Housing Market will Not Recover easily this time.

bkshopr_IHB

bkshopr_IHB

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<strong>Housing Market will Not Recover easily this time.</strong> Recession and rebound of housing economy come in cycles. The recovery for the current housing market will be extremely difficult compared to the last recession. Two components fueled the housing frenzy last time and will not be repeated again within our lifetime. Creative financing allowed buyers to purchase home that they could not afford and creative new house designs that enticed homeowners to upgrade.



Prior to the recession of the 90?s houses were ugly. 3 car garages dominated the front elevation with no curb appeal to the front door experience. Plans were the same everywhere. Irvine was well known for endless supply of pink stucco boxes. The differences were the size of houses. Architects were busy using the % enlargement button on the photo copy machine. In 1995 new products with detached garages and courtyards allowed homes to have more windows, better natural light and cross ventilation, privacy yards, granny flats, back stairs, casita and etc.



Practically everyone thought of their existing homes were obsolete. I remember all my buddies became model home junkies because the new homes provided endless amusement for the entire family. Kids were having a ball running up and down split stairs and admired the themed secondary bedrooms. Mom imagined entertaining in the kitchen island with view of TV and the raised hearth of the family room fireplace. Ping pong and billiard rooms with Super Bowl size TV and beer refrigerator was the lost and found center of the lost dads.



Families then realized how inadequate their current dwellings were when compared to the model homes. Equity allowed them to upgrade to a luxury homes. First time buyers without equity wanted a piece of the action too and creative financing enable them to have a bigger buying appetite. Flippers and endless TV house shows really pushed the home buying into a national phenomenon.



Architects copied from one another and product quality were improved everywhere after 1995. I am sorry to say this time around housing industry is not so lucky. The design quality margin between a new home and existing homes are very slight or even. New homes could no longer entice the existing homeowners to upgrade like the last recession. Home builders across California are reluctant to build because they can not compete with the current resale inventory. Places like Irvine one will find a good bargain as well as WTF prices. Sellers asking for WTF prices are testing the market for the knife catchers since there are no new products out there to define the final pricing verdict.



Developers and builders are reluctant to build and postponing project indefinitely because they are afraid to compete with the bargain resale. There are no housing genius architects out there to invent a much clever product. Builders and architects are definitely out of tricks this time around and I do not expect to see a housing renaissance like the last recession.



Builders will build when the demand is high and supply is low. In the mean time bargain resale inventory will likely last through 2012.
 
Good ideas. May be Apple and Lexus should collaborate and shift their focus toward designing homes.



Will technology really allow family to find time for each other?



During the Victorian age children learned to sing and play musical instruments to entertain family and guests. Mom and dad read stories to chidren as form of entertainment.



Family made soap, candles, clothes, and plenty of knitting during many evenings together.



When technology were introduced into the households during the 40's families started to drift apart. It got progressively worse over the subsequent decades.



Technology is supposed to help us to save time so we can spend time with the family instead every member of the household is addicted to chasing after the next upgrade.



We are here blogging on the new IHB upgraded format and ignoring our spouse and kids?????
 
[quote author="skek" date=1210770148]Once again, another informative post from bk. Thanks for sharing your insights with us.



Here's an idea -- the next enticement to upgrade will be technology. Smart homes will make their appearance in the next up cycle, and everyone living in "dumb" homes will once again feel obsolete and need to move up. An old home might be retrofitted, but there will be some bells and whistles that won't be feasible without a major remodel. New smart neighborhoods will be networked for community building, education, entertainment and security. Virtual commuting will become feasible. The hi-tech neighborhoods will command a premium and carry a cache. Real estate professionals will claim a new value paradigm -- after all, you are paying for more than just a house, the new smart home will make your life easier and enable you to spend more time with the kids -- and who can put a price on that? Wash, rinse, repeat.</blockquote>


Many of the builders have been going with high tech upgrades as the standard. I think what you are saying is taking it up another notch, and I agree, this could be a major selling point. That, and a wine cellar/storage. Hence why I could never buy at the Marquee, for $1k a month in HOAs, I want wine storage and a weekly massage.



