Frustration with Irvine inventory!

[Mcdonna1980_IHB]

Watch over the next several months, and the downpayments will start to decline. There are only so many buyers able to put 35% down. Once they are spent, we will see those putting 30% down get a turn, then 25% down, and so on. The market was not inflated by people with large downpayments, and it cannot be supported by them either.

Down payments have already been trending down:

This is a graph of the 3-month moving average down payment percentage for Irvine properties. Amazingly, even with the downtrend, prices have flattened out / ticked up...

I bet the graph for FHA loans shows a slope but in the other direction. When you guys look up the mortgage history can you tell if a loan is FHA?

 

[usctrojanman29_IHB]

Watch over the next several months, and the downpayments will start to decline. There are only so many buyers able to put 35% down. Once they are spent, we will see those putting 30% down get a turn, then 25% down, and so on. The market was not inflated by people with large downpayments, and it cannot be supported by them either.

Down payments have already been trending down:

This is a graph of the 3-month moving average down payment percentage for Irvine properties. Amazingly, even with the downtrend, prices have flattened out / ticked up...

I bet the graph for FHA loans shows a slope but in the other direction. When you guys look up the mortgage history can you tell if a loan is FHA?

As I've stated before....FHA loans with those 3.5%-5% downpayments are really subprime loans waiting to happen.

 

[Mcdonna1980_IHB]

Ipop, have you seen an upswing in 3-5% down payment? Also, I suppose a lot of Irvine homes purchased with large down payment could be FHA since money gifted is allowed as a down payment through that program.

 

[usctrojanman29_IHB]

Of the 650 or so properties indicated in Irvine inventory right now, around 200 of them are already in escrow. That suggests that there is only around 3 months of available inventory on the market in Irvine today.

Ipop's observation shouldn't be ignored. Basically the low inventory tells us that prices aren't going to fall much (if any) over the next few months. But you have to remember that it tells us pretty much nothing about what prices are going to do over the next few years. There are countless examples of areas that saw brisk sales and low inventory in 2005/2006 only to see prices cut in half 3 years later.

It is interesting how low the inventory is yet there are homes on the market for hundreds of days. Ordinarily, if the inventory were very low, prices would go up, but since buyers are not able to raise their bids due to tight lending standards, the higher priced inventory just sits there, and prices stay flat.

Watch over the next several months, and the downpayments will start to decline. There are only so many buyers able to put 35% down. Once they are spent, we will see those putting 30% down get a turn, then 25% down, and so on. The market was not inflated by people with large downpayments, and it cannot be supported by them either.

Agreed, in a healthy market the low inventory that we are seeing would translate to a large upswing in prices. But since a large portion of those sales are distressed (REO and short sales), it puts a cap on the rise in pricing. Plus, add the fact that lenders and appraisers are getting more conservative and you have a possible answer why pricing is essentially flat. It will be interesting to see what will happen once these current buyers run out of steam and distressed inventory keeps increasing....my guess is that it will be met with lower prices.

 

[ipoplaya_IHB]

Ipop, have you seen an upswing in 3-5% down payment? Also, I suppose a lot of Irvine homes purchased with large down payment could be FHA since money gifted is allowed as a down payment through that program.

I'll have to sift through IR2's data a little more to ascertain that...

 

[ipoplaya_IHB]

 

[roundcorners_IHB]

Look at my redfin search; Irvine is immune; buy NOW!

 

[usctrojanman29_IHB]

I'll make a prediction that if the stock market takes another leg down, so will the home buying activity in Irvine. 10-year bond rates up another 20bps...not long before mortgage rates are over 5%.

 

[ipoplaya_IHB]

I'll make a prediction that if the stock market takes another leg down, so will the home buying activity in Irvine. 10-year bond rates up another 20bps...not long before mortgage rates are over 5%.

Hey SC, how does 81 Canopy compare to your old place? It just closed for $710K, a CS of 206, so it's holding true with other recent QH closes at mid 2004 pricing...

 

[usctrojanman29_IHB]

I'll make a prediction that if the stock market takes another leg down, so will the home buying activity in Irvine. 10-year bond rates up another 20bps...not long before mortgage rates are over 5%.

Hey SC, how does 81 Canopy compare to your old place? It just closed for $710K, a CS of 206, so it's holding true with other recent QH closes at mid 2004 pricing...

