Economic Slowdown?

[morekaos]

More "if true..thens"....those lines have not worked out as of late.

2.9% GDP in 2018 was a real thing. 

2014:  2.5
2015:  2.9
2016:  1.6
2017:  2.3
2018:  2.9

Are you predicting GDP growth in 2019 to be better than 2.9%?

Surprise!! Didn't see that comin. Well, not really.

US economy grows by 3.2% in the first quarter, topping expectations

First-quarter gross domestic product expanded by 3.2%, the Bureau of Economic Analysis said in its initial read of the economy for that period.
Economists polled by Dow Jones expected the U.S. economy increased by 2.5% in the first quarter.
Gross domestic product for the first quarter was the best start to a year since 2015.

https://www.cnbc.com/2019/04/26/gdp-q1-2019-first-read.html
https://youtu.be/yMwmqp3GLMc

https://youtu.be/yMwmqp3GLMc

Think this discussion might be better served here.  The "sugar high" crowd may want to take notice of the positive possibilities.

In defense of a booming economy. This is no ?sugar high.

The Bloomberg consensus estimate for first-quarter annualized GDP growth was just 2.3 percent, meaning the experts had undershot the actual result by nearly a full percentage point. That happens, given that forecasting is an inexact science. But when Friday?s numbers were released, a scramble ensued to downplay the results to justify previous pessimism. That 3.2 percent growth figure? It was illusory, due to a host of one-time factors, such as companies boosting inventories as a precaution against escalating trade friction with China. This fast growth can?t last, said the experts. ?The first-quarter number is overstating the strength of the economy,? Ben Herzon of Macroeconomic Advisers told The Washington Post.

Well, who?s to say the good times can?t last? That?s what JPMorgan Chase CEO Jamie Dimon said during his investor conference call earlier in April. Consumers are in good shape, he said. People are re-entering the workforce. And companies are feeling positive and have plenty of capital, all of which means growth can go on for years. ?There?s no law that says it has to stop,? Dimon said.

https://www.chicagotribune.com/news/opinion/editorials/ct-edit-economy-trump-gdp-growth-unemployment-20190428-story.html

 

[fortune11]

Dimon has been famously wrong before .  CEOs tend to extrapolate good times forever and over build / over hire / and then we have recessions when things unwind.  all this is just noise .  where was he in nov-dec last year

I have told everyone on multiple threads there is no recession coming.  but we will be 2-handle on gdp on average.  this 3.2 is an aberration with a lot of one time stuff, some of it you will see reversed w q2 and beyond. 

same deal on housing -- we are now at the local trough and likely recovering

 

[Kenkoko]

GDP growth has not translated to real wages for most Americans. In fact, for most U.S. workers, real wages have barely budged in decades despite record GDP growth.

The stock market is also a poor indicator of how an average Irvine family is impacted. A whopping 84 percent of all stocks owned by Americans belong to the wealthiest 10 percent of households. And that includes everyone's stakes in pension plans, 401(k)'s and individual retirement accounts, as well as trust funds, mutual funds and college savings programs like 529 plans.

Irvine's housing market was boosted by FCBs. Even the builders admitted so. Going forward, FCBs impact will continue to fade. Real wages will become more of a factor. Sure, there are rich people that lives in Irvine, but most are not.
https://www.pewresearch.org/fact-ta...rs-real-wages-have-barely-budged-for-decades/
https://www.politifact.com/californ...-khanna/what-percentage-americans-own-stocks/

 

[irvinehomeowner]

Irvine's housing market was boosted by FCBs. Even the builders admitted so. Going forward, FCBs impact will continue to fade. Real wages will become more of a factor. Sure, there are rich people that lives in Irvine, but most are not.

I disagree with you. While I am the original proponent of the power of FCBs (not just Chinese) in Irvine, I also know there are many non-FCBs that keep Irvine real estate stronger than surrounding cities.

The data that you are looking at regarding median income and poverty in Irvine is skewed.

 

[Kenkoko]

I disagree with you. While I am the original proponent of the power of FCBs (not just Chinese) in Irvine, I also know there are many non-FCBs that keep Irvine real estate stronger than surrounding cities.

The data that you are looking at regarding median income and poverty in Irvine is skewed.

Care to provide any facts and data to back up your opinion?

