Spring 2014 Pricing - Best Guess on the Resale Market?

[irvinehomeowner]

OpenSky is correct that it is a comp... but not THE comp. Appraisers will take all things into consideration and if there are more similar homes at higher sale prices, those will affect the appraisal more.

Even more so, sellers often do not care about comps. From personal experiences, they will always feel that their home is priced right even if a better home that sold for less is nearby.

 

[ps99472]

How long does it take for a property to shrug off short sale/foreclosure stigma after it's sold?  Or is there such a thing in Irvine?

If the new owners put Carmichael on the market now (or maybe a couple months) would it go for a higher price?

 

[OpenSky]

 

[irvinehomeowner]

How long does it take for a property to shrug off short sale/foreclosure stigma after it's sold?  Or is there such a thing in Irvine?

If the new owners put Carmichael on the market now (or maybe a couple months) would it go for a higher price?

I'm not sure sure but I think 6 months is a good threshold. Sometimes 3 months but that depends on other conditions. A short sale or foreclosure usually signifies a "lower than normal" price so prospective buyers will take that into consideration.

For example:
http://www.redfin.com/CA/Irvine/23-Eastlake-92604/home/4690934/crmls-S721769

Same agent, closed for $910k in April 3, 2013.

Relisted later that month on April 29, 2013 for $1.4m:
http://www.redfin.com/CA/Irvine/23-Eastlake-92604/home/4690934

But didn't close until 6 months later on Oct 31, 2013 for $1.29m.

Since you are a serial refi'er, do you ever ask the appraiser how long an appraisal lasts? I think when we last did our appraisal on a refi, we had to order a new one because it was a few months later when we actually decided to go through with the refi.

 

[jmoney74]

@OpenSky - I just sold my home in West Irvine and closed escrow end of Dec.  Problem with sales numbers there is that homes just don't go up for sale often.  My agent told me more would probably go up this year.  Everything that went up sold relatively quickly because it was very limited (Low Meloroos) type area.  I have to add that the 4 bedrooms might be less desirable for FCBs because a lot of the plans out there don't have bedrooms downstairs. 

 

[OpenSky]

 

[OpenSky]

8)

 

[irvinehomeowner]

I read that article too, thanks for the paywall bypass.

 

[OpenSky]

 

[bones]

/

 

[OpenSky]

 

[irvinehomeowner]

Either way, sales are simply dead in the water in 92602. And it has everything to do with OH (and new product in general).

We did ~5 open houses today, every realtor lamented the new home inventory "problem."

I find this interesting.

You would think that because resale inventory is so low and most new inventory has a waiting list and a wait time of 3-6 months, that there would be some demand for resale.

The problem with resale isn't just the new homes... it's their ridiculous asking prices.

 

[jmoney74]

I agree... there is good demand even for West Irvine.. however, 92602 inventory is still very low.  Priced correctly, they will sell fast.  Too many homeowners are asking for way too much.. and it's even more near the Stonegate/Woodbury areas.  With more new homes coming into play.. it's going to be interesting how this all plays out. 

 

[OpenSky]

 

[OpenSky]

Lansner had a decent article today, highlighting the swelling of vacant/investor-owned properties in the market vs. last year -- now representing 29% vs 14% a year ago.

He concludes that investors are cashing out -- and if they get desperate, the influence on the market is more broad than it once was.

Structurally, if they are indeed heading for the hills, cash outs don't likely flow back into the housing market like an owner-occupied sale - it's a dead end transaction.

OCR's site sucks as usual, as I can't find the html version of his piece. You can suffer through the pdf of the e-paper, redacted to Page 1/2 of the RE section.

 

[quattroporte]

Lansner had a decent article today, highlighting the swelling of vacant/investor-owned properties in the market vs. last year -- now representing 29% vs 14% a year ago.

He concludes that investors are cashing out -- and if they get desperate, the influence on the market is more broad than it once was.

Structurally, if they are indeed heading for the hills, cash outs don't likely flow back into the housing market like an owner-occupied sale - it's a dead end transaction.

OCR's site sucks as usual, as I can't find the html version of his piece. You can suffer through the pdf of the e-paper, redacted to Page 1/2 of the RE section.

I noticed the same thing. A lot of properties that were sold to cash buyers in the last 2 years have started showing up on MLS. Far more than what I saw last year. 

 

[Chairman]

There should be some limit on how many homes a FCB cash buyer can purchase. They are not helping the community nor the housing market. They just drive prices up by over paying to begin with and then are looking to cash out at another higher price. Definitely the signs of a bubble. I guess since they are all cash purchases they can't go into foreclosure and drive prices down. If they have to sell they may just have to lower their WTF prices. I have no inkling as to how many homes are FCB owned in Irvine looking to be dumped. This is the downside effect from China's rapid inflation and tax evaded monies.

