Whatever happened to the IHB naysayers?

T

traceimage

New member
I was thinking recently about how when I was house hunting, back in 2008 and 2009, I was a little nervous because several people on the old IHB forums were saying to rent, not buy, because housing prices were going to drop once all the elusive shadow inventory came onto the market. Some were saying that houses in Irvine would drop to $400-$500k, or even less. We took a chance and bought in mid 2009. That turned out not to be "the bottom" of the most recent cycle, but I think it was still a pretty good time to buy. Now that I've started looking again, the prices are all insane. I don't think we would even be able to afford to move back into our house if we didn't own it already.

So what happened with the shadow inventory? Do people still think inventory is going to skyrocket and prices are going to plummet at some point?
 
I was one.  I still think the market is going to get punk'd

I did by in about 2010.  The deals where good if you could find one.

I said it then, and I still think it's true, I suspect we havea lot of people,priced in.

Keep in mind for most of the bubble, from 1998 thru 2006 average monthly sales volume was around 4500 MLS transactions  July this yer was really good, but still came in around 3300.

In itself mortage rates going from 6.5% in 2006 to 3.875% today. And rents have annual 5 % increases everyday since then.

So if the world economy ever gets back on its feet and central banks stop pumping 0% interbank rates, OC  and irvine wills weavers different market.

Sure, put 50% down on that million dollar pad! borrow the other half t 6.5% and cry.
 
traceimage said:
I was thinking recently about how when I was house hunting, back in 2008 and 2009, I was a little nervous because several people on the old IHB forums were saying to rent, not buy, because housing prices were going to drop once all the elusive shadow inventory came onto the market. Some were saying that houses in Irvine would drop to $400-$500k, or even less. We took a chance and bought in mid 2009. That turned out not to be "the bottom" of the most recent cycle, but I think it was still a pretty good time to buy. Now that I've started looking again, the prices are all insane. I don't think we would even be able to afford to move back into our house if we didn't own it already.

So what happened with the shadow inventory? Do people still think inventory is going to skyrocket and prices are going to plummet at some point?
Click to expand...

When private equity were buying up houses, that was a sign to buy a home.

Now private equity are buying energy.


 
I've wanted to comment on this for awhile now. It's easy to dig up old threads and read just how wrong certain people were.
 
The "first time home buyers" are on the sidelines waiting to buy, but I don't see them buying anytime soon especially in high priced markets.
 
all the naysayers bought before the 25% rise at the end of 2012.  We are psychic.

If you think about it, we were bears since 2008...4 years later, How could we remain bears?..

I really should say...4 years later and after the government pumped 1 quadrillion dollars into the economy...how could we let our money depreciate?
 
Actually I joined Irvinehousingblog in 2007...so 5 years of being a bear was long enough.
 
These were the 3 biggest "wrongs" that the bears said would happen:

1. Government could not bail out housing.
2. Rates will rise.
3. Shadow inventory will come in a tsunami due to all the foreclosures from ARMs

All those 3 were related, and when the Fed obliterated #1, everything else did not come to fruition.
 
I joined IHB in 2005 but started taking a bearish stance in 2003, only for my neck of the woods, not Irvine.  I had actually been looking to buy since 2001, and kept waiting for prices to retrace back to 1999.  I once had an agent at an open house in 2003 basically tell me I would be stupid NOT to buy, since prices in that neighborhood were rising 8% a month. It was a ridiculous statement, but it would be true for much longer than I would have ever guessed.  I did buy a house that year with my gf, but I really thought we were buying near a peak, so we bought something cheap.  I watched the house's value almost double over the next 3 years, and of course it was a bubble, but my timing was off.  Prices just kept going much farther than what anyone expected, thanks to Greenspan and Bernanke.  But I was proved right, eventually.  Prices crashed, finally bottoming out to below where I had bought, in nominal terms, almost 10 years later.  4 years after the end of the crash, that house is still closer to its 2003 price than to its 2006 price.

zubs said:
all the naysayers bought before the 25% rise at the end of 2012.  We are psychic.
Click to expand...

Lol!  Must be!  My wife (gf got promoted) and I bought our 2nd home in Sept 2011.  It was a house we first saw in 2004 and really liked, and I thought for sure prices would keep falling.  I had a serious discussion with the wife about whether she would be ok with the house dropping 20% in value. 

