Home sales weaken as Chinese investors sour on US real estate!!!

[lnc]

my take is that FCBs or not a price correction is coming to Irvine, possibly as early as 2017 Spring and more than likely by 2018 spring.  The no.of Irvine listings have been steadily increasing from last (2015) Fall.  Currently there are close to 900 listings of which 402 listings show a price reduction (226 within the past 30 days and 176 with price reduction that occurred more than 30 days prior)

Where you getting your listing numbers from?  As of 9pm on 8/13/16, there are only 684 active listings in Irvine which is basically flat with last year at this time while sales are up.  That means we have about 2.5 months of active inventory which is a weak seller's market.  If you took out 1.5m+ home listings the amount of inventory is below 2 months of inventory.  I said it before, if we didn't have new homes for sale resale home prices would be increasing. 

I belie the close to 900 number are from unfiltered refine listings.  If we just go on to Redfin and search under Irvine, it show around 880 listing.  But after filter it out new constructions, lands, other listings and only includes existing homes, the listing number now show 690 listings. 

2.5 month of inventory is quit low.  If Irvine home price is peaked and price correction is coming, I would expect more than 6 month of inventory.  With current sales rate, the inventory need to be over 1600 listings. 

 

[usctrojancpa]

my take is that FCBs or not a price correction is coming to Irvine, possibly as early as 2017 Spring and more than likely by 2018 spring.  The no.of Irvine listings have been steadily increasing from last (2015) Fall.  Currently there are close to 900 listings of which 402 listings show a price reduction (226 within the past 30 days and 176 with price reduction that occurred more than 30 days prior)

Where you getting your listing numbers from?  As of 9pm on 8/13/16, there are only 684 active listings in Irvine which is basically flat with last year at this time while sales are up.  That means we have about 2.5 months of active inventory which is a weak seller's market.  If you took out 1.5m+ home listings the amount of inventory is below 2 months of inventory.  I said it before, if we didn't have new homes for sale resale home prices would be increasing. 

I belie the close to 900 number are from unfiltered refine listings.  If we just go on to Redfin and search under Irvine, it show around 880 listing.  But after filter it out new constructions, lands, other listings and only includes existing homes, the listing number now show 690 listings. 

2.5 month of inventory is quit low.  If Irvine home price is peaked and price correction is coming, I would expect more than 6 month of inventory.  With current sales rate, the inventory need to be over 1600 listings. 

Since I was up and curious, I started looking closer at Redfin's Irvine inventory.  Looks like they are picking up Tustin Ranch, Foothill Ranch, Newport Coast, Tustin, Laguna Hills, list of all new home floor plans (not actual listings), and some other random listings because of the way they draw their map.  MLS is the most accurate source of inventory, period end of story.

 

[B2FiNiTY]

The irvine co. is very strict and hard to work with regarding leases. They are very picky on who they choose so not surprised to see properties sitting.

 

[renter1]

Doesn't same idea apply here?
http://www.businessinsider.com/san-...-collapsing-under-its-own-lopsidedness-2016-8

 

[irvineshadow]

^ Isn't that area distorted by Silicon Valley?  Even CEOs can't afford rent there, iirc.

 

[Cornflakes]

We have been crying too expensive san fran for few years now. Time to start shorting san fran housing small $ every week and keep shoring until trump wins or rates rise or recession hits or some crazy trigger brings down the house.

 

[riznick]

Canada is starting to stick it to the Chinese.  More and more might start migrating here from Canada.

Vancouver enacted a 15% property tax on foreign buyers.  Prices have dropped 20% since the law was passed. 

Vancouver Housing Market Implodes:http://www.zerohedge.com/news/2016-...ge-home-price-plunges-20-1-month-market-devas

As a new dawn breaks in Metro Vancouver?s real estate market, realty companies and real estate boards are reporting the first anecdotes of deals falling through as foreign buyers forfeited deposits on binding deals rather than pay the new tax. Worse, if only for the unprecedented local housing bubble, and certainly better for potential local homeowners who were locked out from the massively overpriced market, they report evidence of local buyers withdrawing offers in expectation that the market will soften.

