Observations from the front lines of the Irvine housing market?

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usctrojancpa

usctrojancpa

Well-known member
I am currently working with a several buyers, including 2 cash buyers, who are actively looking for a SFRs in Irvine.  From working with them, I have the following general observations:

1)  Short Sale listings tend to have the best pricing but the pricing on these short sales is getting closer and closer to market price
2)  The % of short sale listings that are getting approval and close have been on the rise over the past 6+ months
3)  Many home priced around market gets multiple offers, including over list price (some even sight unseen)
4)  There are very few REO properties for sale (this makes sense as foreclosures keep getting postponed at the foreclosure auction)
5)  Most of the organic sellers who have equity list their homes for WTF prices, at times extreme WTF prices that are even higher than bubble peak prices (I wonder if they are serious sellers or are they fishing for suckers?)
6)  Organic sellers are taking a while to lower their WTF asking prices and when they do lower the prices it is by $10k-$20k
7)  TIC has been able to sell the Woodbury home collection in relative short order and there have been announcements of new home developments due to the strong demand

The attached spreadsheet illustrates the strength and pick up in the Irvine real estate market since last May.  Things really started to pick up in Oct of last year and the re-sale number would have been that much higher if TIC would not have come along with the Woodbury home collection.  That being said, there would have been a limitation on the number of sales due to the lack of inventory.  Inventory levels continue to be low and buyer demand is very strong (as validated by the fact that there are only about 3 months worth of homes on the market).  About 1 in every 5 of 6 homes in bought for cash and the majority of the rest are bought with significant down payments of 40%+.  The foreclosure wave is not coming, banks will slowly bleed inventory into the market which will be absorbed by the buyers. 

On a more specific note, one of my cash buyers has been getting outbid on their search for a Irvine home by both financed and other cash buyers.  One of my other buyers purchased a condo over in Northwood recently.  We got into escrow by asking quickly when the listing came out and bought it at $9k under list price.  The interesting thing was that several offers at and above list price ($10k-$20k above list) came days after the seller signed our counter offer.  I don't think a lot of the bears understand how strong the buyer demand for Irvine homes is out there.  I too was a bear but after what I saw with my every eyes over the past 6-9 months, I began to realize that the strength was for real.

We'll have to see if the European debt mess spreads and we get a replay of Sept 2008.  It'll be interesting to see what will happen over the next few months with the tax credits going away.  I think there might be a little pause, but as long as Europe doesn't implode and drag the rest of the world with it, including us, the real estate market in Irvine will keep ticking along.  We shall see...

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I agree with the assessment.

I sold my house in Feb and have been looking for a place ever since.
I am looking for 4br 3ba house 15 years old or newer.  There is just no inventory.  When something comes up that are move in condition, it is priced around $370+ per sq ft, but gets picked up right away.  I put in an offer on an Woodbury house at asking price within 3 days of the house coming out on the market.  I never even received a counter offer.  The seller accepted a "very good" offer and did not bother with other multiple offers.  I can only imagine how much over asking price she got.  My guess is easily $30K over the asking price.
I also see that the Short sale prices creeping up and the bank is asking a lot more than they were back in Oct/Nov 2009.  On a couple of offers I have put in the short sale houses, the bank is coming back with WTF prices. 

It's just frustrating!!!

I did notice that the interest rate actually went down last few days.  Wonder if the European crisis will keep the interest low for a while....
 
Irvine2Irvine said:
I agree with the assessment.

I sold my house in Feb and have been looking for a place ever since.
I am looking for 4br 3ba house 15 years old or newer.  There is just no inventory.  When something comes up that are move in condition, it is priced around $370+ per sq ft, but gets picked up right away.  I put in an offer on an Woodbury house at asking price within 3 days of the house coming out on the market.  I never even received a counter offer.  The seller accepted a "very good" offer and did not bother with other multiple offers.  I can only imagine how much over asking price she got.  My guess is easily $30K over the asking price.
I also see that the Short sale prices creeping up and the bank is asking a lot more than they were back in Oct/Nov 2009.  On a couple of offers I have put in the short sale houses, the bank is coming back with WTF prices. 

It's just frustrating!!!

I did notice that the interest rate actually went down last few days.  Wonder if the European crisis will keep the interest low for a while....
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Believe me, I feel your pain.  Do you mind me asking what size and where the home that you sold in Feb was?  I'll give you a couple of specific examples of the strength of the market...my cash buyer put an FULL priced off on 19 Sandpiper at $550k for a 3bed/2bath Woodbridge home...they got outbid by 3 offers, including one that was another cash offer.  They submitted an offer on 17 Soaring Hawk in Woodbridge at $590k...the seller counters back at $100 over list price.  Inventory is increasing a little bit, but it's lower than it was last year at this time while the number of sales are up 20-40% year-over-year.  I notice that new sellers are increasing their list prices as they see that Irvine home prices are up about 10% from last year.
 
