Observations from the front lines of the Irvine housing market?

Pinging @usctrojancpa ... ran into him over the weekend and he's got some interesting things to share.

Spoiler: FCBs do make a difference (where is Graphrix? My streak is going on like 15 years now).
 
I just got back from 3 week vacation in Japan. I took the opportunity to meet up with an old Japanese friend. She said she plan to move back to S. Cali preferably Irvine end of year. Some of her friends are trying to move too. She said the main reason is the weather.

Weather in Japan’s main island is just brutal and the peak of summer is still at least a month away. We are so blessed to have such nice weather here. Even when it hits100 degree here, it is much more pleasant than humid 80 degree.

As the weather becoming more extreme everywhere else, more and more people with money look to move to places like OC. I just dont see how real estate here will ever become less affordable especially in good cities like Irvine. If you are a buyer, not only you have to compete with local, out of state folks, investors…now you gotta deal with rich climate refugees.
 
Danimal said:
I just got back from 3 week vacation in Japan. I took the opportunity to meet up with an old Japanese friend. She said she plan to move back to S. Cali preferably Irvine end of year. Some of her friends are trying to move too. She said the main reason is the weather.

Weather in Japan’s main island is just brutal and the peak of summer is still at least a month away. We are so blessed to have such nice weather here. Even when it hits100 degree here, it is much more pleasant than humid 80 degree.

As the weather becoming more extreme everywhere else, more and more people with money look to move to places like OC. I just dont see how real estate here will ever become less affordable especially in good cities like Irvine. If you are a buyer, not only you have to compete with local, out of state folks, investors…now you gotta deal with rich climate refugees.
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Except we have this little thing called immigration policy. Not as tough as immigrating to Japan or AUS but it will get harder for foreigners to buy property here. Actually many Chinese are buying in Japan (even though they face massive racial discrimination) as Japan has a surplus of vacant properties and has policies in place to make it easier for foreigners to buy them.
 
Liar Loan said:
By USC's own admission, it took a massive rate drop from 5% to 2.5% just to keep Irvine prices flattish to slightly down. I wonder what happens when post-pandemic rates start to normalize again? tic, tic, tic...
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Do we have a verdict here?
 
paydawg said:
Do we have a verdict here?
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We do... Irvine has been flat in real terms since peaking in April 2022.

Of course, mortgage rates have not been normalized for very long -- only since March 2023 -- because prior to that CPI exceeded mortgage rates, meaning borrowers were still getting "free money" up until 9 months ago.
 
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Liar Loan said:
We do... Irvine has been flat in real terms since peaking in April 2022.

Of course, mortgage rates have not been normalized for very long -- only since March 2023 -- because prior to that CPI exceeded mortgage rates, meaning borrowers were still getting "free money" up until 9 months ago.
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Now you want to factor-in real vs nominal terms? Isn't inflation part of the equation here? When you're invested in an asset during high inflation, the investor will get rewarded, whether it's a house, a bullion of gold, fine art, etc..

In rough terms, mortgage rates started going up in Q4 of 2021. Since then, average Irvine home values (i did a quick search of 92618 values on zillow.com) went up about 30%. FYI - CPI went up roughly 14% during that same time-frame. Something doesn't jive if Irvine has been flat in real terms.
 
paydawg said:
Now you want to factor-in real vs nominal terms? Isn't inflation part of the equation here? When you're invested in an asset during high inflation, the investor will get rewarded, whether it's a house, a bullion of gold, fine art, etc..

In rough terms, mortgage rates started going up in Q4 of 2021. Since then, average Irvine home values (i did a quick search of 92618 values on zillow.com) went up about 30%. FYI - CPI went up roughly 14% during that same time-frame. Something doesn't jive if Irvine has been flat in real terms.
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I know you're not around here as much, but @usctrojancpa made the call that Irvine would outperform inflation, even buying at the peak, so that is why we measure in real terms. When inflation was 0-1% it didn't matter much whether we measured in real terms or nominal, but with 70's style inflation roaring back it matters a lot now.