The stock market going record highs have very little effect on the average Irvine household. 84 percent of all stocks owned by Americans belong to the wealthiest 10 percent of households. To be in the top 10% wealth bracket, your household net worth needs to be above $1,182,390.36
How many households in Irvine have that?

We don?t even need to talk about poverty since that?s on the extreme end. Let?s talk about the fact that real wages have barely budged in decades despite record GDP growth.

Are you saying stagnant real wages have no effect on Irvine home prices?

Sure, there are non-Chinese FCBs buying new homes in Irvine. But that?s just 20-25% of the buyers.

It?s interesting to me that you want to shift the focus away from Chinese FCBs.

Are you really saying there will be no effect on Irvine home prices when 75%-80% in new home buying slows down significantly?

In case you missed my previous post, here is Larry Webb, CEO of New Home Co.

?In Southern California and primarily, Orange County and even more significantly Irvine, the foreign buyer and principally, the Chinese foreign buyer, first and second generations, made up 75 percent to 80 percent of the marketplace,? Larry Webb, CEO of New Home Co., recently told investors. ?And certainly, in the second half of last year, that buyer group was reduced significantly.?

https://www.ocregister.com/2019/03/...tion-10-as-luxury-market-chinese-buyers-fade/

 

[fortune11]

all I have to say is don?t get lost in economics and econometrics - it is not really a science

Median incomes , median this median that

All this matters for mean reverting systems - like height . Otherwise humans would be 100 ft tall just from small probabilities multiplying over time

It is all about the Marginal buyer . Think of where that buyer is coming from . Ok maybe it is an FCB. . Maybe it is a small business owner . What is their present financial condition ?  What is their propensity to consume housing right now ?

This is why people who are actually in touch w on the ground reality (like USC etc) are quick to react to changing conditions . Their livelihood depends on it.  Whereas economic analysis types don?t have any real time feedback loop informing their decision making process .

 

[irvinehomeowner]

I disagree with you. While I am the original proponent of the power of FCBs (not just Chinese) in Irvine, I also know there are many non-FCBs that keep Irvine real estate stronger than surrounding cities.

The data that you are looking at regarding median income and poverty in Irvine is skewed.

Care to provide any facts and data to back up your opinion?

The stock market going record highs have very little effect on the average Irvine household. 84 percent of all stocks owned by Americans belong to the wealthiest 10 percent of households. To be in the top 10% wealth bracket, your household net worth needs to be above $1,182,390.36
How many households in Irvine have that?

We don?t even need to talk about poverty since that?s on the extreme end. Let?s talk about the fact that real wages have barely budged in decades despite record GDP growth.

Are you saying stagnant real wages have no effect on Irvine home prices?

I don't think anyone on this board actually believes the median income reported on the census is the reality of what is true in Irvine. A better indicator would be what is the income needed to support a median home price mid-$850ks.

If wages are stagnant, how does that support the rising cost of Irvine homes? There are no more ninja loans, financing requires better evidence of income. You need to look at the result. If there aren't rich people in Irvine (not just FCBs), who can afford Orchard Hills? Shady? Quail Hill? It's not like there are homes sitting around vacant.

Sure, there are non-Chinese FCBs buying new homes in Irvine. But that?s just 20-25% of the buyers.

It?s interesting to me that you want to shift the focus away from Chinese FCBs.

Are you really saying there will be no effect on Irvine home prices when 75%-80% in new home buying slows down significantly?

In case you missed my previous post, here is Larry Webb, CEO of New Home Co.

?In Southern California and primarily, Orange County and even more significantly Irvine, the foreign buyer and principally, the Chinese foreign buyer, first and second generations, made up 75 percent to 80 percent of the marketplace,? Larry Webb, CEO of New Home Co., recently told investors. ?And certainly, in the second half of last year, that buyer group was reduced significantly.?
https://www.ocregister.com/2019/03/...tion-10-as-luxury-market-chinese-buyers-fade/

What percentage of "new" homes makes up the Irvine market? What percentage of homes sold by the New Home Co make up the "new" home market in Irvine? Using percentages like "75-80%" becomes less sensational when you actually apply the math.

And I'm not shifting focus away from Chinese FCBs, you are applying an importance on them that I'm trying to tell you is not as impactful as you think it is. There are actually many of us on this board who are living in $1m+ homes ($2m+ even), and none of us are Chinese FCBs.

And there have been many counters as to why Chinese FCBs would not mass exit the Irvine market. Combine that with the fact that there are other FCBs that are not affected by Chinese economy, even if they were to mass exit (highly unlikely), that effect is not as great as you think it is.

