<p>red: <em>"I am just not as confident as some people in this blog that housing price in Irvine will go down much more than 10-15% than current pricing."</em></p>
<p>Actually none of us are soothsayers, or even claim to have all the answers. In fact, we are merely taking a guess that the market will continue it's downward trend. Here's a brief recap of what we have observed through this forum and others that track Irvine:</p>
Builders will continue to ride out the down trend until they are marginally profitable at around $150 - $160 per sq ft. In fact, builders will "lead" the way down for the market overall. The current price per sq ft. is around $375 - $400 for new contruction. So they have a long way to go <em>(and there will be many suckers along the way)</em> to the bare minimum margin of profit for the builders.
<em>Put this into context: A 2000 sq ft TH retailing now for $750,000 (i.e. $375/sq ft) could be selling for $360,000 ($160/sq ft.) - this ain't no stinkin' 10% decline, it is more like 50%!!!</em>
Important note: Builders need TICs approval to lower prices below a certain range. In other words, prices are somewhat "regulated" in Irvine by TIC (The Irvine Co. - to the uninitiated) so prices will have a slower than normal downward adjustment than if the entire area been built up and we were talking strictly about demand for resale homes to compare against.
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There may be an escalation in the downward trend if there's a recession as being forecast by the inverted yield curve, and as other astute observers of the economy have <a href="http://calculatedrisk.blogspot.com/2006/12/housing-in-2007.html">noted</a>.
The prices of existing homes in Irvine, since they are for the most part based on comps, will follow the down trend set by the builders.
People who are bringing in equity into their home purchases, should be on the alert for "instant equity vaporization" when they buy their house in Irvine:
As I have noted before, if you are older, with older kids in school, you will most likely base your purchase decision on a longer time horizon, i.e. 10 - 20 years to see your kids through to high school within the same school district. In this case, people who bring in equity can feel 'safer' that they can ride out the ups and downs since "they are not going anywhere, anytime soon." If these people are in secure enough jobs, they should do fine.
However, if their jobs could be impacted by an economy in recession, then their "equity" will be screwed too, since they would have to sell and relocate to a place with better job prospects or try to rent it out (with very likely negative cash flow)...
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If you are younger and have hope to get into a starter home first then move up to a larger home later, if you are bringing in equity, you might as well kiss it goodbye now. You will have to essentially (in the best case) start over when you decide to move up. In the worst case, if your job is negatively impacted by the economy, then you will be screwed in other ways, i.e. potential default/foreclosure etc.
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