More on the tax:http://www.afr.com/real-estate/resi...-off-chinese-investment-surge-20160801-gqitf9

As of Tuesday, foreign buyers of property in Vancouver, which like Sydney is one of the world's hottest real estate markets, will have to pay a 15 per cent transaction tax.

 

[Bullsback]

Let me ask this question. Do people think it is a bad idea what Vancouver did or do they think it is a good idea? I'm curious. On one hand, you have free market economy, on the other hand, if you are the city of Vancouver, you have a local economy to support and businesses have employee needs, which, the higher real estate costs, the more difficult or even impossible it can be to actually have a desirable workforce with the right skill sets that the local economy / businesses need.

My biggest concern with where pricing has gone in parts of OC (and this is an even worse issue in the bay area) is that you create an environment where young talent and young employees don't ever enter the job force in this market (while others move) because you just can't live a desirable lifestyle. The one benefit for OC thus far has been the inland empire along with some other areas within OC which haven't gotten as ridiculous (although most everything in HB / South Orange County is pretty pricey in general, especially compared to median / average incomes).  That was fine, for workers who bought houses before stuff sky-rocketed and stayed in the market (thus you really didn't get "outpriced"), but as we continue to move to where most people who have <10 years working experience haven't seen anything but prices, which are on the lower side of the affordability index, you start to create this environment where it becomes more difficult for businesses to have sustainable models and well, you then get into a dicey situation. 

The reality is, affordability is still a key longer term metric.  I wonder if California would enact something like this, it would in general, but considered a "liberal" type policy.

 

[LongIrvine]

http://www.vox.com/2016/8/8/12390048/san-francisco-housing-costs-tokyo

I'm more inclined towards free market. Not the worst thing in the world to have lots of people that want to live in the same nice place that I live. Yes it results in more traffic and other issues. But prefer to other extreme see Detroit.

I think lower housing cost is a really good thing. So in spite of the fact that I just paid a lot for over priced housing, I'd generally would be in favor of more building

 

[eyephone]

Let me ask this question. Do people think it is a bad idea what Vancouver did or do they think it is a good idea? I'm curious. On one hand, you have free market economy, on the other hand, if you are the city of Vancouver, you have a local economy to support and businesses have employee needs, which, the higher real estate costs, the more difficult or even impossible it can be to actually have a desirable workforce with the right skill sets that the local economy / businesses need.

My biggest concern with where pricing has gone in parts of OC (and this is an even worse issue in the bay area) is that you create an environment where young talent and young employees don't ever enter the job force in this market (while others move) because you just can't live a desirable lifestyle. The one benefit for OC thus far has been the inland empire along with some other areas within OC which haven't gotten as ridiculous (although most everything in HB / South Orange County is pretty pricey in general, especially compared to median / average incomes).  That was fine, for workers who bought houses before stuff sky-rocketed and stayed in the market (thus you really didn't get "outpriced"), but as we continue to move to where most people who have <10 years working experience haven't seen anything but prices, which are on the lower side of the affordability index, you start to create this environment where it becomes more difficult for businesses to have sustainable models and well, you then get into a dicey situation. 

The reality is, affordability is still a key longer term metric.  I wonder if California would enact something like this, it would in general, but considered a "liberal" type policy.

So what may happen or already has happened is that potentially there will be multiple families or relatives that live in one home. Since affordability is an issue relatives may live in a household to cover the mortgage.

 

[Cornflakes]

I wonder sometimes how many people these sky high real estate prices actually affect negatively. Say a street has 30 homes that were built 30 years ago. If we assume simple distribution of residency period on that street, there would be a resident of 30 years, 29 years, 28 years and so on. That would entail 1 house on this street going for sale every year, nowdays at the sky high prices. It would take only 1 newcomer in SF or OC or Brooklyn to fill that vacancy. That is just 3.33% of the street population, and by extension the city. Make it double and call it 7% of the city's population is replenished every year.