Those Canopy condos are larger, detached, and further up the hill from my old condo. I believe this unit is 3bed, 2.5bath, and 2,000sf. If that's the case, it closed at $355/sf...if we use BK's formula of a 10% premium to detached condos versus attached condos in Irvine...the price per sf for my condo would be $355/1.1 = $328/sf (my sales price had a $336/sf) which sounds about right as my floorplan can now be had for $580k-$590k versus my sales price of $620k.

 

[wols0003_IHB]

Greetings IHB,

I've been a lurker for long time (is two and a half years a long time?), and this is my Cherry popping post. I've been following the San Diego, Palm Springs/Palm Desert, Orange County and the Inland waste areas since 2004.

We are now more than three years from 2006 peak prices. I hate to say this, because I also believed that Irvine home prices would trend with overall SoCal prices; it just isn't going to happen. I moved to Irvine in February of 2006, so that my wife could attend graduate school at UCI. After living in Irvine for a few months, we both agreed that it would be a great place to raise a family. We have been waiting and waiting and waiting for prices to come down in Irvine, but prices are just not coming down. The most popular mantra is that FCB's are holding up Irvine prices. I disagree. Asian American family buyers are holding up prices, because they really like Irvine. Irvine is the new "beach front property" "panoramic city view" "ocean sunset view" phenomenon. In past real estate crashes these "... " certain areas held their values incredibly well; they were nearly immune to the overall price decreases. Irvine appears to be nearly immune also, not because of ocean views and beachfront properties, but rather great schools, safe environment and low levels of spoiled, drugged out rich WASP kids. Affluent Asian American family buyers prefer Irvine over Newport Beach and Laguna Beach, because their children's friends are less likely to be messed up, drug using, surfer beach bums.

Cherry, I like you am very frustrated with this waiting game. It just doesn't seem like it's going to happen in Irvine. Hopefully I'm wrong, but there is no way anyone can say that prices in Irvine have tanked from 2006 peaks; I just haven't seen it. IHB bears, please don't mention short sale listings as a price reference, as we all know that short sale listing prices mean exactly jack shit. Good luck Cherry.

 

[traceimage_IHB]

I'm a long-time lurker too and it seems to me that the housing prices in Irvine have come down from where they were a couple of years ago, but they are still high enough to be too expensive for most people. Will they drop further? Who knows. Will they drop to the level that a regular person making a normal salary will be able to afford a house in Irvine? In my opinion, probably not. But it's always been like that. Those who can afford the most desirable areas can choose to live where they want, and those who can't have to go live elsewhere. Or they can rent where they can't afford to buy.

 

[IrvineRenter_IHB]

I hate to say this, because I also believed that Irvine home prices would trend with overall SoCal prices; it just isn't going to happen.

The opinion and attitude of your post is becoming more common now that we are having a bear rally. It is to be expected. The beliefs you are expressing are the motivations that cause knife catchers to act.

The bottom line is that one of two things is going to be true:

(1) You are right, and all the people we characterize as knife catchers are actually creating a price floor.

(2) We are right, and prices will continue to fall which will put everyone who buys now deep underwater.

If you are right, me and others like me will either overpay to live in Irvine in a couple of years, or we will go buy for much less in a nearby housing market (much of South OC will be flattened). I will probably choose to do the latter if I must.

If we are right, those who are buying today will be trapped in their properties for a decade or more.

Economics and past history is on our side. Emotions based on fears of being price out is on your side. Where will you place your bet?

 

[ipoplaya_IHB]

Irvine prices have come down, just not much compared to many other areas:

The bear rally IR refers to can definitely be seen in increase of the 3-mo average.

 

[irvine_home_owner_IHB]

Greetings IHB,

I've been a lurker for long time (is two and a half years a long time?), and this is my Cherry popping post. I've been following the San Diego, Palm Springs/Palm Desert, Orange County and the Inland waste areas since 2004.

Welcome to the IHB. Glad you decided to start posting.