Find these numbers and we can talk:

What percentage of all Irvine real estate do FCBs own? Of that percentage, how many are Chinese?

 

[nosuchreality]

Tract housing is bought with income.  Irvine is tract housing.  Its target market is the upper middle class top quintile income and really top half of networth.  Both of which are doing quite well in the current economy.

JIMHO, the primary problem the builders have and why they're going to get further hammered is they've catered their marketing and design to the FCB market.

There wont be a real shortage of qualified buyers for your resale unless your pricing at a profit on a the prior FCB purchases on the top end tracts.  The mid-tier will remain strong.

 

[Kenkoko]

Find these numbers and we can talk:

What percentage of all Irvine real estate do FCBs own? Of that percentage, how many are Chinese?

IHO, it's perplexing to me that you want me to bring more data so I am qualified to have a conversation with you.  You still have yet to come up with any facts or data to back up your claims.

The only substance you provided was that there are actually many of non Chinese FCBs on this board who are living in $1m+ homes or even $2m+ homes.

But that's not really a good argument. I am a FCB living in 1m+ house, my FCB parents are living in 2m+ house, and we know many other FCBs living in 1m+ homes too. Does that add anything meaningful to the discussion?

You can dismiss the poverty number or the median income. But numerous studies have shown real wage growth has been stagnant for decades. I have yet to hear any coherent argument why this would have no impact on the housing market.

 

[fortune11]

There are mysteries and there are puzzles

Puzzles can be solved by having more data (to complete it)

Mysteries require at some point , a leap of faith based on available evidence and experience to make projections . Having more data will not necessarily help you solve a mystery

You have to decide for yourself whether you are solving a puzzle or a mystery when it comes to Irvine housing

 

[irvinehomeowner]

There are mysteries and there are puzzles

Puzzles can be solved by having more data (to complete it)

Mysteries require at some point , a leap of faith based on available evidence and experience to make projections . Having more data will not necessarily help you solve a mystery

You have to decide for yourself whether you are solving a puzzle or a mystery when it comes to Irvine housing

Definitely mystery.

Non-fundamentals abound.

 

[irvinehomeowner]

If wages have been stagnant how have prices gone up in Irvine?

That?s the best evidence, Irvine is so expensive.

 

[irvinehomeowner]

And I?m not asking you to bring more data, I?m asking you to do math.

If new homes are 10% of the Irvine market and the New Home Company builds 10% of those new homes (I?m being generous here) than 75-80% of that is what?

I think you are overstating the impact.

 

[Kenkoko]

And I?m not asking you to bring more data, I?m asking you to do math.

If new homes are 10% of the Irvine market and the New Home Company builds 10% of those new homes (I?m being generous here) than 75-80% of that is what?

I think you are overstating the impact.

The problem with your math is you are assuming FCBs only buy new homes. Do you have any facts or data to prove that?

 

[Kenkoko]

If wages have been stagnant how have prices gone up in Irvine?

That?s the best evidence, Irvine is so expensive.

There is really no If. Numerous studies and economists agree that real wages has been stagnant for decades.

If you are going to question that, please come up with supporting facts and data.

Just because prices have gone up does not mean it can keep going up. You need real wage growth for prices to keep going up.

 

[Kings]

do we know how much real wages have grown for the top 10-20% of earners in this country, which would be a better representation of irvine's population?  on average, the entire country's real wage growth may have been stagnant, but i would argue it's possible the top earners (including factoring in dual income households, which were not as popular 20-30 years ago as they are now especially with women having children later in life) may be outpacing the average wage growth.  also keep in mind that the median household income of $95k/year in irvine includes all the poor college kids - so what is the true median household income of actual working households in irvine?  i would bet it's closer to $120k/year and only increasing.

 

[irvinehomeowner]

And I?m not asking you to bring more data, I?m asking you to do math.

If new homes are 10% of the Irvine market and the New Home Company builds 10% of those new homes (I?m being generous here) than 75-80% of that is what?

I think you are overstating the impact.

The problem with your math is you are assuming FCBs only buy new homes. Do you have any facts or data to prove that?

Hold.

You're the one who has twice quoted an article about New Home Company and Chinese FCBs not buying. You even asked if Irvine prices would be affected significantly if 75-80% of new home buying were to slow down:

Are you really saying there will be no effect on Irvine home prices when 75%-80% in new home buying slows down significantly?

