Housing Analysis

[usctrojancpa]

But wasn?t December when we would see price drops catch up to inventory drops?

Let?s be truthful here, was 2018-2019 really a significant ?slowdown?? Sure, prices stopped rising but savings was mostly due to interest rates not dropping prices.

This was more like a letdown.

There were price declines in the fall/winter of 2018 from the summer of 2018 due to a significant increase in inventory along with rates touching 5% in Nov of 2018.  Then as rates started coming down in early 2019, buyers started coming off the sidelines with the low end buyers first followed by the middle and higher end buyers as rates kept going down into the 3% range (the low end buyers are most sensitive to mortgage rates/total monthly payments hence why they came off the sidelines first).  The majority of my buyers in 2019 and currently are "move-up" buyers who are coming from the low end of the market and buying into the middle of the market.  Since the lower end of the market is doing the best, those clients tend not to have many problems selling their homes quickly for good prices.

 

[eyephone]

It doesn?t make sense to move up. There is no tax benefit as before.

Short term rental property is the way to go. (in cities that permit it.)

 

[eyephone]

If you don?t believe me read about it. There are big time companies that are in short term rentals or planning to go i in that space.

 

[irvinehomeowner]

*Still* waiting for those December price lags to catch up.

And the "pain" in Irvine... who is feeling that?

Where are those OCReg articles talking about price drops in Irvine and Tustin? Are they still writing those zip code specific housing articles? Can someone post them here again?

 

[Mety]

There is no price drop. Well maybe a little bit, but not much difference so far. But if you were to apply 3% yearly default appreciation, then the price dropped a little more than a little bit...

 

[panda]

The Orange County unemployment report will be the leading indicator for a price drop.

 

[Mety]

Any predictions on the OC or even the entire US unemployment rate this year?

 

[eyephone]

No comment 

 

[panda]

Mety. The unemployment chart for OC moves in a wave pattern. You can see that currently that the unemployment moves in a wave pattern and never in a horizontal line. The gray bar indicates previous recessions.

 

[Mety]

Mety. The unemployment chart for OC moves in a wave pattern. You can see that currently that the unemployment moves in a wave pattern and never in a horizontal line. The gray bar indicates previous recessions.

So you predict it will go up and the housing price will go down soon?

 

[panda]

Mety,
Yes. Take a look at the OC unemployment chart above. The unemployment % cannot be negative therefore it is a matter of time of a reversal. If the OC employment chart was a stock, I would be loading the truck to bet big that the OC unemployment rate will reverse from its all time low.

The gray bar indicates previous recessions. Irvine housing was not impacted too much in the recession between 2000-2002 where the unemployment rate rose to 5%, however when it reached 7% from 1990 - 1994 and 10% between 2007-2009, you will see the Irvine home prices drop. Trojan's median and average Irvine home price chart is already start to see the beginning of a reversal. 

Mety. The unemployment chart for OC moves in a wave pattern. You can see that currently that the unemployment moves in a wave pattern and never in a horizontal line. The gray bar indicates previous recessions.

So you predict it will go up and the housing price will go down soon?

 

[panda]

Mety, just for fun... 

Let's pretend a Prophet appeared in your dream and told you that the next crash is going to be worse than the last recession of 2009 and the unemployment rate in Orange County will rise between 10-15%. He will grant you one wish and allow you to exchange all your California assets for another recession proof housing market where you whether the recession storm? Which housing market would you pick? The answer is not Atlanta or Vegas.

Nashville TN is what I consider to be the recession proof housing market. When all the other housing markets dropped by 40% across the country between 2007-2011, Nashville's housing market only dropped by 9%. Check out the appreciation on the Nashville. Nashville's housing market is currently 55% above its last peak, while LA is only up 3.3% from its peak. Chicago is still negative at 15%, where as Vegas is the worst housing market still lagging behind by 17% of its last peak price.

 

[usctrojancpa]

Mety,
Yes. Take a look at the OC unemployment chart above. The unemployment % cannot be negative therefore it is a matter of time of a reversal. If the OC employment chart was a stock, I would be loading the truck to bet big that the OC unemployment rate will reverse from its all time low.

The gray bar indicates previous recessions. Irvine housing was not impacted too much in the recession between 2000-2002 where the unemployment rate rose to 5%, however when it reached 7% from 1990 - 1994 and 10% between 2007-2009, you will see the Irvine home prices drop. Trojan's median and average Irvine home price chart is already start to see the beginning of a reversal. 