Now the person who sold the house, there is a decent chance that he/she bought another nicer house to move into within the city itself, thereby reducing that 7% by some degree. This person is not really affected by high prices as he/she sold high and buying high.

Of course there is fresh blood moving into popular cities, which would be blend of renters and buyers. So, there will be small bump in the % of population affected by high prices.

If my  assumptions above are in the ball park of reality, I can see why prices keep going absurdly high for long duration.

 

[Bullsback]

Let me ask this question. Do people think it is a bad idea what Vancouver did or do they think it is a good idea? I'm curious. On one hand, you have free market economy, on the other hand, if you are the city of Vancouver, you have a local economy to support and businesses have employee needs, which, the higher real estate costs, the more difficult or even impossible it can be to actually have a desirable workforce with the right skill sets that the local economy / businesses need.

My biggest concern with where pricing has gone in parts of OC (and this is an even worse issue in the bay area) is that you create an environment where young talent and young employees don't ever enter the job force in this market (while others move) because you just can't live a desirable lifestyle. The one benefit for OC thus far has been the inland empire along with some other areas within OC which haven't gotten as ridiculous (although most everything in HB / South Orange County is pretty pricey in general, especially compared to median / average incomes).  That was fine, for workers who bought houses before stuff sky-rocketed and stayed in the market (thus you really didn't get "outpriced"), but as we continue to move to where most people who have <10 years working experience haven't seen anything but prices, which are on the lower side of the affordability index, you start to create this environment where it becomes more difficult for businesses to have sustainable models and well, you then get into a dicey situation. 

The reality is, affordability is still a key longer term metric.  I wonder if California would enact something like this, it would in general, but considered a "liberal" type policy.

So what may happen or already has happened is that potentially there will be multiple families or relatives that live in one home. Since affordability is an issue relatives may live in a household to cover the mortgage.

Or people move to other areas where good jobs exist which also have more affordable home pricing / other indexes (and yes, crappier weather).  I'm not saying any of this happens now, but if you have sustained levels of very low affordability, I would think over time, you'd see a degradation in the quality of the available workforce.  Even silicon valley is seeing some of that crop up, with mini silicon valley's popping up (even Irvine would probably count as one with a lot of VC money coming down here) but you obviously have Austin and a few other areas as well emerging. 

 

[Bullsback]

I wonder sometimes how many people these sky high real estate prices actually affect negatively. Say a street has 30 homes that were built 30 years ago. If we assume simple distribution of residency period on that street, there would be a resident of 30 years, 29 years, 28 years and so on. That would entail 1 house on this street going for sale every year, nowdays at the sky high prices. It would take only 1 newcomer in SF or OC or Brooklyn to fill that vacancy. That is just 3.33% of the street population, and by extension the city. Make it double and call it 7% of the city's population is replenished every year.

Now the person who sold the house, there is a decent chance that he/she bought another nicer house to move into within the city itself, thereby reducing that 7% by some degree. This person is not really affected by high prices as he/she sold high and buying high.

Of course there is fresh blood moving into popular cities, which would be blend of renters and buyers. So, there will be small bump in the % of population affected by high prices.

If my  assumptions above are in the ball park of reality, I can see why prices keep going absurdly high for long duration.

It won't impact people who own existing real estate, the impact is on newer entrants to the workforce (as well as people who didn't own real estate and rent).  Part of this will adjust by people just not buying homes and instead renting (which we've already seen) as well as people accepting smaller spaces, but, there are tipping points and as more of people who settled in Orange County or bought when it was more affordable stop working / retire / sell, you have to replace those jobs with new people who as prices climb higher (and salaries don't climb at those levels), start to have more and more negative views of working a career locally and thus move (and over time, this impacts the overall quality of talent that exists).

