Economic Slowdown?

[irvinehomeowner]

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.

When did I say zero or close to zero? I was just pointing out the flaw in your argument. Remember, I think there is a high percentage of FCB owners (all FCBs, not just Chinese), but I don't agree that trouble in the Chinese economy will have the impact you think it will... not just due to what is the actual percentage of the Irvine market they make up but also because as other posters have stated, they won't sell en masse. They didn't do it 10 years ago so why would they do it now?

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.

Irvine abhors a vacuum.

Where the *Chinese* FCBs leave, others will fill in. Sorry, no data for that, but that's how unicorns work.

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.

So far it seems you and Panda are in the minority. As other posters have said, if there is a 10-15% drop in Irvine, that translates to 20-40% elsewhere... and that means some major economic downturn. Which I guess is your point... AI will kill us all.

 

[Kenkoko]

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.

12.5% of Irvine household falls in the bottom 25% Income bracket

Poor college kids account for roughly that % of Irvine population. So let's discard that.

18.4% of Irvine household falls in the top 10% Income bracket. These are the ones to really benefit from the historic income and wealth growth we've had.

36.3% of Irvine household falls in the top 25% Income bracket.

So the without the top 36% and the bottom 12.5%, still more than 50% of Irvine household falls in the 25%-75% household income bracket.

Stagnant real wages affect more than half of Irvine households even if you take out the top 25% and the poor college kids.

 

[Kenkoko]

So far it seems you and Panda are in the minority. As other posters have said, if there is a 10-15% drop in Irvine, that translates to 20-40% elsewhere... and that means some major economic downturn. Which I guess is your point... AI will kill us all.

That's a huge misrepresentation of my point on AI and automation. I am not saying AI will kill anyone. I believe AI and automation is the way to a better future. It's the path to that will create massive economic disruptions especially if our policy makers do not get on top of this. This is a big reason why I support Andrew Yang.

We will reach a point where the human mind, and human labor, is straight up inefficient and obsolete compared to its predecessor. Those ?new jobs? for humans to ?adapt into? simply won?t exist at all when literally anything a human can do will be better done by a machine.

Most of the economic gains from AI and Automation will only go to the top % of American who are owners and shareholders of large tech companies.  The rest of the American people will see very little of that gain and many of them will suffer due to job displacement.

Our winner take all style of capitalism will lead to massive economic disruptions as we make this technological transformation.

 

[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.

12.5% of Irvine household falls in the bottom 25% Income bracket

Poor college kids account for roughly that % of Irvine population. So let's discard that.

18.4% of Irvine household falls in the top 10% Income bracket. These are the ones to really benefit from the historic income and wealth growth we've had.

36.3% of Irvine household falls in the top 25% Income bracket.

So the without the top 36% and the bottom 12.5%, still more than 50% of Irvine household falls in the 25%-75% household income bracket.

Stagnant real wages affect more than half of Irvine households even if you take out the top 25% and the poor college kids.

great, now let's talk about the percentage of owner-occupied homes, which is 48%.  assuming the vast majority of the top 36% earners in irvine are homeowners, that means 75% of the homeowners are top earners which have benefited from higher wage growth.

now, who owns the other 52% of homes?  does this include tic rentals?  what percentage of this is fcb?

 

[Kenkoko]

great, now let's talk about the percentage of owner-occupied homes, which is 48%.  assuming the vast majority of the top 36% earners in irvine are homeowners, that means 75% of the homeowners are top earners which have benefited from higher wage growth.

now, who owns the other 52% of homes?  does this include tic rentals?  what percentage of this is fcb?

I don't exactly see the reason to break it down into owners vs renters. Does it provide more clarity? if so on what ?

For home prices to continue to move up, we do need renters to have enough income growth and become first time home buyers. We also need owners in starter homes/condos to have income growth to buy move up homes. These are people affected by stagnant real wages.

 

[irvinehomeowner]

So far it seems you and Panda are in the minority. As other posters have said, if there is a 10-15% drop in Irvine, that translates to 20-40% elsewhere... and that means some major economic downturn. Which I guess is your point... AI will kill us all.

That's a huge misrepresentation of my point on AI and automation. I am not saying AI will kill anyone.

[...]

I was joking... but now you know how it feels to have your opinion misrepresented.

I never said FCBs are close to zero percent of Irvine real estate nor did I say Irvine prices will keep going up.

I don't exactly see the reason to break it down into owners vs renters. Does it provide more clarity? if so on what ?

Wait. Weren't you the one who cited the high percentage of non-owner occupied homes in Irvine as a liability? If that wasn't you I apologize.

