OC Bubble

You have you ask yourself.. what actually makes a bubble pop?  Generally over leveraging.  In OC, however, it's all about the cash.  So even if we get to a slow down.. not like a bunch of people are going to walk away from their cash purchase. 
 
jmoney74 said:
You have you ask yourself.. what actually makes a bubble pop?  Generally over leveraging.  In OC, however, it's all about the cash.  So even if we get to a slow down.. not like a bunch of people are going to walk away from their cash purchase. 
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Only ballers like you, Homie and the FCBs deal in cash.
 
irvinehomeowner said:
jmoney74 said:
You have you ask yourself.. what actually makes a bubble pop?  Generally over leveraging.  In OC, however, it's all about the cash.  So even if we get to a slow down.. not like a bunch of people are going to walk away from their cash purchase. 
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Only ballers like you, Homie and the FCBs deal in cash.
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oh you know it!  lol.

tumblr_m1inx2MleB1qzozj1.jpg
 
FCBs pay in cash, but a lot of that cash is leveraged.  So what happens when they need to pay up when the Asian stock markets go down like they are now?  Either going to see a lot of houses sold or a lot of immigration coming in.
 
thetruth said:
FCBs pay in cash, but a lot of that cash is leveraged.  So what happens when they need to pay up when the Asian stock markets go down like they are now?  Either going to see a lot of houses sold or a lot of immigration coming in.
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Cash by definition is not leverage.  You're thinking of mortgage.
 
test said:
thetruth said:
FCBs pay in cash, but a lot of that cash is leveraged.  So what happens when they need to pay up when the Asian stock markets go down like they are now?  Either going to see a lot of houses sold or a lot of immigration coming in.
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Cash by definition is not leverage.  You're thinking of mortgage.
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Cash is not leverage.  The Chinese put cash into these homes because they are fearful of the Asian stock market.  Not sure how immigration would come in either just because of a market crash?
 
Cash by definition is not leveraged, but cash can be leveraged/borrowed.  It's like trading on margin.  They park cash here in USA real estate because there's a lot of restrictions on real estate purchasing there and if you ever see what a million dollars buy in Hong Kong then you'll understand why these Motor Courts look big.

In terms of migration...see what the Chinese government will do to you when you can't pay up.  Sit in their jail or move over here where you already have a house paid for.
 
test said:
thetruth said:
FCBs pay in cash, but a lot of that cash is leveraged.  So what happens when they need to pay up when the Asian stock markets go down like they are now?  Either going to see a lot of houses sold or a lot of immigration coming in.
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Cash by definition is not leverage.  You're thinking of mortgage.
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Like thetruth said, cash by definition is not leveraged, but cash can be leveraged/borrowed. Mortgage aside, even a car loan is leveraged. In fact, it is more commonly done that people would think.

Leverage is an investment strategy of using borrowed money (cash) to generate investment returns. So yes, the cash being used can be leveraged.

People could be fully invested in the stock market and can still pull out "cash" without even selling a single security.

What do you think happened during the stock market crash of 2009 when huge margin calls hit? It was a snow ball effect and something had to be done to meet the margin calls....come up with cash, sell assets or file bankruptcy. And we all know what happened next.

test, you should stick to doing what you do best.....taking pictures.
 
lol

dang

I would say though.. Chinese work a bit different.  They aren't like Americans.  They will buy and hold forever.  lol.. just the way they are.  I doubt they will just sell for 30% less than what they put into it. 
 
samuroo said:
http://www.doctorhousingbubble.com/...ocal-home-prices-real-esate-bubble/#more-7366
Thoughts?
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The article basic stating that the OC housing price are too expensive and people shouldn't able to continue to afford them but failed to mention any credible cause that will trigger a sale off and significant drop in housing prices.  During the last bubble, many cities suffer significant price drop of 40% or more but Irvine mainly suffer a 25% price correction.  And this time around, Irvine resident's financial situation are even more robust then pre-bubble years due to all cash purchase, no liar loans, high down payment and low interest rate.  It's unlikely there will be a mass sale off and acute drop in home prices in Irvine.