We are now more than three years from 2006 peak prices. I hate to say this, because I also believed that Irvine home prices would trend with overall SoCal prices; it just isn't going to happen. I moved to Irvine in February of 2006, so that my wife could attend graduate school at UCI. After living in Irvine for a few months, we both agreed that it would be a great place to raise a family. We have been waiting and waiting and waiting for prices to come down in Irvine, but prices are just not coming down. The most popular mantra is that FCB's are holding up Irvine prices. I disagree. Asian American family buyers are holding up prices, because they really like Irvine. Irvine is the new "beach front property" "panoramic city view" "ocean sunset view" phenomenon. In past real estate crashes these "... " certain areas held their values incredibly well; they were nearly immune to the overall price decreases. Irvine appears to be nearly immune also, not because of ocean views and beachfront properties, but rather great schools, safe environment and low levels of spoiled, drugged out rich WASP kids. Affluent Asian American family buyers prefer Irvine over Newport Beach and Laguna Beach, because their children's friends are less likely to be messed up, drug using, surfer beach bums.

I should clarify... the FCB Theory is MY most popular mantra. It's mostly a joke and the demographic you outline still falls into the FCB category... affluent Asian American families are basically Foreign Cash Buyers. There are spoiled kids in Irvine... just a different kind of spoiled.

Cherry, I like you am very frustrated with this waiting game. It just doesn't seem like it's going to happen in Irvine. Hopefully I'm wrong, but there is no way anyone can say that prices in Irvine have tanked from 2006 peaks; I just haven't seen it. IHB bears, please don't mention short sale listings as a price reference, as we all know that short sale listing prices mean exactly jack shit. Good luck Cherry.

There has been a drop from 2006 peaks... although not as pronounced as other areas. Although not 40% across the board (IR has profiled some significant drops in the main blog)... a 10-20% drop is noteworthy for Irvine. Houses that sold new for ~$1.5m are at about ~$1.1m, houses in the older areas like Westpark that were $1.1m are now listing (and closing) for low-mid $800s. It really depends also on what part of Irvine you are looking at... some places are more stubborn than others. Shady has seen some huge drops... but most people here aren't in the Shady price range so they don't notice that.

Part of the reason the drops aren't significant (in my amateur opinion) is there isn't that much inventory. People are holding because they don't want to lose equity and unlike other areas... they can afford too. This will change once the loans reset/recast because even though interest rates are low... it's much harder to qualify for refis.

If you've been following this board... you'll also see that many don't think it will even bottom in Irvine until 2012... that's still almost 3 years to go. The last bubble cycle was about 7 years from peak to trough... if 2006 is the peak... then really you shouldn't be doing anything until 2013. And... if the down turn takes as long as the upturn (which I don't think because it was falsely continued by exotic financing)... that would really put us at 2016 (if the last bottom was around 1996).

But I'm not as smart as everyone else so take what I post with a grain of salt... if anyone could exactly pinpoint tops/bottoms... they are very rich right now.

I hope to see you post more, this place needs more differing opinions. And don't worry about the IHB bears... they just look like they can bite.

 

[tkaratz_IHB]

I hate to say this, because I also believed that Irvine home prices would trend with overall SoCal prices; it just isn't going to happen.

The opinion and attitude of your post is becoming more common now that we are having a bear rally. It is to be expected. The beliefs you are expressing are the motivations that cause knife catchers to act.

The bottom line is that one of two things is going to be true:

(1) You are right, and all the people we characterize as knife catchers are actually creating a price floor.

(2) We are right, and prices will continue to fall which will put everyone who buys now deep underwater.

If you are right, me and others like me will either overpay to live in Irvine in a couple of years, or we will go buy for much less in a nearby housing market (much of South OC will be flattened). I will probably choose to do the latter if I must.

If we are right, those who are buying today will be trapped in their properties for a decade or more.

Economics and past history is on our side. Emotions based on fears of being price out is on your side. Where will you place your bet?

I too am starting to become more and more convinced that So Cal, especially Irvine, is at a bottom, BUT, I'm definitely not going to call it and buy a home because we do have a bit of insurance, which is inflation. I think we can all agree that home prices will not appreciate as they has in the 2001 - 2006 era, in fact it will most likely by around a normal 2-3% a year for the next 5 years. With interest rates so low, inflation will certainly outpace home appreciation. So, in theory, the longer you can wait, the more purchasing power you will have. Assuming you have a job.

