What the bubble?!?

Is Irvine feeling a bit bubble-licious to you lately?

  • Yes... buy now are be priced out forever.

    Votes: 23 27.4%

  • No... it's just there are only 3 houses on the MLS and interest rates are .00000888%

    Votes: 9 10.7%

  • Maybe... but it's short term... just a mini-bubble that will pop in several months

    Votes: 30 35.7%

  • I have no idea... but I think I just saw a unicorn

    Votes: 19 22.6%

  • Other

    Votes: 3 3.6%
  • Total voters
    84
@paperboy:

While you think prices are not as high as 05-06... don't you think they are still elevated?

Adjust your prices in 05-06 to what they should be fundamentally, scale up with inflation to today, and your math should show you that prices today are still bubbly, if not as super-bubbly as 9 years ago.
 
irvinehomeowner said:
@paperboy:

While you think prices are not as high as 05-06... don't you think they are still elevated?

Adjust your prices in 05-06 to what they should be fundamentally, scale up with inflation to today, and your math should show you that prices today are still bubbly, if not as super-bubbly as 9 years ago.
Click to expand...

Let's do the math. I always compare buying to renting since I need a place to live and I only bought when it was cheaper than renting.

Here is a home for rent in Stonegate. 1650 sq ft @ $3000/mohttp://www.point2homes.com/US/Home-For-Rent/CA/Orange-County/Woodbury/59-Coleridge/41662288.html

It sold for $597.5khttp://www.redfin.com/CA/Irvine/59-Coleridge-92620/home/51685530

The cost of renting is simple: $3000/mo

Let's look at the cost of buying:
$846/mo property tax (1.7%)
$2,422/mo mortgage payment (4.5% 30 yr fixed)
$60/mo home insurance
$250/mo HOA
$200/mo upkeep (gardener, pest control, repairs, maintenance)
--------------------
Total: $3,778/mo in cash out

Tax deductible:
$600/mo property tax
$1790/mo interest
------------------------
$2390/mo @ 25% marginal fed + 8% marginal ca:

<$788/mo> tax savings

<$620/mo> paying off mortgage initially

$450/mo lost after-tax interest (@ 4% on $119,500 down + $15,500 for landscaping etc)

Net monthly cost to buy: $2,820
Net monthly cost to rent: $3,000

No - right now we are not in a real estate bubble since it's cheaper to buy than to rent assuming you have a down payment. I am not even including any price appreciation on the home or rent increases on rent.

Of course there are plenty of real estate markets where it's always cheaper to buy - most people just can't afford / save up the down payment or have the credit history or stable job to qualify for a mortgage without PMI. Here in Irvine that is not the case.

 
I tend to agree.. but it's hard for first time home buyers to get that amount of down payment.  That will eventually catch up to the market unless we are in a place where only the wealthy kids have access with limited inventory.  Inventory will grow so we'll see how everything will go.
 
@paperboy:

So when I use your inflation and what fundamental prices should have been to scale up to what prices should be now, you move to rental parity as your support?

Why did you abandon your inflation-based argument?

#movingtarget
 
irvinehomeowner said:
@paperboy:

So when I use your inflation and what fundamental prices should have been to scale up to what prices should be now, you move to rental parity as your support?

Why did you abandon your inflation-based argument?

#movingtarget
Click to expand...

We don't agree on "fundamental prices" from 2006 so there is no point starting from a point where we can't agree. At the time I lived in San Diego and prices for so-so homes in so-so neighborhoods never fell more than 30%. Desirable homes never fell more than 20% unless it was a short sale or foreclosure. 40% is a made up number that you keep using (You think that the best condition, most desirable single family homes in the best neighborhoods that are standard sales should have fallen 40%).

When you look at affordability, the falling interest rates since 2006 also play a big factor. I know you disagree, but at least for me they were the difference between making the plunge and buying vs staying on the sidelines.
 
paperboyNC said:
40% is a made up number that you keep using
Click to expand...
That's not MY made up number, that's the people on IHB who kept saying that back in 2008.
(You think that the best condition, most desirable single family homes in the best neighborhoods that are standard sales should have fallen 40%).
Click to expand...
No, I don't. I've been saying that forever, but I don't think you remember that.
When you look at affordability, the falling interest rates since 2006 also play a big factor. I know you disagree, but at least for me they were the difference between making the plunge and buying vs staying on the sidelines.
Click to expand...
No, I understand this argument. But if you look at my original poll, I did say this was a mini-bubble and I was just talking about prices... sans inflation.

If you want to bring inflation, interest rates and rental parity into it, that's a different conversation... something like "What the affordability?!?".

But now you brought up a question, for Irvine, what was the bubble prices over by? If not 40% or even 20% than what? And, do you consider 2014 a fundamentally priced year, or was it more like 2012. I think 2012 was (and if you factor in interest, even moreso), and then prices jumped in 2013 which is when I originally posted this thread and hence the "bubble" word.
 
paperboyNC said:
irvinehomeowner said:
@paperboy:

While you think prices are not as high as 05-06... don't you think they are still elevated?