My point is your math is wrong based on the articles you posted. The actual percentage of Chinese FCBs buying new homes in Irvine is *NOT* 75-80%. And that actual percentage is even smaller when you factor in total new homes and all homes in Irvine. So until you can back up that "fact", the burden of proof is on you, not me.

 

[nosuchreality]

do we know how much real wages have grown for the top 10-20% of earners in this country, which would be a better representation of irvine's population?  on average, the entire country's real wage growth may have been stagnant, but i would argue it's possible the top earners (including factoring in dual income households, which were not as popular 20-30 years ago as they are now especially with women having children later in life) may be outpacing the average wage growth.  also keep in mind that the median household income of $95k/year in irvine includes all the poor college kids - so what is the true median household income of actual working households in irvine?  i would bet it's closer to $120k/year and only increasing.

From 1995 to 2015 the start of the top quintile had 12% real wage growth.  Since then its only gone higher.

If you want the top 10%, go use the US Census American community survey for Irvine, Orange County or even the Santa Ana -x-x MSA and look at family income deciles.

I'll suggest you look at family income and not household or per capita.

 

[irvinehomeowner]

If wages have been stagnant how have prices gone up in Irvine?

That?s the best evidence, Irvine is so expensive.

There is really no If. Numerous studies and economists agree that real wages has been stagnant for decades.

If you are going to question that, please come up with supporting facts and data.

You keep using macro data for micro scenarios. Let's be clear, we are talking about Irvine specifically. Let's say I agree that wages have been stagnant, then what explains the rising prices in Irvine? When you find that explanation, then you can tell me why you think prices in Irvine are going to drop significantly (maybe you think it's the Chinese FCBs).

Just because prices have gone up does not mean it can keep going up. You need real wage growth for prices to keep going up.

When have I said prices will keep going up?

I just disagree that *Irvine* is headed for a significant crash. There has to be a lot more going on than stagnant wages, AI replacing jobs, and "Chinese" FCBs not buying homes from the New Home Co.

Don't you know wealthy people in Irvine who are not Chinese FCBs since you keep focusing on that?

 

[Kenkoko]

And I?m not asking you to bring more data, I?m asking you to do math.

If new homes are 10% of the Irvine market and the New Home Company builds 10% of those new homes (I?m being generous here) than 75-80% of that is what?

I think you are overstating the impact.

The problem with your math is you are assuming FCBs only buy new homes. Do you have any facts or data to prove that?

Hold.

You're the one who has twice quoted an article about New Home Company and Chinese FCBs not buying. You even asked if Irvine prices would be affected significantly if 75-80% of new home buying were to slow down:

Are you really saying there will be no effect on Irvine home prices when 75%-80% in new home buying slows down significantly?

My point is your math is wrong based on the articles you posted. The actual percentage of Chinese FCBs buying new homes in Irvine is *NOT* 75-80%. And that actual percentage is even smaller when you factor in total new homes and all homes in Irvine. So until you can back up that "fact", the burden of proof is on you, not me.

Is there a reason to suspect drastically different numbers from other builders? New Home Co. said 75%-80%, Toll Brother said ?Significant? amount.

It?s difficult to find Irvine specific data point but here is another data point that points more towards what I?m saying than what you?re suggesting.

Here is the breakdown of foreign home buyers for California. 71% Asia, 6% Europe, 14% Latin America, 5% North America
https://infogram.com/foreign-buyer-origins-in-california-1hxj481g55e92vg

It?s difficult, if not impossible, to know the real % of FCBs that buy all homes in Irvine because there?s no builders tracking this stat in resell homes and many FCBs buy with LLCs.

Of course, I agree the # is not 75% for the overall Irvine market. But I think it's a significant amount, definitely not zero or close to zero like you seem to be suggesting. Therefore, i believe it will have an impact on Irvine home prices.

It?s true there are FCBs still out there buying like UCS pointed out. But, they will continue to go down in number. China will begin to admin 2nd round of capital outflow crackdown at end of this year. This time it will also come with a claw-back mechanism. We will see less FCBs going forward.

To me, Irvine home prices are not immune to small corrections. Irvine market has slow downed already and all it took was a small rate hike and some marginal decrease in FCBs.

Therefore I agree with Panda that a 10%-15% drop is possible in the next 4/5 years.