No matter which index you use, they all say we're back to at least 2003/2004 pricing

irvine_home_owner_IHB

irvine_home_owner_IHB

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This is one of the few Real Estate articles I found interesting in the OC Register:



<a href="http://headlines.ocregister.com/news/percent-25320-home-price.html">http://headlines.ocregister.com/news/percent-25320-home-price.html</a>



It has some explanation on how the indexes differ in how they calculate their numbers but they all seem to come to the same conclusion:

<blockquote><em>DataQuick's pricing is 41 percent off its peak and was last this low in February 2003.



California Realtors? Their benchmark shows pricing of 40.5 percent off the peak and back at January 2003 levels.



First American? By my math, it's off 30 percent from peak and lowest since March 2004.



Case-Shiller? Off 40 percent from the peak to a level last seen in August 2003.



The government reports? Down 25 percent from peak to second quarter 2004 pricing.



Even Zillow, with its Zestimates showing relatively modest recent losses, says Orange County pricing is off 32 percent from the top and was last this low in the third quarter of 2003.</em>

</blockquote>
I've always wondered this... but what year do most of you consider "bottom" pricing? 1999? 1996?
 
1996 is probably about right, just from looking at index graphs. I think pricing was last "reasonable" around 1998/1999. If prices go back to 1998 + 3% compounded, I'll probably be willing to buy.
 
[quote author="irvine_home_owner" date=1241675601]This is one of the few Real Estate articles I found interesting in the OC Register:



<a href="http://headlines.ocregister.com/news/percent-25320-home-price.html">http://headlines.ocregister.com/news/percent-25320-home-price.html</a>



It has some explanation on how the indexes differ in how they calculate their numbers but they all seem to come to the same conclusion:

<blockquote><em>DataQuick's pricing is 41 percent off its peak and was last this low in February 2003.



California Realtors? Their benchmark shows pricing of 40.5 percent off the peak and back at January 2003 levels.



First American? By my math, it's off 30 percent from peak and lowest since March 2004.



Case-Shiller? Off 40 percent from the peak to a level last seen in August 2003.



The government reports? Down 25 percent from peak to second quarter 2004 pricing.



Even Zillow, with its Zestimates showing relatively modest recent losses, says Orange County pricing is off 32 percent from the top and was last this low in the third quarter of 2003.</em>

</blockquote>
I've always wondered this... but what year do most of you consider "bottom" pricing? 1999? 1996?</blockquote>


If we can indefinitely sustain sub-5% interest rates, we should hold 2002 pricing. If we see interest rates rise, there is no telling how bad it could get. I think we will see nominal pricing in the 2000-2001 range by 2012 with inflation adjusted pricing back to 1997. It might get even worse if unemployment stays on its current trajectory.
 
[quote author="IrvineRenter" date=1241678220]

If we can indefinitely sustain sub-5% interest rates, we should hold 2002 pricing. If we see interest rates rise, there is no telling how bad it could get. I think we will see nominal pricing in the 2000-2001 range by 2012 with inflation adjusted pricing back to 1997. It might get even worse if unemployment stays on its current trajectory.</blockquote>


Last year I would have agreed with your 2000/1997 prediction.



But I failed to appreciate that the total economy would take a dump, rather than just the housing sector. Lack of broad thinking on my part for ignoring the effect of HELOC on the broader economy and also the bank/credit fiasco.



I'm moving towards a 1997/1987 prediction now. 1997 nominal pricing, inflation adjusted to 1987.





<strong>How is that for bear-ish?</strong>





Mostly I think that the upper end is going to crush the market. No move-up buyers, few people with $100k plus down payments, and lots of "must sell" (REO/trustee/etc) inventory at all levels.



All those people who were going to buy the 3/2 condo in Irvine will be able to afford the 4/2 SFR, and the people who were going to buy the 2/1 condo around South Coast will be buying the 3/2 condo in Irvine.
 
I would say earlier than 1996 in real terms (not counting inflation, so actually even worse). I've found as far back as 1988-1992 pricing (non-inflation adjusted) in isolated examples in Riverside, which is why I don't think it will fall much further out here, because that's such an extreme fall off that every apartment renter with a marginally steady job, a 650+ FICO score, and at least 3.5% down is now in the market for a house out here. Irvine probably will catch up to Riverside eventually, so there you go-prices should bottom out at what they were when the first Bush was President.



Here's a new listing that is a good example:



<a href="http://www.redfin.com/CA/Riverside/5462-Conestoga-Ln-92504/home/4908348">5462 Conestoga Lane, Riverside, CA 92504</a>



Sold for $118,000 in 1990, currently listed at $99,900. 1,240 sq ft, but it's a 2/2. That's really large for a 2 bedroom-it's a dual master kind of thing. The location is lousy-I don't like the neighborhood (Nichols Park is bad-I vetoed anything west of Streeter in my search), plus it backs up to railroad tracks. This was new in 1984, so I suspect some of this is the neighborhood going downhill since then-but the railroad was there when it was built.
 
But what will happen next year when you can buy a 1200sf SFR in Corona or a nicer part of Riverside, for that same $100k?



Won't that one in the worse neighborhood have to fall farther?





That is why I disagree when people say the IE is close to the bottom. So long as the next step up the rung is still falling, the bottom cannot be near the bottom.
 
[quote author="freedomCM" date=1241696559]But what will happen next year when you can buy a 1200sf SFR in Corona or a nicer part of Riverside, for that same $100k?



Won't that one in the worse neighborhood have to fall farther?





That is why I disagree when people say the IE is close to the bottom. So long as the next step up the rung is still falling, the bottom cannot be near the bottom.</blockquote>
True and the prices in the IE will fall but the dollar amount of the price drops will be small because the prices have already been crushed. So if Irvine prices fall 20% it'll be about a $100k drop and the IE prices will fall 20% or $20k.
 
There are a lot of renters in Riverside. It's actually amazing how many apartment buildings there are, considering it's an inexpensive city to buy a house in. A good number of said apartment dwellers qualify (decent FICO, steady job, some savings) to purchase a home, if the price is right. Well, the price is right. All sorts of things are selling, frequently above list. I saw a house right next door to a gas station-with a liquor license and a refrigerator case full of 40s-sell for $140k after being listed at $120k. The only things that really aren't selling on the low end are:



1. Stuff in Eastside and Casa Blanca

2. Fixers



The first group is bad neighborhoods squared, and the second group isn't selling because said apartment dwellers don't have enough cash on hand to fix them up, plus almost all of them have FHA loans which won't lend on many fixers.



Basically, the demand for cheap (sub $150k), non-fixer houses in Riverside is much greater than the supply right now. Prices aren't going to go down until that changes, and I see no sign that is happening. But prices can't go up, either, because there's a pretty firm wall where most of said apartment dwellers can't go past in price. Net result-stable prices, at least on the low end, which means we've hit bottom.
 
I would buy at 2002 prices. I remember thinking it was stupid to rent in 2002 (why pay $200 more in rent when you could own?) In 2003 I didn't think renting was stupid.
 
[quote author="freedomCM" date=1241745422]More to rent than own in 2002?



Where the heck were you living in 2002? Dallas?</blockquote>


Well, now that I think of it, that was probably in early 2002 when we had that post 9/11 dip. Then things went abruptly crazy.



Regardless, it makes more sense to own if owning costs less than renting. So whenever that happens, I'll buy.
 
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