Adjust your prices in 05-06 to what they should be fundamentally, scale up with inflation to today, and your math should show you that prices today are still bubbly, if not as super-bubbly as 9 years ago.
Click to expand...

Let's do the math. I always compare buying to renting since I need a place to live and I only bought when it was cheaper than renting.

Here is a home for rent in Stonegate. 1650 sq ft @ $3000/mohttp://www.point2homes.com/US/Home-For-Rent/CA/Orange-County/Woodbury/59-Coleridge/41662288.html

It sold for $597.5khttp://www.redfin.com/CA/Irvine/59-Coleridge-92620/home/51685530

The cost of renting is simple: $3000/mo

Let's look at the cost of buying:
$846/mo property tax (1.7%)
$2,422/mo mortgage payment (4.5% 30 yr fixed)
$60/mo home insurance
$250/mo HOA
$200/mo upkeep (gardener, pest control, repairs, maintenance)
--------------------
Total: $3,778/mo in cash out

Tax deductible:
$600/mo property tax
$1790/mo interest
------------------------
$2390/mo @ 25% marginal fed + 8% marginal ca:

<$788/mo> tax savings

<$620/mo> paying off mortgage initially

$450/mo lost after-tax interest (@ 4% on $119,500 down + $15,500 for landscaping etc)

Net monthly cost to buy: $2,820
Net monthly cost to rent: $3,000

No - right now we are not in a real estate bubble since it's cheaper to buy than to rent assuming you have a down payment. I am not even including any price appreciation on the home or rent increases on rent.

Of course there are plenty of real estate markets where it's always cheaper to buy - most people just can't afford / save up the down payment or have the credit history or stable job to qualify for a mortgage without PMI. Here in Irvine that is not the case.
Click to expand...

im guessing for a lot of people on this board, they dont get to deduct property taxes, so at a combined rate of 30% that would increase the payment by about 240/month which would actually make buying slightly more expensive. but practically speaking its a wash, at least on this particular house you chose. 
 
Also, why would I be willing to pay the same monthly as back in 2005-06 for the same house?

Back then, those were inflated prices so I didn't want to pay that much (which is why I sold).

What I want to do is pay less monthly for the same house, or pay the same monthly for a better house.
 
irvinehomeowner said:
But now you brought up a question, for Irvine, what was the bubble prices over by? If not 40% or even 20% than what? And, do you consider 2014 a fundamentally priced year, or was it more like 2012. I think 2012 was (and if you factor in interest, even moreso), and then prices jumped in 2013 which is when I originally posted this thread and hence the "bubble" word.
Click to expand...

You were right that we had a mini bubble on certain homes in 2013. I could have gotten more for my home last summer than I could get today.

2012 had prices that were too low (which is inventory dried up so fast) and yes, 2014 is more fundamentally priced overall than 2012 or 2013. I still think that land is more valuable and homes with more land will retain their value and grow in value more in the long run than homes without land. That's why I'd love to get out of my detached condo sooner rather than later and get a >6000 sq ft lot.
 
irvinehomeowner said:
Also, why would I be willing to pay the same monthly as back in 2005-06 for the same house?

Back then, those were inflated prices so I didn't want to pay that much (which is why I sold).

What I want to do is pay less monthly for the same house, or pay the same monthly for a better house.
Click to expand...

Thanks to lower interest rates and lower prices (if you look in the right places) you can pay about 20% less for the same house than you did in 2006. Once you factor in inflation, you are paying even a lot less.

Your wish has been granted. I'm sure USCTrojan and Solvent Green can get you all setup.
 
There's that word again...

http://www.latimes.com/business/realestate/la-fi-home-prices-20140326,0,4729002.story#axzz2x5NGPUrA

O.C., L.A. and Inland Empire homes are overpriced, Trulia says

No place is that gap between home price and income growing faster than in Southern California, which led Kolko to rank Orange County, Los Angeles and the Inland Empire among his five most overvalued markets in a "Bubble-Watch" report he issued Tuesday. If a new housing bubble is forming, he wrote, it will form here first.
 
My question is.. if there is a bubble which there very well might.. how will it play out when 30% of the buyers around here paid cash!  Also, a lot of the other buyers have put a big down payment.  Not sure if there would be a sell off.
 
jmoney74 said:
My question is.. if there is a bubble which there very well might.. how will it play out when 30% of the buyers around here paid cash!  Also, a lot of the other buyers have put a big down payment.  Not sure if there would be a sell off.
Click to expand...
And there is still less than 3 months worth of re-sale inventory.  If you see inventory levels start to get to 6+ months, then it'll be time to worry about home prices falling.  We seem to be at an equilibrium at the moment with flatish prices.
 
jmoney74 said:
My question is.. if there is a bubble which there very well might.. how will it play out when 30% of the buyers around here paid cash!  Also, a lot of the other buyers have put a big down payment.  Not sure if there would be a sell off.
Click to expand...
That's why the last bubble didn't hit Irvine as hard as other cities.

Since owners were not distressed by falling values, they didn't have to panic sell and just waited it out which caused less of a foreclosure tsunami as predicted.

I asked about this before but was I was dismissed as being crazy.
 
You must log in or register to reply here.
Back
Top