 

[irvinehomeowner]

@kenkoko:

On Irvine's price resiliency...

Has it occurred to you that if prices do drop significantly in Irvine that people may actually buy more in Irvine? They will double down ala Buffet style (Warren not KBBQ).

This is what happened during the last downturn, there was supposed to be a significant number of foreclosures that were supposed to hit the market for those who couldn't pay due to ninja loans... instead of just hitting the open market, they were either a) bought in bulk by investors b) held on to by the banks c) can-kicked d) gobbled up quickly by buyers waiting for lower prices in Irvine... which was another reason why Irvine didn't take the dive that everyone predicted.

 

[Kenkoko]

Wait. Weren't you the one who cited the high percentage of non-owner occupied homes in Irvine as a liability? If that wasn't you I apologize.

Nope, not me.

 

[Kenkoko]

@kenkoko:

On Irvine's price resiliency...

Has it occurred to you that if prices do drop significantly in Irvine that people may actually buy more in Irvine? They will double down ala Buffet style (Warren not KBBQ).

This is what happened during the last downturn, there was supposed to be a significant number of foreclosures that were supposed to hit the market for those who couldn't pay due to ninja loans... instead of just hitting the open market, they were either a) bought in bulk by investors b) held on to by the banks c) can-kicked d) gobbled up quickly by buyers waiting for lower prices in Irvine... which was another reason why Irvine didn't take the dive that everyone predicted.

I?ve said numerous times that Irvine is desirable and will have a lot of downward price resistance.

But a lot of things I see are chipping away at the margins that could drives us lower. We can debate how many Irvine household is affected by stagnant real wages. But that % is not zero. We can debate the numbers of future FCBs but that # is not going to return to the level of the past few years. We can debate how fast AI and automation will lead to job loss but no matter what spectrum you stand on this issue, it?s going to happen. (I?d argue it?s already happening. We just had the most Q1 layoffs in a decade by a very wide margin too)
https://www.axios.com/us-q1-layoffs-in-a-decade-6309b133-5212-4204-976b-347de6f4ad41.html


Is 10%-15% correction unthinkable? It?s essentially where we were at 5 years ago. Can prices retreat to that level? It?s certainly possible to me.

As to the doomsday scenario you are referring to, AI and automation is really the wild card here. Nobody knows how we are going to handle the economic disruption caused by massive job displacement. It will happen when we reach the point where a significant % of human mind and human labor is straight up inefficient and obsolete compared to AI/Automation.

 

[usctrojancpa]

great, now let's talk about the percentage of owner-occupied homes, which is 48%.  assuming the vast majority of the top 36% earners in irvine are homeowners, that means 75% of the homeowners are top earners which have benefited from higher wage growth.

now, who owns the other 52% of homes?  does this include tic rentals?  what percentage of this is fcb?

I don't exactly see the reason to break it down into owners vs renters. Does it provide more clarity? if so on what ?

For home prices to continue to move up, we do need renters to have enough income growth and become first time home buyers. We also need owners in starter homes/condos to have income growth to buy move up homes. These are people affected by stagnant real wages.

The talk about income is only one piece of the puzzle.  What about how much buyers put down?  Let's forget the FCBs because I don't represent them.  From my Irvine buyers, about 80% of them have put down between 25-50% so only average they are putting down 35%.  I know that is a high down payment percentage compared to surrounding cities just as Tustin, Costa Mesa, Lake Forest, Aliso Viejo.  Most Irvine buyers tend to be very conservative so if they are approved for a loan of $1m they will only send up borrowing $700k to $800k.  What's that mean?  Well, they are "strong hands" which can easily withstand any minor price decline and most of their homes would cash flow if they were to be rented out.

 

[eyephone]

Business Insider Article: Gig-economy workers like Uber and Lyft drivers may be skewing low unemployment numbers

Unemployment numbers may not fully account for gig-economy workers, who may self-report as being "employed" despite not being on a payroll, according to a new report from the Federal Reserve Bank of Dallas.

The Federal Reserve Bank of Dallas - one of 12 regional reserve banks that make up the centralized Fed - found that although unemployment is low, wage growth has not increased. One reason could be the rise of gig workers: The report found that the number of workers who pay self-employment taxes has risen steadily over the past 35 years.
https://www.google.com/amp/s/amp.bu...ivers-gig-economy-unemployment-numbers-2019-4

 

[usctrojancpa]

Business Insider Article: Gig-economy workers like Uber and Lyft drivers may be skewing low unemployment numbers

Unemployment numbers may not fully account for gig-economy workers, who may self-report as being "employed" despite not being on a payroll, according to a new report from the Federal Reserve Bank of Dallas.

