates? No. Interest rates dropping further? How could they?



The only thing I can think of is that if EVERYONE thinks that housing prices are going up soon in Irvine, and tries to buy a house, we could see a short-term bump in prices before the bottom falls out again.</blockquote>


Prices in Irvine sure look like they have bottomed. They have been stable for about ten or eleven months-looks like a bottom to me. I suspect the true bottom will happen after the summer buying season, maybe in December or January, but that's about it. Calling bottom doesn't mean I'm saying prices are going to go up significantly any time soon, because they won't. It just means they aren't going down much any more.
 
[quote author="usctrojanman29" date=1248956337][quote author="Strom" date=1248951326]How much of the money out there is speculative right now? I have talked to several people whose "parents are entrepreneurs" (i.e. - they made a lot of money holding RRE during the bubble and think they're RE moguls). They have told me that their parents are buying in Irvine as an "investment", and have made and continue to make offers on houses. Obviously, the only "investment" in Irvine SFHs is "speculation" at this point. How much of that is out there?</blockquote>
It's hard to say really. I know the buyers that I'm working with are looking to occupy their Irvine home as their primary residence.</blockquote>
I think there are a lot of people who think Irvine real estate is a great investment. I posted on the main blog a while ago that this spring I saw four houses in my neighborhood get listed, bought, and show back up on the rental market within weeks. When I saw what they paid, and I saw the asking price for the rent, I knew that if the buyers had put down no more than 20%, the rent they were asking didn't cover the mortgage, the HOA and taxes. So either they are putting in way more than 20%, or maybe they are paying all cash and see the rent as their return.
 
[quote author="nefron" date=1248994323][quote author="usctrojanman29" date=1248956337][quote author="Strom" date=1248951326]How much of the money out there is speculative right now? I have talked to several people whose "parents are entrepreneurs" (i.e. - they made a lot of money holding RRE during the bubble and think they're RE moguls). They have told me that their parents are buying in Irvine as an "investment", and have made and continue to make offers on houses. Obviously, the only "investment" in Irvine SFHs is "speculation" at this point. How much of that is out there?</blockquote>
It's hard to say really. I know the buyers that I'm working with are looking to occupy their Irvine home as their primary residence.</blockquote>
I think there are a lot of people who think Irvine real estate is a great investment. I posted on the main blog a while ago that this spring I saw four houses in my neighborhood get listed, bought, and show back up on the rental market within weeks. When I saw what they paid, and I saw the asking price for the rent, I knew that if the buyers had put down no more than 20%, the rent they were asking didn't cover the mortgage, the HOA and taxes. So either they are putting in way more than 20%, or maybe they are paying all cash and see the rent as their return.</blockquote>


Did you check IR2's site?



<a href="http://www.irvinerealtorsite.com/">http://www.irvinerealtorsite.com/</a>



One spreadsheet will show you how much they put down. The other one will show you the actual lease price. Did they get their list lease price?
 
[quote author="nefron" date=1248994323][quote author="usctrojanman29" date=1248956337][quote author="Strom" date=1248951326]How much of the money out there is speculative right now? I have talked to several people whose "parents are entrepreneurs" (i.e. - they made a lot of money holding RRE during the bubble and think they're RE moguls). They have told me that their parents are buying in Irvine as an "investment", and have made and continue to make offers on houses. Obviously, the only "investment" in Irvine SFHs is "speculation" at this point. How much of that is out there?</blockquote>
It's hard to say really. I know the buyers that I'm working with are looking to occupy their Irvine home as their primary residence.</blockquote>
I think there are a lot of people who think Irvine real estate is a great investment. I posted on the main blog a while ago that this spring I saw four houses in my neighborhood get listed, bought, and show back up on the rental market within weeks. When I saw what they paid, and I saw the asking price for the rent, I knew that if the buyers had put down no more than 20%, the rent they were asking didn't cover the mortgage, the HOA and taxes. So either they are putting in way more than 20%, or maybe they are paying all cash and see the rent as their return.</blockquote>
I didn't bother. I know what the house sold at and I know what the asking lease price was and I know the HOA fees. I can calculate the mortgage at 20% down, add up the taxes and the HOA and compare it to the asking lease price. They certainly didn't get more than their asking lease price. In all cases, the asking lease price was less than the mortgage plus taxes plus HOA. So either they are putting down more than 20% or reduced their costs by paying all cash or got a loan at a super low interest rate (this was when rates were at 4.5%, too). Bottom line: The perception is that prices are low enough that Irvine properties are investment material, otherwise they wouldn't have popped back up on the rental market.
 
