Spring 2014 Pricing - Best Guess on the Resale Market?

[quattroporte]

You should buy when you can afford it

I agree

 

[qwerty]

@qwerter:

If the relationship was proportional, it's a no-brainer to buy in a high-rate/low-price scenario, but it's not, so saying that rising rates will bring down prices isn't an informative statement.

And based on the last year of activity, not really a true one either.

Yeah there is not a perfect relationship with rates and prices cause it is just one variable but it's an important one. While the one percent rates may not have reduced pricing it appears that's it's finally starting to have an impact on the new developments. I know, not a perfectly proportional impact but an impact none the less. And if rates went up another point then it would continue to have some sort of downward pressure on prices. They may still not come down bit it could have the impact if getting a fully loaded house for what you get a base house now or perhaps wipe out price increases for the next one, two or three years

 

[test]

You should buy when you can afford it

I agree

Unfortunately for quattroporte that would be never

 

[irvinehomeowner]

@quattro:

Show me the charts you are looking at. The low was December 2012 and has moved up from there. You are citing .25% differences as not going up but they are if sustained.

Take a look at this chart and you tell me where you think the pivot point was:

http://www.bankrate.com/funnel/graph/default.aspx?cat=2&ids=1,-1&state=zz&d=1095&t=MSLine&eco=-1

And for Irvine prices:

http://www.redfin.com/city/9361/CA/Irvine
Prices where lower in December 2012 and also have moved up from there.

 

[quattroporte]

You should buy when you can afford it

I agree

Unfortunately for quattroporte that would be never

  *Yawn* Same lines every time.

 

[quattroporte]

@quattro:

Show me the charts you are looking at. The low was December 2012 and has moved up from there. You are citing .25% differences as not going up but they are if sustained.

Take a look at this chart and you tell me where you think the pivot point was:

http://www.bankrate.com/funnel/graph/default.aspx?cat=2&ids=1,-1&state=zz&d=1095&t=MSLine&eco=-1

And for Irvine prices:

http://www.redfin.com/city/9361/CA/Irvine
Prices where lower in December 2012 and also have moved up from there.

http://www.mortgagenewsdaily.com/mortgage_rates/charts.asp

 

[irvinehomeowner]

@quattro:

Even your link shows that rates went up from December 2012.

 

[quattroporte]

@quattro:

Even your link shows that rates went up from December 2012.

Yes, I mentioned that in my previous comment. My question to you; what was the average range of the interest rate between December 2012 to April 2013?

 

[qwerty]

Comparing Boeing and carmakers to home sellers  isn't an apples to apples comparison. Boeing builds to order and the car makers can reduce inventory. And when the car makers get stuck with a bunch of inventory they give incentives to dealers to move the old inventory. A homeowner may need to sell today for whatever reason and if rates when up tomorrow, he may well find a buyer willing to pay his price but like u said, the reduced purchasing power will limit the pool of financed buyers so he can try to wait it out or reduce the price to sell to a financed buyer. I wish at our commercial business we could have said the price is the price is the price but when the economy was in the tank we couldn't. We wanted revenue so we had to lower prices if wanted to make numbers for the quarter and then it would be at reduced profitability.  Eventually Boeing will need to sell planes and if their current prices aren't moving planes they will drop the prices. Boeing has the benefit if deriving 40% of their revenue from the govt so they can afford to be a little more firm on the commercial side

 

[test]

Only someone who thinks built-in fridges are personal property would compare Boeing and carmakers to home sellers LOL

 

[paperboyNC]

Comparing Boeing and carmakers to home sellers  isn't an apples to apples comparison. Boeing builds to order and the car makers can reduce inventory. And when the car makers get stuck with a bunch of inventory they give incentives to dealers to move the old inventory. A homeowner may need to sell today for whatever reason and if rates when up tomorrow, he may well find a buyer willing to pay his price but like u said, the reduced purchasing power will limit the pool of financed buyers so he can try to wait it out or reduce the price to sell to a financed buyer. I wish at our commercial business we could have said the price is the price is the price but when the economy was in the tank we couldn't. We wanted revenue so we had to lower prices if wanted to make numbers for the quarter and then it would be at reduced profitability.  Eventually Boeing will need to sell planes and if their current prices aren't moving planes they will drop the prices. Boeing has the benefit if deriving 40% of their revenue from the govt so they can afford to be a little more firm on the commercial side

Housing supply does indeed drop as demand drops:

A) Builders can slow down building or delay projects entirely as demand drops

B) Builders can change the product they build (more $400K attached condos and fewer $1.2MM SFRs) as demand at the high-end decreases

C) Many home owners and investors have a minimum floor price they will sell for. If they don't find a buyer they will take their homes back off the market.

Ford and Boeing lose a lot of money if they idle their factories so they can't just cut back production completely. The analogy doesn't have as many holes in it as you think.

 

[quattroporte]

Only someone who thinks built-in fridges are personal property would compare Boeing and carmakers to home sellers LOL

And only someone who lives in a trailer (you) doesn't understand the cost of capital.