Also the chance of a big housing bubble in Irvine is not likely because morekaos said so.
morekaos said:
RE prices here have ALWAYS been out of line with the rest of the country and probably always will be no matter the economic environment.
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In general if people are leveraged they take out a mortgage because:
- Loans against a home generally have the lowest rates and longest payback periods
- Interest is tax deductible

That's why it's rare to find someone without a mortgage who is leveraged.
 
Meggie said:
Looks like Irvine bubble is starting to pop.  Almost $200K reduction:
http://www.redfin.com/CA/Irvine/126-Tomato-Spgs-92618/home/52327825
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While the price reduction is substantial, I don't think this is representative of Irvine - this particular property is on the outskirts of Portola Springs, close to the toll road, in the section of PS closer to the landfill, and generally undesirable location (not convenient to shopping, schools, etc).  I don't know anyone shopping in that price range willing to compromise on that many factors while still willing to pay $1.2M.  There are much better alternatives in that price range.
 
Most people think because it's all cash purchases, that it's a safer.  While that is true, there is a high risk this OC Bubble can pop a good chunk.  There's a lot of money coming from overseas and also from market funds built around real estate funds.  With the overseas money a lot of it is leveraged on various investments, which is why there's such high growth in China.  If any of those investment vehicles get hit hard then you'll naturally see liquidation.  With their stock market and real estate starting to take hits, then we may start to see that happen now.  The term FCB seems to be obvious..since how is anyone from overseas suppose to obtain a mortgage if they can't prove income to our local banks.  BTW, I think it's been stated before on other threads but besides financial reasons, if a foreigner spends at least $500,000 on a USA investment(real estate included) then they put themselves on the fast track for a green card. 

With our USA market funds, those won't trigger a sell off probably for another couple of quarters.  People are seeing statements where they've made 12%+ year over year on their real estate fund which is great compared to most.  But if the price increases or rent is flat for a few quarters of a year then people are going to transition money to higher yielding investment vehicles. 

I know I've babbled about a few topics there.  In summary, the market won't roll over like it did in 2008 because banks won't be eating the losses in this case it'll be the investment firms/people paying into those funds.  But we could easily see a 10-20% drop over the course of a couple years because of that whole process unwinding.  Just speculation and I'm sure plenty of the intelligent people on the forum have thought about some of these points but I figure I 'd just spew it all on here.
 
thetruth said:
Most people think because it's all cash purchases, that it's a safer.  While that is true, there is a high risk this OC Bubble can pop a good chunk.  There's a lot of money coming from overseas and also from market funds built around real estate funds.  With the overseas money a lot of it is leveraged on various investments, which is why there's such high growth in China.  If any of those investment vehicles get hit hard then you'll naturally see liquidation.  With their stock market and real estate starting to take hits, then we may start to see that happen now.  The term FCB seems to be obvious..since how is anyone from overseas suppose to obtain a mortgage if they can't prove income to our local banks.  BTW, I think it's been stated before on other threads but besides financial reasons, if a foreigner spends at least $500,000 on a USA investment(real estate included) then they put themselves on the fast track for a green card. 

With our USA market funds, those won't trigger a sell off probably for another couple of quarters.  People are seeing statements where they've made 12%+ year over year on their real estate fund which is great compared to most.  But if the price increases or rent is flat for a few quarters of a year then people are going to transition money to higher yielding investment vehicles. 

I know I've babbled about a few topics there.  In summary, the market won't roll over like it did in 2008 because banks won't be eating the losses in this case it'll be the investment firms/people paying into those funds.  But we could easily see a 10-20% drop over the course of a couple years because of that whole process unwinding.  Just speculation and I'm sure plenty of the intelligent people on the forum have thought about some of these points but I figure I 'd just spew it all on here.
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We could see unwinding and price drops. I think though... If it did drop 20 percent... Buying would pick up fast again.
 
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