I am still a bear.  I still think we're in a bubble.  In my area, at least.  Prices are still high partly because inventories are low.  There are maybe 15 SFRs for sale in my zip code.  It seems the only people selling are the retired ones who are cashing in and moving the hell away from Dodge.  Everyone else is "priced in," as NSR says.  The young couple who bought my neighbor's 3/2 for $50k over asking, and then dumped a bunch of money into it fixing it up, probably won't be going anywhere for a long time.  Then again, maybe they're 1%ers. 

The other big factor is lending rates.  How long can they stay this low?  Aren't we done with QE?.  What will happen to prices if/when the cost of money goes up?  If GDP starts contracting (lower exports, weak foreign demand, strong dollar) what will the govt do to combat it?  A shrinking economy would take housing down with it, would it not?  Things seem precarious.

The Irvine market IS unique.  Not a unicorn, but it does have a widening appeal (i.e., ^demand) to foreign money to a greater degree than most other housing markets. 
 
daedalus said:
The Irvine market IS unique.  Not a unicorn, but it does have a widening appeal (i.e., ^demand) to foreign money to a greater degree than most other housing markets. 
Click to expand...
I should have put this as #4: The Legend of the FCB
 
hah, i agree with IHO's post "3 biggest wrongs", but mostly with #1, fedgov pumped money beyond imagination.

that said, i left SoCal for jobs, and now am in McMansion#2 since then, each purchased for $125/sf, in great school 10 districts (but with bad weather).

(oh, and for IHO, i moved up to a 3/1 car garage house.  once you have four, you can never go back.  and yesterday i noticed one of my neighbors has a 2/1/2 garage-want!)

 
Irvine pricing generally makes no ECONOMIC sense, cap rates are much lower than comparable real estate classes available elsewhere (never mind the diversification, maintaince capex and property management), however, once I add in my UTILITY yield (and it's different for everyone), value of locking up 30 year money at 3.5% PRE-TAX(assuming I'm not a forced seller in say 10 years), I start getting a different answer.  Although inflation hasn't really shown up in the data, I do think housing is a good hedge, generally think people prefer to live closer to work than not, prefer to live closer to the water than not and prefer to have good schools/parks/amenities than not. 

Just purchased in BP, think the numbers make absolutely NO economic sense.  As others have noted, what is worth to be able to walk my kids to school?  What is it worth to be part of a young, diverse, vibrant community?  I grew up in Irvine and have looked a lot at resale, and for our family's purposes, couldn't find a happy blend between house/lot size and younger community, but that's just us.  Generally, I think if I can sell from a position of strength, ie. low likelihood that company will move, get fired/replaced, or never sell at all, we'll generally be in good shape.  To a large extent, won't change my family's retirement plans/retirement lifestyle, and I just accept the fact that there are scenarios out there that this doesn't work out and 10 years from now, I'd be lucky to sell it for what I purchased it at given potentially higher interest rates, endless supply (10k homes being built by 5 Points, Irvine Co, New Home Co, and others etc) is something I can accept. 

Think the driving factor to supporting values will continue to be high quality jobs in the area (Are losing Broadcom and Allergan Exec's), high quality school district and college choices.  One would hope that CA creates a better business environment, cannot continue to afford to lose to other states and moreover, the United States figures out how to handle double taxation/inversions. 
 
Whatever happened to the IHB naysayers?

They all got shiny new real estate licenses and are now selling homes themselves.

-IR2
 
I should mentioned that I seriously looked at buying a few times in my life:

2001 (but not in California) - decided I was too young to buy - weren't many condos for sale in the area at the time and the apts were a lot closer to the "action" that the affordable homes.
2006 - homes were way too overpriced. My rent for a condo was half of what it would have cost with 20% down and a 30yr mortgage
2010 - didn't feel like we wanted to stay in our neighborhood for long enough to justify buying. Renting was still cheaper on a cash outlay basis than buying
2012 - Buying was cheaper than renting! On a cash monthly outlay basis - not including any principal payments or tax advantages! We had just moved to Irvine and wanted to rent for a year to get a feel for the neighborhoods, but my gut told me that if buying was that much cheaper than renting, the deal (combo of pricing and interest rates) wouldn't last and we'd be fools not to buy so we drove up to Irvine one weekend and bought a home on a whim.

Right now buying and renting are pretty close to even (assuming you don't have to pay PMI and can take advantage of the itemized deductions). I do consider selling our home and renting - but the biggest deterrent is that I can't get anything on my equity elsewhere without taking substantial risk. If I could get 5% in a CD I'd be a lot more inclined to rent.
 
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