I.e., if you go to wealthy, vacation spots, such as say the Hamptons, you don't have a bunch of businesses there because it wouldn't be sustainable to have a workforce there (yes there are other reasons too, but this is one of the reasons).  Similarly, it is why you couldn't headquarter google in some rural place with a lack of a population / talent pool of highly educated engineers, programmers, etc. 

 

[eyephone]

Let me ask this question. Do people think it is a bad idea what Vancouver did or do they think it is a good idea? I'm curious. On one hand, you have free market economy, on the other hand, if you are the city of Vancouver, you have a local economy to support and businesses have employee needs, which, the higher real estate costs, the more difficult or even impossible it can be to actually have a desirable workforce with the right skill sets that the local economy / businesses need.

My biggest concern with where pricing has gone in parts of OC (and this is an even worse issue in the bay area) is that you create an environment where young talent and young employees don't ever enter the job force in this market (while others move) because you just can't live a desirable lifestyle. The one benefit for OC thus far has been the inland empire along with some other areas within OC which haven't gotten as ridiculous (although most everything in HB / South Orange County is pretty pricey in general, especially compared to median / average incomes).  That was fine, for workers who bought houses before stuff sky-rocketed and stayed in the market (thus you really didn't get "outpriced"), but as we continue to move to where most people who have <10 years working experience haven't seen anything but prices, which are on the lower side of the affordability index, you start to create this environment where it becomes more difficult for businesses to have sustainable models and well, you then get into a dicey situation. 

The reality is, affordability is still a key longer term metric.  I wonder if California would enact something like this, it would in general, but considered a "liberal" type policy.

So what may happen or already has happened is that potentially there will be multiple families or relatives that live in one home. Since affordability is an issue relatives may live in a household to cover the mortgage.

Or people move to other areas where good jobs exist which also have more affordable home pricing / other indexes (and yes, crappier weather).  I'm not saying any of this happens now, but if you have sustained levels of very low affordability, I would think over time, you'd see a degradation in the quality of the available workforce.  Even silicon valley is seeing some of that crop up, with mini silicon valley's popping up (even Irvine would probably count as one with a lot of VC money coming down here) but you obviously have Austin and a few other areas as well emerging.

I don't think the quality of workforce will go down. But I think some neighborhoods that have multiple families living in one house will take up parking spaces and bring more traffic. Which is legal.

 

[Bullsback]

I should point out, I don't think any of the above is going to happen overnight.  And I also am not a believer (anymore) in any form of a major crash / correction happening.  With how qualified buyers are, to have a real crash, you'd have to drive something which actually drove a strong supply (without having off-setting demand) of homes on the market where people would be willing to realize losses (and sell at distressed values) or total decreased demand (i.e., massive earthquake). Given the amount of highly qualified borrowers as well as cash buyers who bought up the recent real estate, I don't see what event would cause that (outside of some just epic market crash where you had huge unemployment, etc).  Yes, there might be little corrections here or there, but the only thing that would drive any major price correction would be rapid upward changes in rates (which isn't happening) or significant unemployment / massive recession (again, we are probably heading into a softening of the overall credit markets, so while some recession is probably coming...after all, the economy is cyclical), the credit quality of borrowers is much better than the last crisis so I don't see many overall similarities. 

If anything, I think their will be a slight correction which will correspond to changes in rates / economic movements unless you just have a huge glut of new builds come onto the market (and while new builds help drive up prices because right now they make up a huge part of the supply and can have tight control on the supply (although they will at times have to discount) and even then, a huge glut won't put people in a position to force individual to put a lot of homes on the market at "distressed" prices. 

 

[Ready2Downsize]

I wonder sometimes how many people these sky high real estate prices actually affect negatively. Say a street has 30 homes that were built 30 years ago. If we assume simple distribution of residency period on that street, there would be a resident of 30 years, 29 years, 28 years and so on. That would entail 1 house on this street going for sale every year, nowdays at the sky high prices. It would take only 1 newcomer in SF or OC or Brooklyn to fill that vacancy. That is just 3.33% of the street population, and by extension the city. Make it double and call it 7% of the city's population is replenished every year.