[quote author="nefron" date=1249002833][quote author="nefron" date=1248994323][quote author="usctrojanman29" date=1248956337][quote author="Strom" date=1248951326]How much of the money out there is speculative right now? I have talked to several people whose "parents are entrepreneurs" (i.e. - they made a lot of money holding RRE during the bubble and think they're RE moguls). They have told me that their parents are buying in Irvine as an "investment", and have made and continue to make offers on houses. Obviously, the only "investment" in Irvine SFHs is "speculation" at this point. How much of that is out there?</blockquote>
It's hard to say really. I know the buyers that I'm working with are looking to occupy their Irvine home as their primary residence.</blockquote>
I think there are a lot of people who think Irvine real estate is a great investment. I posted on the main blog a while ago that this spring I saw four houses in my neighborhood get listed, bought, and show back up on the rental market within weeks. When I saw what they paid, and I saw the asking price for the rent, I knew that if the buyers had put down no more than 20%, the rent they were asking didn't cover the mortgage, the HOA and taxes. So either they are putting in way more than 20%, or maybe they are paying all cash and see the rent as their return.</blockquote>
I didn't bother. I know what the house sold at and I know what the asking lease price was and I know the HOA fees. I can calculate the mortgage at 20% down, add up the taxes and the HOA and compare it to the asking lease price. They certainly didn't get more than their asking lease price. In all cases, the asking lease price was less than the mortgage plus taxes plus HOA. So either they are putting down more than 20% or reduced their costs by paying all cash or got a loan at a super low interest rate (this was when rates were at 4.5%, too). Bottom line: The perception is that prices are low enough that Irvine properties are investment material, otherwise they wouldn't have popped back up on the rental market.</blockquote>


What makes you think that these people are that smart? They may have just compared the mortgage with the rent, and not account for taxes or vacancies.
 
[quote author="ERPguy" date=1249008310][quote author="nefron" date=1249002833][quote author="nefron" date=1248994323][quote author="usctrojanman29" date=1248956337][quote author="Strom" date=1248951326]How much of the money out there is speculative right now? I have talked to several people whose "parents are entrepreneurs" (i.e. - they made a lot of money holding RRE during the bubble and think they're RE moguls). They have told me that their parents are buying in Irvine as an "investment", and have made and continue to make offers on houses. Obviously, the only "investment" in Irvine SFHs is "speculation" at this point. How much of that is out there?</blockquote>
It's hard to say really. I know the buyers that I'm working with are looking to occupy their Irvine home as their primary residence.</blockquote>
I think there are a lot of people who think Irvine real estate is a great investment. I posted on the main blog a while ago that this spring I saw four houses in my neighborhood get listed, bought, and show back up on the rental market within weeks. When I saw what they paid, and I saw the asking price for the rent, I knew that if the buyers had put down no more than 20%, the rent they were asking didn't cover the mortgage, the HOA and taxes. So either they are putting in way more than 20%, or maybe they are paying all cash and see the rent as their return.</blockquote>
I didn't bother. I know what the house sold at and I know what the asking lease price was and I know the HOA fees. I can calculate the mortgage at 20% down, add up the taxes and the HOA and compare it to the asking lease price. They certainly didn't get more than their asking lease price. In all cases, the asking lease price was less than the mortgage plus taxes plus HOA. So either they are putting down more than 20% or reduced their costs by paying all cash or got a loan at a super low interest rate (this was when rates were at 4.5%, too). Bottom line: The perception is that prices are low enough that Irvine properties are investment material, otherwise they wouldn't have popped back up on the rental market.</blockquote>