......with red and blue lights to distinguish the gender

 

[qwerty]

Comparing Boeing and carmakers to home sellers  isn't an apples to apples comparison. Boeing builds to order and the car makers can reduce inventory. And when the car makers get stuck with a bunch of inventory they give incentives to dealers to move the old inventory. A homeowner may need to sell today for whatever reason and if rates when up tomorrow, he may well find a buyer willing to pay his price but like u said, the reduced purchasing power will limit the pool of financed buyers so he can try to wait it out or reduce the price to sell to a financed buyer. I wish at our commercial business we could have said the price is the price is the price but when the economy was in the tank we couldn't. We wanted revenue so we had to lower prices if wanted to make numbers for the quarter and then it would be at reduced profitability.  Eventually Boeing will need to sell planes and if their current prices aren't moving planes they will drop the prices. Boeing has the benefit if deriving 40% of their revenue from the govt so they can afford to be a little more firm on the commercial side

Housing supply does indeed drop as demand drops:

A) Builders can slow down building or delay projects entirely as demand drops

B) Builders can change the product they build (more $400K attached condos and fewer $1.2MM SFRs) as demand at the high-end decreases

C) Many home owners and investors have a minimum floor price they will sell for. If they don't find a buyer they will take their homes back off the market.

Ford and Boeing lose a lot of money if they idle their factories so they can't just cut back production completely. The analogy doesn't have as many holes in it as you think.

So these things all happen in response to rising interest rates. Why? To avoid price drops. Yes a homeowner doesn't have to sell but if he does he may have to sell at a lower price.

 

[qwerty]

It doesn't change the fact they will not drop the price unless all other options have failed.  Why? Because they still have to make their target profit, or they risk having their stock downgraded because they missed earnings projections.  Since their cost of capital is known to them, they must have a rate of return higher than that or investors will shun their stock.

My point remains the same - those who can afford it don't give a damn what the interest rate is.  Because they are financing less of the transaction's price.  Just like folks buying durable goods - those with strong balance sheets are less affected by what the interest rate is for a purchase, since they pay cash.


If you are living below your means, and taking a mortgage no greater than 2.5 times your gross annual salary, what difference does it make that the interest portion of your payment is higher in a 6.0% environment than a 4.5% interest rate environment?  You would have not based your decision on your max monthly payment you could afford, but the one that you were comfortable spending and saving the rest.

Those who are stretching to get into a transaction are going to be affected (like the people with bad credit).  These are the folks living at their means or perhaps above it. Or companies purchasing goods / inventory on credit.

Yes companies will try to keep their margins at all cost. You keep on referencing those who can afford it, keep in mind the majority of the US lives check to check. For those folks interest rates play a huge factor. They can't absorb a 1% increase in rates over the course of a year if the house price they were looking to buy stays the same. What would u say is causing the slowdown in sales of new construction in irvine? It seems the major change in the last year has been the rise in rates.

 

[paperboyNC]

Yes companies will try to keep their margins at all cost. You keep on referencing those who can afford it, keep in mind the majority of the US lives check to check. For those folks interest rates play a huge factor. They can't absorb a 1% increase in rates over the course of a year if the house price they were looking to buy stays the same. What would u say is causing the slowdown in sales of new construction in irvine? It seems the major change in the last year has been the rise in rates.

Demand for new houses is not necessarily ongoing. There was a large pent up demand for new housing and now that those households have bought a home they are no longer buying one. Houses are not like cars that get replaced every few years.

Plus prices keep going up (increasing supply and decreasing demand). Interest rates aren't really any higher if you get an ARM than they were at the bottom.

 

[qwerty]

The developers and TIC would tell you there is plenty of demand which is why they are bringing orchard hills online and the great park developers will build an additional 4k homes more than planned. You say the higher prices led to more supply and decreased demand, I would counter to say that they could continue to increase prices while rates were at 3.5 and now at 4.5 can't pass on those price increases because people are having a harder time affording it whether by choice or the banks not qualifying them. I would say demand would return real quick if they dropped the prices of the home by 10-15%. There is no demand at the current price and that may have been influenced by the one percent rate increase. At the current rates (4.5), a 10-15% price drop would help sales a lot.

 

[OpenSky]

8)

 

[irvinehomeowner]

The rise from 3.5 to 4.5 did not affect my affordability... as I think it wouldn't for most people shopping in certain price ranges.

As I said, back when rates were in the mid 3s, prices were lower, now the rates are mid 4s, and unfortunately, prices are higher... so I am getting hit on both ends. But then like others said, instead of getting fixed, get an ARM to get the same rate you would have got last year.

 

[qwerty]

The rise from 3.5 to 4.5 did not affect my affordability... as I think it wouldn't for most people shopping in certain price ranges.

As I said, back when rates were in the mid 3s, prices were lower, now the rates are mid 4s, and unfortunately, prices are higher... so I am getting hit on both ends. But then like others said, instead of getting fixed, get an ARM to get the same rate you would have got last year.

There are some like yourself who will eat the extra payment but a lot of people won't. So now you get an arm to compensate for the higher rate and potentially increasing your cost over the long term increasing your risk. The builders will try to get as much as they can get and the combo of price increases and rate increases are now resulting in slower sales in irvine new construction

 

[eyephone]

This is what I hear from my friends and coworkers. I need to get a house before the interest rate even rises more.

Buy now - or be priced out and rent. When the interest rate rises it squeezes people out. But for investors/flippers they don't care. They are looking at the ROI.