I also think the green building adds value as well. <a href="http://www.olsonhomes.com/find/community/overview.aspx?codeTitle=depotwalk">I was quite impressed with Olson Co.'s Depot Walk in Orange</a>, and their green and technological advantages they had over any other product. <a href="http://www.sunpowermonitor.com/residential/kiosk.aspx?id=A64760FE-D261-48C7-BB99-C645E001E93F&type=address">You could login to SunPower to see how much energy you were using</a>, and selling back if you underused and having to pay for if you overused. I also thought the floor plans were great, and with my GED in Feng Shui from the school of BKShopr, they could be BK approved floor plans. What I didn't like, were the high HOA dues with no pool, or at least a hot tub. Gotta have a hot tub in case TenMagnet shows up with his recent group of prey. I also know there is an apartment complex on Lemon, that was denied by the city of Orange to be torn down and rebuilt as condos. Granted the investor would lose his a$$ more than he did on his project on Admiral Way in Costa Mesa, but at least the meth lab complex would be torn down. The city wanted less homes, more parking, and less development fees, and now the investor will bail. So, they are stuck with the meth lab apartment complex, still no parking, and $0 in fees. Good job Orange, good job, and a great job redeveloping the circle area. I am sure people would rather try to find parking in a area with crime ridden apartment complex, than try to find parking in a area with a new condo building complex.



/rant over.



And, sorry for going OT, but I have been meaning to get that out for months.
 
Prices certainly will not recover quickly. The overhang of bad mortgages and underwater homeowners selling at breakeven will go on for a decade or more. I have to think that when the economy recovers, new homes will sell again. The forces of population and job growth will create the demand. There will probably be lower transaction volumes because people will not be moving up as much. The "property ladder" the Californian's have become accustomed to climbing will probably have fewer rungs.
 
Skek,



My ranting is similar to Graph's. It has nothing to do with your comments. We both are frustrated and needed a forum to voice our discontent with the mis-opportunities in most housing projects.



Technology is great to be incorporated into the home during framing stages. Those who tried to retrofit the built-in speakers in older homes know the difficulties. All of the tech gadgets are done in a spec level outside the scope of architects. Most homes will likely be heading that way. Cat 5 wiring is now in every new home as standard features.



The unfortunate thing about technology in homes is that it is not user friendly. Many homeowners do not even know how to set the thermostat. The custom package of Lutron mood and accent lighting is a nightmare for homeowners to operate.



Homeowners are not all young and technology savvy. Some are old foreigners who can't speak english and most older folks are just clueless about technology.



It would be so easy when the buyer demographic is all IHB posters. However housing thus far is still the low tech of all the industries. A house is being framed today is no different from the Colonists 250 years ago.



I thought Depot Walk has some great ideas. It is Leed certified and incorporated eco friendly materials. The location is best suited for service business than residential. The roof deck is nice but walking on the waterproofing seem cheap and appeared unfinished. I was considering it for my business but the negatives out weigh my desire to buy there.



Olson Company specialized in infilled sites. Its quality of construction and craftsmanship is inferior. Many homeowners were very dissatisfied with Warranty and defects. Their projects are driven by in town locations and not by quality. Its 3 story tuck-under projects in Garden Grove and Tustin are ugly.









[quote author="skek" date=1210808897]bk, you probably should have read a mixture of sarcasm and marketing spin into my statement that "after all, you are paying for more than just a house, the new smart home will make your life easier and enable you to spend more time with the kids?and who can put a price on that?" A family with flat panel TVs and Playstations in every room might be high-tech, but at the expense of family quality time. But, that would be the sales pitch, right?



graph, yeah, today's technology upgrades consist of either heavy duty wiring or a few gimmicks and gizmos. I am indeed talking about taking it up a notch. Greentech will certainly be a part of that. Never underestimate the power of a billion dollar industry to innovate. There's always the next best thing coming around the corner.</blockquote>
 
[quote author="bkshopr" date=1210813387]The location is best suited for service business than residential. </blockquote>


I'll give you one guess at what they tore down to build that property.
 