What makes you think that these people are that smart? They may have just compared the mortgage with the rent, and not account for taxes or vacancies.</blockquote>


I'm not saying I think they are smart at all. I'm just saying that I think there is a real mania in Irvine real estate right now, so much so that people think current prices are a bargain and anything below about $550,000 qualifies as an investment. As long as this continues, there will be a low inventory on the market and the low end won't creep any lower. I think the market has found a bottom at $500,000 +/- 10% for a reasonable 1500 sq ft 3/2 sfr. I don't think it's going to go any lower until the investors are exhausted or something forces the market to break that floor. I think prices will creep lower as rates rise but the monthly payment, which is what most people look at, will stay the same. JMHO.
 
[quote author="nefron" date=1249081576][quote author="ERPguy" date=1249008310][quote author="nefron" date=1249002833][quote author="nefron" date=1248994323][quote author="usctrojanman29" date=1248956337][quote author="Strom" date=1248951326]How much of the money out there is speculative right now? I have talked to several people whose "parents are entrepreneurs" (i.e. - they made a lot of money holding RRE during the bubble and think they're RE moguls). They have told me that their parents are buying in Irvine as an "investment", and have made and continue to make offers on houses. Obviously, the only "investment" in Irvine SFHs is "speculation" at this point. How much of that is out there?</blockquote>
It's hard to say really. I know the buyers that I'm working with are looking to occupy their Irvine home as their primary residence.</blockquote>
I think there are a lot of people who think Irvine real estate is a great investment. I posted on the main blog a while ago that this spring I saw four houses in my neighborhood get listed, bought, and show back up on the rental market within weeks. When I saw what they paid, and I saw the asking price for the rent, I knew that if the buyers had put down no more than 20%, the rent they were asking didn't cover the mortgage, the HOA and taxes. So either they are putting in way more than 20%, or maybe they are paying all cash and see the rent as their return.</blockquote>
I didn't bother. I know what the house sold at and I know what the asking lease price was and I know the HOA fees. I can calculate the mortgage at 20% down, add up the taxes and the HOA and compare it to the asking lease price. They certainly didn't get more than their asking lease price. In all cases, the asking lease price was less than the mortgage plus taxes plus HOA. So either they are putting down more than 20% or reduced their costs by paying all cash or got a loan at a super low interest rate (this was when rates were at 4.5%, too). Bottom line: The perception is that prices are low enough that Irvine properties are investment material, otherwise they wouldn't have popped back up on the rental market.</blockquote>


What makes you think that these people are that smart? They may have just compared the mortgage with the rent, and not account for taxes or vacancies.</blockquote>


I'm not saying I think they are smart at all. I'm just saying that I think there is a real mania in Irvine real estate right now, so much so that people think current prices are a bargain and anything below about $550,000 qualifies as an investment. As long as this continues, there will be a low inventory on the market and the low end won't creep any lower. I think the market has found a bottom at $500,000 +/- 10% for a reasonable 1500 sq ft 3/2 sfr. I don't think it's going to go any lower until the investors are exhausted or something forces the market to break that floor. I think prices will creep lower as rates rise but the monthly payment, which is what most people look at, will stay the same. JMHO.</blockquote>


You don't mention any tax deductions in your analysis. This would have a pretty large impact for some people who are renting these houses out wouldn't it?
 
I wonder what is the percentage of investors who are investing in Irvine as oppose to say the IE... Irvine would see a greater appreciation in the long run if bought and sold at the right times versus constant positive cash-flow... I have heard of a lot of Chinese buying the IE too... Geo, got any idea...?
 
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