I've been bouncing so many ideas in my mind regarding the local markets and keep switching from bearish to "pessimistically optimistic" to bearish and back... I figured why not jot some ideas down so here goes. Today's Irvine real estate market is becoming increasingly disjointed in that traditional SFRs are in high demand while anything else seems to be on the decline, including townhomes of which I currently own. Based on local comps, etc., the gov't subsidies helped values to a high of ~$515K in 2010 or $343 per foot and SFRs were right around the same (no evidence of this, though). In any event, as housing credits disappeared, so did the market for townhomes in Irvine, and we are heading towards $300/ft. (maybe at $316 now?). In contrast, SFRs, specifically newer builds in the existing market, are on the rise heading north of $360 /ft. What gives?
Based on experience, my feeling is that there is at least 100-200 families out there who would like to live in Irvine. Some are actively searching, some are waiting for housing prices to decline because all signs point to down... The problem is, you look around, and there are a bunch of people staring back at you... you wonder when they will pull the trigger, they are wondering when you will pull the trigger. This dilmena causes many, including myself, to say "ah what the heck"... and potentially purchase, possibly against your better judgement....So what happens then? These 100-200 are actively bidding on what is currently a LOW level of inventory... supply and demand kicks in, and short-run pricing is on the rise. So what's next? Does equilibrium pricing move up and stay up until more supply? Perhaps? Maybe TIC is managing inventory to create "shifts" in demand.
Everyone's heard the arguments for rising 10yr T rates, which will affect mortgage pricing. So... cheaper house at higher rate or more expensive house at cheaper rate? OR.. are you really optimistic and do you believe rates will stay low and housing prices will crumble? I don't know, I just had a friend tell me that he personally thinks we'll be in the the 200's per foot for new construction in Irvine if the mortgage subsidy gets cut or eliminated. What about the conforming loan limit (for agency jumbo) decrease later this year. Assuming the all cash FCB is nominal, doesn't that really affect housing affordability in the higher ranges? Higher energy prices - wont it affect consumer income to spend on housing? Isnt that what they are saying? That inflation will further affect housing affordability? Can we really have really high interest rates? Why did Bill Gross just dump billions of dollars in treasuries? If we are heading into an inflationary period, doesn't that start pointing to stagflation? All this things create a jumbled mess in my mind. So many signs point to a continued declining market. Everything else around me is declining. I looked at Amalfi Hills in Yorba. Could have bought 2900 sq ft for under $800K. Incredible. Here it wont buy me but 2100.
So what did I do even though all signs point to down? Looks like I'm going to buy a house now.... what the heck am I thinking?
Based on experience, my feeling is that there is at least 100-200 families out there who would like to live in Irvine. Some are actively searching, some are waiting for housing prices to decline because all signs point to down... The problem is, you look around, and there are a bunch of people staring back at you... you wonder when they will pull the trigger, they are wondering when you will pull the trigger. This dilmena causes many, including myself, to say "ah what the heck"... and potentially purchase, possibly against your better judgement....So what happens then? These 100-200 are actively bidding on what is currently a LOW level of inventory... supply and demand kicks in, and short-run pricing is on the rise. So what's next? Does equilibrium pricing move up and stay up until more supply? Perhaps? Maybe TIC is managing inventory to create "shifts" in demand.
Everyone's heard the arguments for rising 10yr T rates, which will affect mortgage pricing. So... cheaper house at higher rate or more expensive house at cheaper rate? OR.. are you really optimistic and do you believe rates will stay low and housing prices will crumble? I don't know, I just had a friend tell me that he personally thinks we'll be in the the 200's per foot for new construction in Irvine if the mortgage subsidy gets cut or eliminated. What about the conforming loan limit (for agency jumbo) decrease later this year. Assuming the all cash FCB is nominal, doesn't that really affect housing affordability in the higher ranges? Higher energy prices - wont it affect consumer income to spend on housing? Isnt that what they are saying? That inflation will further affect housing affordability? Can we really have really high interest rates? Why did Bill Gross just dump billions of dollars in treasuries? If we are heading into an inflationary period, doesn't that start pointing to stagflation? All this things create a jumbled mess in my mind. So many signs point to a continued declining market. Everything else around me is declining. I looked at Amalfi Hills in Yorba. Could have bought 2900 sq ft for under $800K. Incredible. Here it wont buy me but 2100.
So what did I do even though all signs point to down? Looks like I'm going to buy a house now.... what the heck am I thinking?