Secondly, the gold standard around here is to measure in PPSF, and unfortunately Zillow uses the "Zillow Price Index" which nobody trusts.

Lastly, since Irvine is full of cash buyers it makes sense to measure prices in real terms, because if their purchases are lagging inflation then they are losing money (not even accounting for the higher costs of taxes, mello, insurance, and HOA fees in Irvine).
 
I sense a disturbance in the goalpost moving.

Somebody said when interest rates rose, Irvine prices would start crashing... just like somebody said prices would lag inventory increases, prices would dive in 2018, prices would crash after 2022, etc etc.

Let's face it... fundamentals go awry in certain place of the country (it's worse in NorCal).

And don't get me wrong... I think new housing tract homes at $3 for $4m is crazy.... I thought it was crazy when they hit $1m back in 2012-2013. When will the crazy stop?
 
irvinehomeowner said:
I sense a disturbance in the goalpost moving.

Somebody said when interest rates rose, Irvine prices would start crashing... just like somebody said prices would lag inventory increases, prices would dive in 2018, prices would crash after 2022, etc etc.

Let's face it... fundamentals go awry in certain place of the country (it's worse in NorCal).

And don't get me wrong... I think new housing tract homes at $3 for $4m is crazy.... I thought it was crazy when they hit $1m back in 2012-2013. When will the crazy stop?
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It will probably not stop until the FCB demand doesn't dry up or until the government bans FCB's from buying homes here like they are trying to do in states like Florida which will only cause the values to go down significantly when there will be no demand at these high prices which could put a lot of homeowners underwater on their homes.
 
Liar Loan said:
I know you're not around here as much, but @usctrojancpa made the call that Irvine would outperform inflation, even buying at the peak, so that is why we measure in real terms. When inflation was 0-1% it didn't matter much whether we measured in real terms or nominal, but with 70's style inflation roaring back it matters a lot now.

Secondly, the gold standard around here is to measure in PPSF, and unfortunately Zillow uses the "Zillow Price Index" which nobody trusts.

Lastly, since Irvine is full of cash buyers it makes sense to measure prices in real terms, because if their purchases are lagging inflation then they are losing money (not even accounting for the higher costs of taxes, mello, insurance, and HOA fees in Irvine).
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I'll post up the year end data in the next few days and you will see that in 2023 outperformed not only inflation but most all other cities in Orange County with it a double digit median price increase.
 
Yoda said:
It will probably not stop until the FCB demand doesn't dry up or until the government bans FCB's from buying homes here like they are trying to do in states like Florida which will only cause the values to go down significantly when there will be no demand at these high prices which could put a lot of homeowners underwater on their homes.
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exactly. FCBs are the only reason why Irvine prices continue to climb at the rate it has been climbing. I really do fear for investors more so than primary homeowners since you can probably live through the downturns if there is one in Irvine as a primary owner. But as an investor, you definitely will have a hard time since rent prices will go down if prices do nosedive due to changes in policy by the government. But then again maybe I shouldn't feel bad for investors since they are buying up homes preventing locals to afford a home to begin with
 
sleepy5136 said:
exactly. FCBs are the only reason why Irvine prices continue to climb at the rate it has been climbing. I really do fear for investors more so than primary homeowners since you can probably live through the downturns if there is one in Irvine as a primary owner. But as an investor, you definitely will have a hard time since rent prices will go down if prices do nosedive due to changes in policy by the government. But then again maybe I shouldn't feel bad for investors since they are buying up homes preventing locals to afford a home to begin with
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That is not true at all. Orange County prices outside of Irvine have also increased in 2023, although not as much as Irvine, where FCBs don't buy. As I've been says for years, price movement will be based upon where inventory levels are trending and inventory levels are at the lowest point that I've been tracking data (10 years). Yes, demand has decreased given the higher rates and higher prices but the decrease in inventory has been greater than the decrease in buyer demand hence why prices have gone up...a simple supply/demand equation.
 