What is even funnier is seeing some of these Woodbury home listings purchased in 2006 looking to make a profit this year. These funny little yellow guys actually think their homes have appreciated since 2006. Seriously.. I would ONLY live in Irvine if i had family, friendships, relationships, and deep roots to the area, but definitely NOT if you are looking to make a buck as this Irvine housing market is sooo freakin over priced. With these WTF prices they are paying, how do they plan to resell these homes in the future. I respect the fact that the Asian buyers in Irvine have a lot money... but they are just plain stupid if they buying into this overpriced madness.
 
My house was 38 yr old house about 1500 sq ft and sold for almost $390 sq ft.  I did get multiple offers including a full cash offer and ended up selling for about $4K over the listing price.  I sold the house basically two days after the first showing which was the open house.  It kind of makes me feel like I priced my house too low\.  TALK about being a hypocritical!!!!  It's great when I am selling, but it sucks when I am buying.  At least from my experience, I can definitely say that Irvine is still a HUGE seller's market.

Also for the 4br 3ba less than 15 year old that I am looking for, the inventory is much lower today than back in Feb/Mar. :(

My wife is getting restless now that we have been "houseless" for a couple of months.

As for Panda's comment, I totally agree.  Only reason why I am looking to buy in Irvine is because my wife has friends in Irvine, my kids already go to school and belong to the Boy Scouts in Irvine and have friends in Irvine.  We have been living in Irvine for almost 15 years now since before we had our first child, so we are deeply imbeded in the community.  We now have 3 kids and have completely outgrown our home.  Luckly, we bought our house a long time ago and was able to come out a way ahead therefore can put down over 50%.  That means I am not a FCB, but a person with "old money".  If I had my way, I would move out of the city with the equity I have and buy a really nice house with a big lot and maybe even with a view.  But, I am a family man and must yield to the desires of the family which is to stay put in Irvine.  Therefore I must sacrifice and overpay for a house in Irvine.  However, my plan is to hopefully cash out after my kids are done with school and move out to a more reasonably priced neighboorhood about 15 years from now.  Hopefully, I will not be behind when I do so..
 
Who knows???  Maybe we will be saying the same thing in 2025 about 2010.  (I seriously doubt it!!!)

Only advise I can give is the same advise I give to the younger generations at my work.  Buy a house when you need it.  Don't buy it because of the $8K gov't incentive or the $10K California incentive.  Don't buy it because you think you are going to get to write off the taxes because the income tax saving you might realize will not be enough to pay for the property tax and the maintenance.  Where to buy that house is totally upto you and no body else.  Only you can decide...
 
There has been some great blogging over at our old home at IHB over the last few weeks. Basically, there are some larger macroeconomic forces working their way through the system. Chiefly, large number of delinquent loans that need to be cured. If we are to believe these new policies from BofA, then we should see an acceleration of REO activity in the latter part of 2010. Secondly, as mortgage interest rates rise we should see further price pressure.

With such low current inventory in Irvine, I do not see much reason for price declines yet. But given the larger economic forces at work, there is no need to rush and buy a home in Irvine. With a little bit of patience, even Irvine will yield further declines.
 
That will be great when/if that happens.
However, I just noticed that the mortgage rates actually went down in last few days.  It may be because of the European crisis which is driving the stock market down, therefore making people flee to bond market driving the yield lower.  As you know the bond market is closely tied to the mortgage rate.  Just wondering if the European crisis is going to keep the mortgage rate low for rest of the year or two.  Let's just say that it is very hard to predict near future market conditions that drive the mortgage rates. 
Also, as many people on this forum predicted, the price may not go down in direct relation to rate increase in Irvine because so many people are putting down such a big down payment.  Only a significant rise in inventory will lower the price to where we want them to be.
 