The Federal Reserve Bank of Dallas - one of 12 regional reserve banks that make up the centralized Fed - found that although unemployment is low, wage growth has not increased. One reason could be the rise of gig workers: The report found that the number of workers who pay self-employment taxes has risen steadily over the past 35 years.
https://www.google.com/amp/s/amp.bu...ivers-gig-economy-unemployment-numbers-2019-4

I think in general more people are becoming self employed.  I have a few clients who went from working for a corporation or medical/dental group to starting up their own business. 

 

[fortune11]

As an aside, while we are on this topic ...  Everyone who called for austerity back during Obama years got it wrong and caused harm ... Everyone who scaremongered about the deficit got it wrong and caused harm ...Everyone who wrote about the "skills gap" got it wrong and caused harm ...
Everyone who kept warning about inflation got it wrong and caused harm

Lots of regular people - critics, bloggers, gadflies, etc were able to see this but the commanding heights of the econ/policy/political worlds either could not or would not.

Or, an even less charitable interpretation: they didn't get it wrong at all. They didn't want full employment, they didn't want wage growth and empowered workers and they certainly didn't want that happening under a Democratic president.

I mean, years of the titans of industry whining about the skills mismatch, how they can't find good workers, and chin-stroking conferences about labor force participation, and columns about how it was workers' own fault, on and on and on, all just garbage.

Republicans sure seem to understand how running large deficits can boost an economy when they're in power, but risked an unprecedented US default under Obama to impose austerity.

The worst part?  that this will all happen again, and everyone will either forget or pretend to forget how wrong they were.

 

[Kenkoko]

Falling labor force participation is hiding a much higher unemployment number. The latest drop in the unemployment rate was for the wrong reason.Nearly half a million people stop looking for work in April.

Had the labor force participation rate not fallen over the past 12 years, the unemployment rate would be more than double, from 3.6% to 8.5%!

Since Obama?s first term, growth rates during the current expansion has been almost half compare to expansions before 2000.

Deficit hysteria and fiscal responsibility are weighing us down like an anchor. The US government can?t possibly default on debt denominated in dollars.

Debt levels are still very high.We have fewer people looking for work, stagnating wages and anemic growth. Now add to that the fact that an increasing chunk of people?s paychecks just goes to paying off debt.

We might want to start being excited about 2% growth.

 

[fortune11]

Here we go again w the trade wars

All those who missed locking in refinancing a month or two ago , your second chance is coming  !

 

[OCLuvr]

Here we go again w the trade wars

All those who missed locking in refinancing a month or two ago , your second chance is coming  !

When do you expect a rate cut?

 

[paperboyNC]

Falling labor force participation is hiding a much higher unemployment number. The latest drop in the unemployment rate was for the wrong reason.Nearly half a million people stop looking for work in April.

Had the labor force participation rate not fallen over the past 12 years, the unemployment rate would be more than double, from 3.6% to 8.5%!

Since Obama?s first term, growth rates during the current expansion has been almost half compare to expansions before 2000.

Deficit hysteria and fiscal responsibility are weighing us down like an anchor. The US government can?t possibly default on debt denominated in dollars.

Debt levels are still very high.We have fewer people looking for work, stagnating wages and anemic growth. Now add to that the fact that an increasing chunk of people?s paychecks just goes to paying off debt.

We might want to start being excited about 2% growth.

Doesn't look too bad to me:https://fred.stlouisfed.org/series/LNU01300060

Another chart, labor force participation identical to 10 years ago:https://www.cbo.gov/publication/53452

A lot more 55+ working than 10 years ago:https://fred.stlouisfed.org/series/LNS11324230

The only reasons the overall labor participation rate has dropped is because of an aging population:
https://fredblog.stlouisfed.org/2015/08/the-composition-effect-in-the-labor-force-participation-rate/?utm_source=series_page&utm_medium=related_content&utm_term=related_resources&utm_campaign=fredblog

 

[eyephone]

Adding Uber and Lyft drivers to the pool of employed is a little misleading. So if a person does errands or deliver food they are consider employed?


Always analayze the inputs.

 

[Kings]

Adding Uber and Lyft drivers to the pool of employed is a little misleading.

that's right, earning money driving for uber and lyft is not a real job like driving a taxi

 

[eyephone]

Adding Uber and Lyft drivers to the pool of employed is a little misleading.

that's right, earning money driving for uber and lyft is not a real job like driving a taxi

Do they extrapolate the numbers working 40 plus hours maybe I would consider a job. Other than that I wouldn?t.