usctrojancpa said:
That is not true at all. Orange County prices outside of Irvine have also increased in 2023, although not as much as Irvine, where FCBs don't buy. As I've been says for years, price movement will be based upon where inventory levels are trending and inventory levels are at the lowest point that I've been tracking data (10 years). Yes, demand has decreased given the higher rates and higher prices but the decrease in inventory has been greater than the decrease in buyer demand hence why prices have gone up...a simple supply/demand equation.
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I’m not saying other OC areas aren’t increasing. My point is Irvine is growing at the rate it is mainly due to FCBs. Basically irvine prices have always been artificially inflated. And if policy changes were to occur, Irvine would be impacted the most.
 
sleepy5136 said:
I’m not saying other OC areas aren’t increasing. My point is Irvine is growing at the rate it is mainly due to FCBs. Basically irvine prices have always been artificially inflated. And if policy changes were to occur, Irvine would be impacted the most.
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Sleepy
I respect your balanced, bearish views.
But if prices in Irvine are higher for X amount of years, it’s not “artificially inflated”.

A Rolex can’t be “artificially inflated” if the supply is still low and people are willing to pay higher prices. At that point it’s fair market value and is contingent on supply & demand as USCTrojanCPA states.

And talking about policy changes is the same as talking about a potential natural disaster dropping Irvine prices more…who cares?
 
sleepy5136 said:
I’m not saying other OC areas aren’t increasing. My point is Irvine is growing at the rate it is mainly due to FCBs. Basically irvine prices have always been artificially inflated. And if policy changes were to occur, Irvine would be impacted the most.
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Sleepy - I think you can benefit from an Econ 101 course to learn about supply & demand. The supply to demand ratio is pretty low in Irvine.

Ever think that maybe Irvine is ideally situated, and that those who have the most money (like FCBs) are the ones taking advantage? Irvine is close to jobs, is very safe, clean/new, good schools, close to good shopping/dining, and close to other parts of OC. (Yes, even Portola Springs is too ;)). If FCBs weren't taking advantage of all that Irvine offers, others would.
 
TestingIrvine said:
Sleepy
I respect your balanced, bearish views.
But if prices in Irvine are higher for X amount of years, it’s not “artificially inflated”.

A Rolex can’t be “artificially inflated” if the supply is still low and people are willing to pay higher prices. At that point it’s fair market value and is contingent on supply & demand as USCTrojanCPA states.

And talking about policy changes is the same as talking about a potential natural disaster dropping Irvine prices more…who cares?
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Please don’t compare a Rolex to a home. The market for a Rolex is internationally recognized. No offense, but Irvine is not. Please don’t make an argument that it’s internationally recognized because a couple of countries in Asia know about it.

I’m completely fine agreeing to disagree here. Irvine was always crazy expensive compared to the rest of the OC area regardless of supply being high (pre-covid) vs supply being low (after covid). The majority of the reason is FCBs. Give credit to Irvine company. They know their target customers and they executed. New homes with actual land at the fraction of the cost compared to the customers home country? That’s a recipe for instant cash. You do know bubbles exist and don't pop for some time right? Look at the housing bubble, dot com bubble, etc. So yes, Irvines bubble has not popped yet, but it doesn't mean it will not pop one day for who knows what reason.

Irvine also doesn’t folllow the normal housing market as it’s been filled with FCBs buying up homes and inflating the actual value of it. No way are you going to tell me that cookie cutter homes should be selling $800+ sq/ft and it being nowhere near the ocean and instead near the fire proned areas. I will say it once and will say it again, the amount of money investors are paying in Irvine, you can get way better returns elsewhere.
 
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paydawg said:
Sleepy - I think you can benefit from an Econ 101 course to learn about supply & demand. The supply to demand ratio is pretty low in Irvine.

Ever think that maybe Irvine is ideally situated, and that those who have the most money (like FCBs) are the ones taking advantage? Irvine is close to jobs, is very safe, clean/new, good schools, close to good shopping/dining, and close to other parts of OC. (Yes, even Portola Springs is too ;)). If FCBs weren't taking advantage of all that Irvine offers, others would.
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I think you would benefit from getting outside the Irvine bubble.
 
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