 

[usctrojanman29_IHB]

I hate to say this, because I also believed that Irvine home prices would trend with overall SoCal prices; it just isn't going to happen.

The opinion and attitude of your post is becoming more common now that we are having a bear rally. It is to be expected. The beliefs you are expressing are the motivations that cause knife catchers to act.

The bottom line is that one of two things is going to be true:

(1) You are right, and all the people we characterize as knife catchers are actually creating a price floor.

(2) We are right, and prices will continue to fall which will put everyone who buys now deep underwater.

If you are right, me and others like me will either overpay to live in Irvine in a couple of years, or we will go buy for much less in a nearby housing market (much of South OC will be flattened). I will probably choose to do the latter if I must.

If we are right, those who are buying today will be trapped in their properties for a decade or more.

Economics and past history is on our side. Emotions based on fears of being price out is on your side. Where will you place your bet?

I too am starting to become more and more convinced that So Cal, especially Irvine, is at a bottom, BUT, I'm definitely not going to call it and buy a home because we do have a bit of insurance, which is inflation. I think we can all agree that home prices will not appreciate as they has in the 2001 - 2006 era, in fact it will most likely by around a normal 2-3% a year for the next 5 years. With interest rates so low, inflation will certainly outpace home appreciation. So, in theory, the longer you can wait, the more purchasing power you will have. Assuming you have a job.

You really think that rates are going to stay around 5% for the longer term? And you don't think that more and more people being unemployed in the next few years won't affect Irvine home prices (I'm hoping that you don't assume that only those folks in the IE are getting laidoff). If you think inflation will bail out Irvine home prices, I think you are mistaken. The problem with Irvine home prices not dropping now is mainly due to the lack of inventory. I bet if you doubled the inventory, you'd see a nice little drop in the prices. Too many people are chasing too few homes currently.

 

[ipoplaya_IHB]

On the topic of declining inventory, congrats to Deuce for putting one into escrow with less than a week on the market...

Hopefully he becomes the new RE face of that VoC quagmire!

 

[stepping_up_IHB]

Wow, can that guy ever write a description and provide the photos to stand behind it!

 

[tkaratz_IHB]

I hate to say this, because I also believed that Irvine home prices would trend with overall SoCal prices; it just isn't going to happen.

The opinion and attitude of your post is becoming more common now that we are having a bear rally. It is to be expected. The beliefs you are expressing are the motivations that cause knife catchers to act.

The bottom line is that one of two things is going to be true:

(1) You are right, and all the people we characterize as knife catchers are actually creating a price floor.

(2) We are right, and prices will continue to fall which will put everyone who buys now deep underwater.

If you are right, me and others like me will either overpay to live in Irvine in a couple of years, or we will go buy for much less in a nearby housing market (much of South OC will be flattened). I will probably choose to do the latter if I must.

If we are right, those who are buying today will be trapped in their properties for a decade or more.

Economics and past history is on our side. Emotions based on fears of being price out is on your side. Where will you place your bet?

I too am starting to become more and more convinced that So Cal, especially Irvine, is at a bottom, BUT, I'm definitely not going to call it and buy a home because we do have a bit of insurance, which is inflation. I think we can all agree that home prices will not appreciate as they has in the 2001 - 2006 era, in fact it will most likely by around a normal 2-3% a year for the next 5 years. With interest rates so low, inflation will certainly outpace home appreciation. So, in theory, the longer you can wait, the more purchasing power you will have. Assuming you have a job.

You really think that rates are going to stay around 5% for the longer term? And you don't think that more and more people being unemployed in the next few years won't affect Irvine home prices (I'm hoping that you don't assume that only those folks in the IE are getting laidoff). If you think inflation will bail out Irvine home prices, I think you are mistaken. The problem with Irvine home prices not dropping now is mainly due to the lack of inventory. I bet if you doubled the inventory, you'd see a nice little drop in the prices. Too many people are chasing too few homes currently.

My point was that you shouldn't worry about buying now because even if it is the bottom and you did buy, you won't realize actual appreciation for at least five years.

Well, if you doubled the inventory across the board, I'm sure you'd see a drop in prices, however, in the entry level market, i've seen double digit offers above asking price on every condo priced between $400K - $500K in the IUSD. I do think demand is greater than supply and I don't think all the money is coming from parents or foreign money although a significant portion is.