Irvine2Irvine said:
That will be great when/if that happens.
However, I just noticed that the mortgage rates actually went down in last few days.  It may be because of the European crisis which is driving the stock market down, therefore making people flee to bond market driving the yield lower.  As you know the bond market is closely tied to the mortgage rate.  Just wondering if the European crisis is going to keep the mortgage rate low for rest of the year or two.  Let's just say that it is very hard to predict near future market conditions that drive the mortgage rates. 
Also, as many people on this forum predicted, the price may not go down in direct relation to rate increase in Irvine because so many people are putting down such a big down payment.  Only a significant rise in inventory will lower the price to where we want them to be.
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You hit the nail on the head...until inventory levels increase and get over 6+ months of supply can we even talk about price declines.  The European debt mess is not going away next week...many of the over leveraged countries out there will have to rein in their spending which will put the deflation fears on the front burners.  We'll see 4.5% mortgage rates before we see 6% mortgage rates.  The leading indicator for price declines will be the inventory of homes for sale so keep a close eye on that. 

Btw, people you've been having so much trouble find a home are you guys even considering buying a new home over in Woodbury?  Just curious because two of my buyers did just that.
 
Believe it or not, I am getting close to giving up on a resale home and going for a new home in Woodbury.  The price is actually less than a resale per square foot even after upgrades and landscaping.  However, I have to live with a motor court or zero lot line.  Having been a zero lot line owner for past 15 years, I am not so thrilled with the idea but the motorcourt makes me feel like I own a townhome when I walk out the door.  I know that no home is perfect and that I must pick the lesser of evils, but it does make me feel a little "unsettled".
 
Irvine2Irvine said:
Believe it or not, I am getting close to giving up on a resale home and going for a new home in Woodbury.
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I believe it and that is exactly why TIC has been able to sell as many homes as they have in a short time.  They are looking at the same thing that we are....low inventory levels with a bunch of frustrated buyers looking to buy a home and they are squeezing as much profit out of those homes they can with the motor courts, zero lot lines, and tiny lots.  It's a shame that we'll never see a new in home built on a 7,000sf+ lot for less than $1m.
 
I completely agree.

However, I also wonder about the flip side of the coin.  I wonder if the current housing craziness is created partially by the TIC.  Before the 2010 Woodbury collection, the market was still relatively on the down side.  The short sales were actually priced and sold like short sale.  There were no crazy bidding wars on resale homes.  It just seems that starting at beginning of 2010, things started getting crazy.  Maybe it's coincedence and TIC got lucky with the timing or maybe TIC put people into a buying mood with the 2010 Woodbury collection and drove market higher.
 
Some interesting developments over the past month and half since the tax credit craziness has passed.  As I predicted, even Irvine has hit an air pocket of buyers (as shown by the YOY decline in July sales) after all that demand got pushed forward from the tax credits.  Add to that the 800 homes TIC throw onto the market which sold (for the most part) plus add the increasing inventory levels and we are approaching a neutral market versus a seller's market.  That being said, 75-80% of the new Irvine listings are equity sellers who are asking beyond WTF stupid prices.  Here are just a few examples:

http://www.redfin.com/CA/Irvine/10-Sand-92614/home/4697726  ($50-$60/sf above comps)http://www.redfin.com/CA/Irvine/34-Alderbrook-92604/home/4688255($60-$70/sf above comps)http://www.redfin.com/CA/Irvine/2-Glenoaks-92618/home/4746564($80-100/sf above comps)http://www.redfin.com/CA/Irvine/115-Tearose-92603/home/5902055($70-$80/sf above comps)http://www.redfin.com/CA/Irvine/31-Sanctuary-92620/home/5959278($60-$70/sf above comps)http://www.redfin.com/CA/Irvine/158-Trellis-Ln-92620/home/4791002($100/sf+ above comps and my favorite as the listing agent states it's "Best priced home...under $700k" what a joke)  ::)

Personally, I think that the majority of sellers like the ones above are just hoping to find that motivated/desperate buyer, errrr...sucker, to buy their homes at those crazy prices.  I believe that once they realize that buyers aren't gonna take the bite and inventory levels keep increasing they'll probably cancel their listings and try again at a later date.  I've also have seen several properties fall out of escrow and of the homes that I've seen with my buyers the listing agent explained that the "buyers didn't qualify" which translated to plain English most likely that the property did not appraise when the lender got the appraisal back and the buyer wasn't willing to kick in more equity to close.

As the attached spreadsheet shows, the Irvine market has lot some of its steam.  Don't get me wrong, properties that are priced right still fly into escrow within days.  However, the increase in inventory and decline in sales can not be ignored...especially when you consider that rates are lower today than they were in April-June.  I can definitely say that the market has shifted from a seller's market to a more neutral market.  The next 3-6 months will be very interesting as we will find out who the motivated sellers are and the ones that are fishing for a sucker.  I just PRAY that the gov't doesn't come up with a home buyer tax credit 2.0 strategy if they see the real estate market softening up.  ???
 
Overall, do you see softening in prices?

