usctrojancpa
Well-known member
Rates will have to go a lot higher than 6-7% for a 30-year fixed mortgage for it to significantly effect Irvine real estate home prices. I will confidently say that Irvine is one of the most desirable locations in all of Southern California to live, let alone Orange County. Irvine has something that most other cities don't have...a brand name which TIC has successfully built. I have several buyers who will not buy anywhere but Irvine for various reasons (schools and location being at the top of the list). Having viewed over 100 Irvine homes in the past 6+ months, I can say that there is a strong buyer demand out there for these Irvine homes (mostly FCB and non-FCB Asian buyers). You guys should see how many buyers swarm to a new listing of a 4bed home the first few days...it's like moths to a light.
In the perfect world, if interest rates rise real estate prices should fall assuming all other things remain equal. However, a rising interest rate environment generally happens in an inflationary environment which would also suggest that wages would also rise (at least nominal wages). That being said, I just don't see mortgage rates being above 6%-7% in the foreseeable future and I could totally see interest rates stay in the 4.75% to 5.50% range for the next few years. There isn't sustainable inflation out there (only asset inflation due to the flood of money chasing returns in the various markets) because capacity utilization is still very low or in other words there's a lot of slack and over capacity out there that needs to be absorbed before real inflation can take hold.
I totally agree with you CK, many folks like IR and Graph have underestimated the power of the gov't to manipulate the real estate market. Also, banks can hold out a lot long in releasing their REO inventory than most people with families care to wait to buy a home. The REO tidal is NOT COMING...the banks will keep slowing bleeding their REOs into the market which will be quickly absorbed by the market in low inventory environments like we have now. The only possible way the banks will speed up the process is if the gov't and regulators force them too (I highly doubt that will happen). So what do I think will happen? Depending on what happens with the economy, I think that unfortunately the downside risk for Irvine real estate is probably about 5-10% from today's levels. The only way I would change that prediction is if the economy takes a huge dump (causing employment to surge) and/or the number of listings increase 2x+ from today's levels. *SORRY PANDA*
In the perfect world, if interest rates rise real estate prices should fall assuming all other things remain equal. However, a rising interest rate environment generally happens in an inflationary environment which would also suggest that wages would also rise (at least nominal wages). That being said, I just don't see mortgage rates being above 6%-7% in the foreseeable future and I could totally see interest rates stay in the 4.75% to 5.50% range for the next few years. There isn't sustainable inflation out there (only asset inflation due to the flood of money chasing returns in the various markets) because capacity utilization is still very low or in other words there's a lot of slack and over capacity out there that needs to be absorbed before real inflation can take hold.
I totally agree with you CK, many folks like IR and Graph have underestimated the power of the gov't to manipulate the real estate market. Also, banks can hold out a lot long in releasing their REO inventory than most people with families care to wait to buy a home. The REO tidal is NOT COMING...the banks will keep slowing bleeding their REOs into the market which will be quickly absorbed by the market in low inventory environments like we have now. The only possible way the banks will speed up the process is if the gov't and regulators force them too (I highly doubt that will happen). So what do I think will happen? Depending on what happens with the economy, I think that unfortunately the downside risk for Irvine real estate is probably about 5-10% from today's levels. The only way I would change that prediction is if the economy takes a huge dump (causing employment to surge) and/or the number of listings increase 2x+ from today's levels. *SORRY PANDA*