 

[paperboyNC]

I posted this on the What the Bubble? Thread but I think it's appropriate here as well to compare current pricing to the 2005-06 bubble:

Let's say a home sold for $900K in 2005 and then sold for $900K in 2014. There has been 19.8% inflation from 2005 to 2014 so in reality the home sold for $751,252 in 2005 dollars.

Throw in the fact that interest rates are still a lot lower (4.5% compared to 6.5%) and monthly payments are vastly different:

$720K loan @ 6.5% = $4,550.89/mo. @ 4.5% = $3,648.13

If you include both factors (19.8% inflation and a 20.0% savings on the monthly payment) a $900K home in 2005 = $1.3m home in 2014. A 900K home in 2014 = $600K home 2005.

On top of both of those factors, most Irvine homes are selling at slight discounts to 2005/06 non adjusted pricing.

Here's all of the homes from last week's closed sales in Irvine that had previously closed in 2005 or 2006 per Redfin:http://www.redfin.com/CA/Irvine/85-Passage-92603/home/5895169
2006 - $900k, 2014 $870khttp://www.redfin.com/CA/Irvine/9-Bonsall-92602/unit-61/home/5895571
2006 - $645k, 2014 $570khttp://www.redfin.com/CA/Irvine/102-Vintage-92620/home/7210866
2005 - $677k, 2014 $649khttp://www.redfin.com/CA/Irvine/199-Tarocco-92618/unit-83/home/5480172
2006 - $416k, 2014 $390khttp://www.redfin.com/CA/Irvine/30-Le-Vanto-92606/home/4625061
2006 - $701k, 2014 $642khttp://www.redfin.com/CA/Irvine/452-Monroe-92620/unit-88/home/5321937
2006 - $410k, 2014 $380khttp://www.redfin.com/CA/Irvine/53-Avondale-92602/unit-27/home/5884855
2006 - $745k, 2014  $645k

Overall prices for these homes declined 8% from the 2005-06 bubble.

To review:
8% price decline
19.8% inflation
20% monthly payment savings due to interest rates


We have a long way to go until we approach the prices of the last bubble (prices would have to rise 56% or interest rates would have to climb).

Let's look at 30 Le Vanto (a starter home):

2006 -
$701k
$140.2k down payment
$560.8k borrowed at 6.5% interest = $3544.64/mo
Property Tax @ 1.2% = $701/mo
HOA @ $162/mo

Total: $4,408/mo + $140,200 down in 2006 dollars

2014
$642k
$128.4k down payment
$513.6k borrowed at 4.5% interest = $2,602.34/mo
Property Tax @ 1.2% = $642/mo
HOA @ $162/mo

Total: $3,406/mo + $128,400 down in 2014 dollars

$4,408 in 2006 dollars = $5,114.59 in 2014 dollars
$140,200 in 2006 dollars = $162,673.73 in 2014 dollars

$3,406/mo compared to $5,115/mo = 50% more in 2006
$128,400 down compared to $162,674 down = 27% more in 2006

This $642k home would have to immediately rise to around $1 million (over 50%) to be at 2006 affordability. If interest rates remain at 4.5% - we are nowhere near the 2006 bubble. Not even close.

 

[pricedoutJay]

paperboy,

Good analysis on price comparison.  However, 2005/2006 price level was outrageously high.  I don't have real numbers but it might have been 50% or more than what the normal housing market would've dictated.

For example, my friend bought a house in Harvard Square for $380k in 2000.  Now it's fetching $850k.  If his house value went up 5% compounding every year for the last 14 years, it would be about $750k now.  Also the house was valued at around $800k in 2006 already, came down about 10% or so and went back up to $850k.

I'm not disputing your calculation, but comparing the price level now to 2006 may not be accurate in long term.  However, I give you that it is what it is now and the house price (like anything else) is whatever the buyer is willing to pay for.

Nonetheless, a good different perspective to see the Irvine home price.

 

[paperboyNC]

paperboy,

Good analysis on price comparison.  However, 2005/2006 price level was outrageously high.  I don't have real numbers but it might have been 50% or more than what the normal housing market would've dictated.

For example, my friend bought a house in Harvard Square for $380k in 2000.  Now it's fetching $850k.  If his house value went up 5% compounding every year for the last 14 years, it would be about $750k now.  Also the house was valued at around $800k in 2006 already, came down about 10% or so and went back up to $850k.

I'm not disputing your calculation, but comparing the price level now to 2006 may not be accurate in long term.  However, I give you that it is what it is now and the house price (like anything else) is whatever the buyer is willing to pay for.

Nonetheless, a good different perspective to see the Irvine home price.

Thanks. My point is that we are nowhere near the bubble territory that we were in 2006 and likely will not get there again (hopefully ever)