Based on my Redfin/IR2 updates and my daily perusal of various real estate sites... it seems like prices are coming down. Not as much as I'd like but the additional inventory is making it harder for people to keep their listings at above comps.

I also see a lot of shorts getting delisted and relisted... or falling out of escrow... which like you said, is probably based on bank/appraisal issues.
 
There are appraisal issues out there, but some banks are getting realistic. Too bad equity sellers aren't. We had an out of Irvine area property appraise 30k off of the $630k selling price. Per the appraiser there were offers up to $635k. It's possible that some of them had larger down payments than our buyer. The bank holding the property gave up the ghost and lowered the price to the appraisal just to move the property along. This was done without a review appraisal by either party. Talk about a good move for all parties involved. On the other side of the spectrum I've had buyers over pay for properties simply because they feel the value is there, despite what an appraiser says.

All markets have hit an air pocket. If you are a Realtor and have not come to the Irvine Area Broker's Preview held each week at JT Schmidts (sp?) in the District, come on by. It's quite the eye opener. Agents will pitch their tired listings with commonplace phrases like "it's priced well to the market. I just don't understand why we don't have an offer yet" or "Yes, my seller is not in synch with market prices but we're still hoping to get an offer soon". Hope, as they say, is not a plan for success. I go to this event, and others like it for business purposes. Every so often I also wonder if I go because it's akin to driving past a multiple fatality accident on the 405. You don't want to look, but are compelled to do so.

My .02c

Soylent Green Is People.
 
I am not in the market to buy- but I like to see what's going on in University Park and Woodbridge.  I think UP still is pretty hot- especially those 1-level units.  Woodbridge to me is still WTF pricing- esp the 1-level homes. 

There was that auction house http://www.redfin.com/CA/Irvine/40-Meadowgrass-92604/home/4689143 that had a really low price, then now pending.  I wonder what it closes at.

Hopefully it will make these listings with WTF prices come down to earth:
http://www.redfin.com/CA/Irvine/14-Woodsorrel-92604/home/4691318
http://www.redfin.com/CA/Irvine/4-Ponderosa-92604/home/4690082

What do you think these houses should be priced at?  They're asking TRock type $/sq feet.  And even TRock isn't really getting that pricing anymore.
 
Woodsorrel has a nicer lot compared to Ponderosa.

In my opinion, the premium on these are the lot sizes and the ability to add on. Not sure if that is actually what is driving the listing prices but considering 2-story homes in Woodbridge with smaller lots are trading at the same price, that probably has something to do with it.

The central location, pools/lakes/parks of WBridge seems to keep it higher than surrounding 'hoods... but then again... there are many tracts in Irvine that are still at peak.
 
abcd1234 said:
I am not in the market to buy- but I like to see what's going on in University Park and Woodbridge.  I think UP still is pretty hot- especially those 1-level units.  Woodbridge to me is still WTF pricing- esp the 1-level homes. 

There was that auction house http://www.redfin.com/CA/Irvine/40-Meadowgrass-92604/home/4689143 that had a really low price, then now pending.  I wonder what it closes at.

Hopefully it will make these listings with WTF prices come down to earth:
http://www.redfin.com/CA/Irvine/14-Woodsorrel-92604/home/4691318
http://www.redfin.com/CA/Irvine/4-Ponderosa-92604/home/4690082

What do you think these houses should be priced at?  They're asking TRock type $/sq feet.  And even TRock isn't really getting that pricing anymore.
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There's no way that comps support the pricing for 14 Woodsorrel or 4 Ponderosa.  The closest closed comp is 9 Teal which closed for $640k within the past 2 months.
 
irvinehomeowner said:
Overall, do you see softening in prices?

Based on my Redfin/IR2 updates and my daily perusal of various real estate sites... it seems like prices are coming down. Not as much as I'd like but the additional inventory is making it harder for people to keep their listings at above comps.

I also see a lot of shorts getting delisted and relisted... or falling out of escrow... which like you said, is probably based on bank/appraisal issues.
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Do I see a little softening?  Yes, but not much because as I stated....any nice property that is priced around comps goes into escrow quickly.  One of my buyers had an eye on 101 Mosaic (http://www.redfin.com/CA/Irvine/101-Mosaic-92603/home/5902918) and we were gonna give it a little time before we submitted an offer because it was priced about $30-$40/sf over comps but obviously someone liked it enough to pull the trigger quickly.  Prices are coming down, but they are coming down from the Stupid WTF price levels down to WTF prices levels.  When the tide rolls in after the selling season is over, we'll find out who are real motivated sellers are and who the ones that were looking for a sucker are.
 
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