New Home versus Old Home

[usctrojancpa]

I've said it before and I'll say it again, without a significant increase in inventory level we won't see any material price declines in Irvine.

There you go LL... USC is Team Irvine.

Sorry, he said he was on Team Data.

USC's numbers show:  April 2018 > April 2019 > April 2020

Yeah, if you compare April to December you will distort things on a seasonal basis and get the cherry-picked result you are seeking.  Comparing the same month year-over-year shows a decline for two straight years. 

Spring is supposedly the "hot selling season" when new higher home prices are supposed to be set.  Not so much in Irvine.

I haven't been pricing out real estate recently... have prices dropped...?

Thanks for your candid admission.

Median prices aren't really seasonal, inventory levels and sales volumes are seasonal (i.e. typically higher inventory/sales levels around the summer months and lower inventory/sales levels in Dec. and Jan).  Real estate prices don't move like stocks, but more slowly like a big tanker ship. Sometimes you'll get outlier months on median prices due to mix shift of the types of homes that are sold (lower end vs. higher end) so it's best to look at the data trends over a 3-6 month period. For example, if you have a several $10m+ Shady Canyon homes closing in a particular month versus 1 or 2 in another month that'll skew the median prices higher for the month where you had several of those $10m+ closings.

 

[usctrojancpa]

Also, attached is a cost comparison schedule

Martin, in the excel sheet you attached, you are using 0.1% the cost of the house for the annual insurance.
Is this reasonable estimate for insurance in Irvine or can it be higher. Does it depend on SFR versus an attached/detached condo?

The 0.1% of the purchase price estimate for home insurance will be for detached condos and homes, it's a close estimate what you'll probably pay within about 10% +/-. The home insurance will be a lower % for attached condos (somewhere between 0.05% to 0.07% of the purchase price) where you only have buy an HO6 condo policy.

 

[paydawg]

Don't newer homes (in newer neighborhoods) tend to appreciate faster than the older ones?  That's a big selling point for me. 

 

[irvinehomeowner]

Don't newer homes (in newer neighborhoods) tend to appreciate faster than the older ones?  That's a big selling point for me. 

I'm not sure if they appreciate faster but they hold their value better because of herd buy-in.

 

[Liar Loan]

FWIW, case chiller during the last global pandemic:
Dec 1, 1922 92.76
Dec 1, 1921 89.37
Dec 1, 1920 81.52
Dec 1, 1919 76.34
Dec 1, 1918 79.52
Dec 1, 1917 90.03

So based on this, it took about 3+ years for housing to recover after the 1918 flu.

I don't think that it will take that long in today's more connected society... if science is able to create vaccines/treatments... I think the economy will bounce back within a year if not less.

Keep in mind Case Shiller is inflation-adjusted.

There was a World War powering the US economy during 1917-1918 leading to higher wages, rapid GDP growth, and high inflation, but less housing demand due to the millions of deployed soldiers overseas.  The thing they did not have going was a global depression, like we are experiencing now.

Cumulative inflation in 1918 and 1919 was around 35%, so if housing fell by 15% according to Case Shiller (90.03 to 76.34), homes actually increased by 20% in nominal terms. 

If you owned a home, especially a financed home, you did extremely well.