Now the person who sold the house, there is a decent chance that he/she bought another nicer house to move into within the city itself, thereby reducing that 7% by some degree. This person is not really affected by high prices as he/she sold high and buying high.

Of course there is fresh blood moving into popular cities, which would be blend of renters and buyers. So, there will be small bump in the % of population affected by high prices.

If my  assumptions above are in the ball park of reality, I can see why prices keep going absurdly high for long duration.

I've lived in the OC for most of my life. When we got out of college we already had bought a townhome and worked our way up to bigger and better houses eventually getting to Irvine. My hubby worked in tech and I worked in a hospital. Even with both salaries it was not easy to get anything in the OC and we lived paycheck to paycheck with very little furniture etc. Our friends who couldn't seem to live as frugal went to Corona or the IE and drove every day (spending their cash on gas and time on the roads and nowadays tolls). Some worked their way up to buying in the OC, many still commute but no one left their jobs in the OC. Some were savvy and put anything they could afford into company stock purchase plans or got stock options. Yes, you have to wait for those things to pay off but many who go to UCI will eventually get stock options. Enough options can equate to a tidy sum even if the stock doesn't move a lot and there is no cash outlay to exercise and sell...... instant money. Stock purchase plans can work out quite well. My hubby worked for a tech company years ago that just traded in a large range, up, down, up, down but never breaking out (till the bubble). But that stock purchase plan (which did require us to purchase as opposed to a stock option grant) was absolute gold to us. The purchase price was 15% lower than the first or last day of the offering period, whichever was lower and we were always purchasing below the 52 week low. When the stock went up to the top of the range we sold.

Don't underestimate how many people in this area have access to more than just salary.

 

[Perspective]

ISOs, NQSOs, ESPPs, and RSUs are all a very large part of annual comp when salaries get into certain ranges, especially in the tech field.

 

[irvineshadow]

I should point out, I don't think any of the above is going to happen overnight.  And I also am not a believer (anymore) in any form of a major crash / correction happening.  With how qualified buyers are, to have a real crash, you'd have to drive something which actually drove a strong supply (without having off-setting demand) of homes on the market where people would be willing to realize losses (and sell at distressed values) or total decreased demand (i.e., massive earthquake).

I agree with this, it's hard to imagine a crash occuring in the same way considering how excruciating it was to buy our current house or to get qualified now. 

 

[eyephone]

I should point out, I don't think any of the above is going to happen overnight.  And I also am not a believer (anymore) in any form of a major crash / correction happening.  With how qualified buyers are, to have a real crash, you'd have to drive something which actually drove a strong supply (without having off-setting demand) of homes on the market where people would be willing to realize losses (and sell at distressed values) or total decreased demand (i.e., massive earthquake).

I agree with this, it's hard to imagine a crash occuring in the same way considering how excruciating it was to buy our current house or to get qualified now.

I don't think I would actually say this, it may sound cheesy. Never say never

 

[Cornflakes]

Things can get really bad really fast. 2001 bust, followed by housing crisis, followed by the oil crisis, then there was brexit. enough number of people feared enough and big money finds a better place to park their $, the downward spiral feeds itself and make things worse than they actually are.

Wall street will always unlimited supply of triggers to evoke the fear among people and sometimes they just have enough mass line up behind them and boom you have economic crisis out of nowhere.

If next housing bust were to occur, it may not be due to subprime lending. It may be due to, say, people lost jobs, not getting raises and choosing to let go of their expensive houses than rob their retirement. If anything, the previous crisis set the tone among people that it is okay to walk away, there is no shame, it is not even end of life, banks and feds will bend over, and one can always buy home in a period as short as 2-3 years again!