Mety. The unemployment chart for OC moves in a wave pattern. You can see that currently that the unemployment moves in a wave pattern and never in a horizontal line. The gray bar indicates previous recessions.

So you predict it will go up and the housing price will go down soon?

The job market from what I hear from my clients is very strong. Employees getting poached for higher salaries, higher bonuses, promotions, stock option values increasing, and employees thrown relocation packages to move.  Just like with interest rates, we can keep bouncing around this very low unemployment rate for a bit and I'd argue that there is some frictional unemployment rate that we won't go below.  I think the real estate market is currently in a digestion phase of the prices increases since the last election.  My clients asked me where I think the market will go this year and my prediction is that prices will essentially stay flat (assuming rates stay below 4%) in 2020.

 

[panda]

Trojan.

The charts don't lie... look at the OC unemployment chart. So you think that unemployment rate in OC is just going to flat line here at between 2 - 2.5%? If this chart was a stock, I would be loading the truck and betting big time going long here.

Mety,
Yes. Take a look at the OC unemployment chart above. The unemployment % cannot be negative therefore it is a matter of time of a reversal. If the OC employment chart was a stock, I would be loading the truck to bet big that the OC unemployment rate will reverse from its all time low.

The gray bar indicates previous recessions. Irvine housing was not impacted too much in the recession between 2000-2002 where the unemployment rate rose to 5%, however when it reached 7% from 1990 - 1994 and 10% between 2007-2009, you will see the Irvine home prices drop. Trojan's median and average Irvine home price chart is already start to see the beginning of a reversal. 

Mety. The unemployment chart for OC moves in a wave pattern. You can see that currently that the unemployment moves in a wave pattern and never in a horizontal line. The gray bar indicates previous recessions.

So you predict it will go up and the housing price will go down soon?

The job market from what I hear from my clients is very strong. Employees getting poached for higher salaries, higher bonuses, promotions, stock option values increasing, and employees thrown relocation packages to move.  Just like with interest rates, we can keep bouncing around this very low unemployment rate for a bit and I'd argue that there is some frictional unemployment rate that we won't go below.  I think the real estate market is currently in a digestion phase of the prices increases since the last election.  My clients asked me where I think the market will go this year and my prediction is that prices will essentially stay flat (assuming rates stay below 4%) in 2020.

 

[usctrojancpa]

Trojan.

The charts don't lie... look at the OC unemployment chart. So you think that unemployment rate in OC is just going to flat line here at between 2 - 2.5%? If this chart was a stock, I would be loading the truck and betting big time going long here.

Mety,
Yes. Take a look at the OC unemployment chart above. The unemployment % cannot be negative therefore it is a matter of time of a reversal. If the OC employment chart was a stock, I would be loading the truck to bet big that the OC unemployment rate will reverse from its all time low.

The gray bar indicates previous recessions. Irvine housing was not impacted too much in the recession between 2000-2002 where the unemployment rate rose to 5%, however when it reached 7% from 1990 - 1994 and 10% between 2007-2009, you will see the Irvine home prices drop. Trojan's median and average Irvine home price chart is already start to see the beginning of a reversal. 

Mety. The unemployment chart for OC moves in a wave pattern. You can see that currently that the unemployment moves in a wave pattern and never in a horizontal line. The gray bar indicates previous recessions.

So you predict it will go up and the housing price will go down soon?

The job market from what I hear from my clients is very strong. Employees getting poached for higher salaries, higher bonuses, promotions, stock option values increasing, and employees thrown relocation packages to move.  Just like with interest rates, we can keep bouncing around this very low unemployment rate for a bit and I'd argue that there is some frictional unemployment rate that we won't go below.  I think the real estate market is currently in a digestion phase of the prices increases since the last election.  My clients asked me where I think the market will go this year and my prediction is that prices will essentially stay flat (assuming rates stay below 4%) in 2020.

I don't think the unemployment rate can flat much from current levels but yes, I don't see anything in the near term that would cause the employment rate to materially rise. It's the same way that bond rates stayed lower for longer than people thought. I remember telling clients in late 2018 that rates go back down into the 3s before they went into the 6s. There has to be catalyst/s for the unemployment rate to go up and I'm not seeing anything like that right now (doesn't mean that one can't appear), not just because the unemployment rate has been low for too long (i.e. using technical analysis like you would with a stock chart). 