IMO, builders need to build for 2000 technology by adding more cat 5, dual RG6 coax by every TV for Tivo's and DVR's, but the more "high tech" along the lines of lighting, security, AV distribution and entertainment will be a nightmare for the traditional builder. Unless they contract out with a major CE firm, these systems are expensive and highly unreliable. Instead, they need to install expandable infrastructure within the house. I'd pay for 2" conduit to be installed into every room location so that I can upgrade and pull wire anytime i need to, whether it's for a home intercom, home theater, computer networking, satellite, etc. While cat 5 might be fine now, what about cat6 or 10gE or fiber, or whatever comes next.
 
Wow! I have not taken a test since college.



City of Orange was the heart of the Citrus industry during 1900's. Its population was primarily workers for the orange pickers at the fields and packers in the warehouses. Many during the 30's were migrant farmers. Specific housing locations were established to house as well as providing social supports for the foreigners. The structure currently still exist today as a significant and cultural landmark for the early migrant farmer pioneers. Although the Orange packing house has been reduced to a small operation over the last 100 years nonetheless it is still in business. There is a cultural museum and volunteer docents for touring the remaining infrastructures. I saw the footage on Huell Howser!



Because of the packing house the adjacent properties were developed mostly as industrial zone with some sectors zoned as transient housing for the blue collar workers during the WPA administration in promoting social consciousness. During the 70's, at the peak of property vacancies, other non profit organization such as St Vincent De Paul food banks, Used thrift distribution centers, and substance abuse and rehab center established in this city. The voice of the residents was weak then.



Since 1980's various trucking and distribution centers found this location convenient to the neighboring growing cities. The railroad adjacency was an asset as well as cheap rent since no one likes to be next to vibration and noise. The city quickly filled up the abandoned structures and drove the squatters out on to the streets. They are still out there among the OC homeless population. There are often drunks sleeping on the sidewalk during anytime of the day as well as drug abusers. Empty liquor bottles and used syringes were often found in planters boxes and shrubs.



At the site of Depot Walk was a automotive maintenance center with a large structure at the middle with numerous docks. A vehicular "U" shape drive looped around the large structure. Against the 3 perimeter edges of the property were carports and automotive storage.





[quote author="no_vaseline" date=1210813584][quote author="bkshopr" date=1210813387]The location is best suited for service business than residential. </blockquote>


I'll give you one guess at what they tore down to build that property.</blockquote>
 
[quote author="Bubblegum" date=1210816191]IMO, builders need to build for 2000 technology by adding more cat 5, dual RG6 coax by every TV for Tivo's and DVR's, but the more "high tech" along the lines of lighting, security, AV distribution and entertainment will be a nightmare for the traditional builder. Unless they contract out with a major CE firm, these systems are expensive and highly unreliable. Instead, they need to install expandable infrastructure within the house. I'd pay for 2" conduit to be installed into every room location so that I can upgrade and pull wire anytime i need to, whether it's for a home intercom, home theater, computer networking, satellite, etc. While cat 5 might be fine now, what about cat6 or 10gE or fiber, or whatever comes next.</blockquote>


Well thought out post. I agree with you totally. It should be done like a hard drive so you can upgrade or switch out a card when you need to.
 
No need to build in cat5 when wireless is now ubiquitous. This is something I've noticed when I look at homes built in the late 90s and early this decade. They made a big deal out of being wired with cat5. They also have square niches for TVs. Well, TVs are moving to widescreen and computers are moving to wireless. Ten years from now those houses will seem so dated.
 
Good job on the accuracy Blk. I was lucky and saw the same Huell Howser program. The occupants of that commercial property were my former customers.



It's worth noting that the former occupants of that packing house (Villa Park Orchards) moved to Porterville after they sold out to Chapman. The company packing avocados there has a 5 year lease, at which point Chapman will have the city's blessing on whatever they decide to do with the property. The city always does.



In other news - look what new neighbors at that Olson property get to look forward to!



http://www.ocregister.com/articles/adams-police-body-2042421-orange-death
 
I knew someone will ask me someday as I was watching this California Gold episode. Vaseline and I had really good "feng shui" that day when the episode aired.





[quote author="no_vaseline" date=1210824334]Good job on the accuracy Blk. I was lucky and saw the same Huell Howser program. The occupants of that commercial property were my former customers.



It's worth noting that the former occupants of that packing house (Villa Park Orchards) moved to Porterville after they sold out to Chapman. The company packing avocados there has a 5 year lease, at which point Chapman will have the city's blessing on whatever they decide to do with the property. The city always does.



In other news - look what new neighbors at that Olson property get to look forward to!



http://www.ocregister.com/articles/adams-police-body-2042421-orange-death</blockquote>
 
[quote author="graphrix" date=1210773654]I also think the green building adds value as well. </blockquote>


I really believe this will be "The Next Big Thing".



By the time building starts up again (and I'm guessing 5-7 years), everyone will want passive and active solar, and maybe gray-water systems too.
 
<blockquote>No need to build in cat5 when wireless is now ubiquitous. This is something I?ve noticed when I look at homes built in the late 90s and early this decade. They made a big deal out of being wired with cat5. They also have square niches for TVs. Well, TVs are moving to widescreen and computers are moving to wireless. <span style="color: yellow;">Ten years from now those houses will seem so dated. </span></blockquote>
They already seem outdated to me. We've passed on a few houses to rent because the TV niche was too small for our TV.
 
[quote author="bkshopr" date=1210766377]

Builders will build when the demand is high and supply is low. In the mean time bargain resale inventory will likely last through 2012.</blockquote>


Looks like TIC is listening or have done their homework. Orchard Hills is delayed until Fall of 2011, the Irvine side of OH probably won't be released until 2012/2013. Looks like Laguna Crossing is scheduled for 2010.
 
Since last year I predicted that all the builders and developers will freeze their projects for at least a few years.



Another prediction for housing to be released by 2012 should have some incorporation of green components as well as wider glass area for view, light and ventilation.



House style will have evolved to a hybrid of "modern Mediterranean" which will allow roof decks and parapet guard rail wall and 250sf of surface area for mounting solar photo voltaic panels on roof deck hidden from ground floor view by the guardrail height walls.



Products will have the best efficient use of land. Driveway may be eliminated and traded for a combination of a bigger backyard and living space.



[quote author="Bubblegum" date=1210856218][quote author="bkshopr" date=1210766377]

Builders will build when the demand is high and supply is low. In the mean time bargain resale inventory will likely last through 2012.</blockquote>


Looks like TIC is listening or have done their homework. Orchard Hills is delayed until Fall of 2011, the Irvine side of OH probably won't be released until 2012/2013. Looks like Laguna Crossing is scheduled for 2010.</blockquote>
 
[quote author="bkshopr" date=1210772784]

During the Victorian age children learned to sing and play musical instruments to entertain family and guests. Mom and dad read stories to chidren as form of entertainment.

Family made soap, candles, clothes, and plenty of knitting during many evenings together.

</blockquote>


For those who might be interested:



<a href="http://www.backwoodshome.com/articles2/brockway84.html">The Joys of Making Soap</a>



There's a lot of crafts stores that sell stuff for candle making. The General Wax & Candle Company in North Hollywood has a $40 <a href="http://www.generalwax.com/candle-making/candlemaking-classes.php">candle making class</a> and sells candle making equipment.
 
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