 

[panda]

Trojan, Here are three dates from the past and three prior recessions. Just for fun, let's pretend that the unemployment % = magnitude # of an earthquake.

March 1990 Unemployment rate 2.7% and recession started Aug 1990 Unemployment rate 3.8%, Magnitude 7.1
Dec 1999 Unemployment rate 2.2% and recession started Mar 2001 Unemployment rate 3.6%, Magnitude 5.3
Dec 2006 Unemployment rate 3.1% and recession started Dec 2007 Unemployment rate 4.2% Magnitude 10.2

Oct 2019 Unemployment rate 2.5% and recession will start (??) The earthquake Magnitude of a 5, didn't really impact the housing prices in Irvine, but if number hit 7 or above... Irvine Home Prices will be hit just like it did in (1990-1995) and (2007-2009). The current unemployment rate in the OC have very little margin to play with as 2.2% seems  to the record low unemployment rate in the OC and the unemployment chart never flat lines horizontally, but always moves like a wave moving either up or down.

Trojan.

The charts don't lie... look at the OC unemployment chart. So you think that unemployment rate in OC is just going to flat line here at between 2 - 2.5%? If this chart was a stock, I would be loading the truck and betting big time going long here.

Mety,
Yes. Take a look at the OC unemployment chart above. The unemployment % cannot be negative therefore it is a matter of time of a reversal. If the OC employment chart was a stock, I would be loading the truck to bet big that the OC unemployment rate will reverse from its all time low.

The gray bar indicates previous recessions. Irvine housing was not impacted too much in the recession between 2000-2002 where the unemployment rate rose to 5%, however when it reached 7% from 1990 - 1994 and 10% between 2007-2009, you will see the Irvine home prices drop. Trojan's median and average Irvine home price chart is already start to see the beginning of a reversal. 

Mety. The unemployment chart for OC moves in a wave pattern. You can see that currently that the unemployment moves in a wave pattern and never in a horizontal line. The gray bar indicates previous recessions.

So you predict it will go up and the housing price will go down soon?

The job market from what I hear from my clients is very strong. Employees getting poached for higher salaries, higher bonuses, promotions, stock option values increasing, and employees thrown relocation packages to move.  Just like with interest rates, we can keep bouncing around this very low unemployment rate for a bit and I'd argue that there is some frictional unemployment rate that we won't go below.  I think the real estate market is currently in a digestion phase of the prices increases since the last election.  My clients asked me where I think the market will go this year and my prediction is that prices will essentially stay flat (assuming rates stay below 4%) in 2020.

I don't think the unemployment rate can flat much from current levels but yes, I don't see anything in the near term that would cause the employment rate to materially rise. It's the same way that bond rates stayed lower for longer than people thought. I remember telling clients in late 2018 that rates go back down into the 3s before they went into the 6s. There has to be catalyst/s for the unemployment rate to go up and I'm not seeing anything like that right now (doesn't mean that one can't appear), not just because the unemployment rate has been low for too long (i.e. using technical analysis like you would with a stock chart). 

 

[Mety]

The RE cycles along with the unemployment rates tend to form up and down waves like Panda said.

But is it important to single out just the OC or LA area?

When such drastic changes/recessions hit, I believe it was the entire US region, not just OC.

Would it be fair to see the whole US chart instead of one single county?

 

[irvinehomeowner]

*Still* waiting for those December price lags to catch up.

And the "pain" in Irvine... who is feeling that?

Where are those OCReg articles talking about price drops in Irvine and Tustin? Are they still writing those zip code specific housing articles? Can someone post them here again?

Still no explanation as to why such a decrease in volume did not lead to a proportionate decrease in prices?

Is it too early still? Is 2020 the year of the price lag catch-up?

This always happens on the IHB before and TI now... people who are so adamant about their position disappear when things don't exactly turn their way.

The exception... Panda... who sticks around no matter what and actually, if he stayed in Irvine... may have been able to build just as successful a real estate business here.

 

[irvinebullhousing]

Yup,,,,,it is different this time. 

 

[irvinehomeowner]

Just checked some Redfin data... looks like Liar Loan's "safe haven" of Newport Beach is the one experiencing some "pain".

Looks like FCBs are a more stable demographic than surfers?

Until coronavirus decimates Irvine house values... maybe that's the X factor everyone has been waiting for.