When would be next housing Bottom?

[meccos12]

The buyers that bought in 2010 to today in Irvine (at least the ones that I've represented or seen on the listing side) are very conservative by nature and put larger than average amounts down on their purchase.  In my 12+ years of real estate, I can count on one hand how many buyers I've seen put down less than 20%.  Irvine prices may drop but it won't cause a tidal wave of foreclosures or short sales because there are many buyers sit on the sidelines waiting to jump in now they see a material price drop (5-10%).  Because lending has been so strict and due to the conservative nature of the average Irvine buyer (forget about the cash buyers), Irvine will decline less than other surrounding Orange County cities...I'm confident of that.

I dont think anyone will disagree with your statement here.  However I would argue that the Chinese buyers may be a potential liability in the future for Irvine home prices. If there is ever a situation where the Chinese sell in mass that would be disastrous for cities like Irvine.  I truly believe that Irvine housing has cooldown and that the drop in Chinese buyers are a big reason why.  However what would cause a mass sell off?  I dont know. 

 

[Kings]

The buyers that bought in 2010 to today in Irvine (at least the ones that I've represented or seen on the listing side) are very conservative by nature and put larger than average amounts down on their purchase.  In my 12+ years of real estate, I can count on one hand how many buyers I've seen put down less than 20%.  Irvine prices may drop but it won't cause a tidal wave of foreclosures or short sales because there are many buyers sit on the sidelines waiting to jump in now they see a material price drop (5-10%).  Because lending has been so strict and due to the conservative nature of the average Irvine buyer (forget about the cash buyers), Irvine will decline less than other surrounding Orange County cities...I'm confident of that.

I dont think anyone will disagree with your statement here.  However I would argue that the Chinese buyers may be a potential liability in the future for Irvine home prices. If there is ever a situation where the Chinese sell in mass that would be disastrous for cities like Irvine.  I truly believe that Irvine housing has cooldown and that the drop in Chinese buyers are a big reason why.  However what would cause a mass sell off?  I dont know.

tent city

 

[usctrojancpa]

The buyers that bought in 2010 to today in Irvine (at least the ones that I've represented or seen on the listing side) are very conservative by nature and put larger than average amounts down on their purchase.  In my 12+ years of real estate, I can count on one hand how many buyers I've seen put down less than 20%.  Irvine prices may drop but it won't cause a tidal wave of foreclosures or short sales because there are many buyers sit on the sidelines waiting to jump in now they see a material price drop (5-10%).  Because lending has been so strict and due to the conservative nature of the average Irvine buyer (forget about the cash buyers), Irvine will decline less than other surrounding Orange County cities...I'm confident of that.

I dont think anyone will disagree with your statement here.  However I would argue that the Chinese buyers may be a potential liability in the future for Irvine home prices. If there is ever a situation where the Chinese sell in mass that would be disastrous for cities like Irvine.  I truly believe that Irvine housing has cooldown and that the drop in Chinese buyers are a big reason why.  However what would cause a mass sell off?  I dont know. 

No doubt that the slowdown in the higher end home is partially due to less FCB activity but they are still out there and now using asset based loans to buy versus going all cash because they can't get all their money out of China in large chunks.  What would cause a mass sell off?  A deep recession with massive layoffs will fuel a mass sell off...what will cause that is a big question.  Deep trade war?  All out war in the Middle East with Iran?  Who knows.

 

[Liar Loan]

So is it LL rhetoric time now?

Living/working in Irvine is anecdotal evidence, not data. 

Except for the fact that being and owner and a buyer of several properties in Irvine allowed me to know more about the market at that time than you... or anyone who did not live or shop Irvine at that time. That experience is just as important as data... and at times, more important because it can see things that data can't. I remember I was one of the few who said FCBs will keep Irvine from dropping as far and as fast as other cities... all the data mongers (including Larry) thought otherwise.

You claim that the exact model of house you prefer outperforms all others.  Hmmm...  It just doesn't sound unbiased when every aspect of the city, neighborhood, floor plan, and garage width that you prefer happen to be the ones that outperform all others. 

Not all others.. just your condo. Sounds like your bias not mine.

As for garage width, I just cited what Larry posted on his blog. Since he seems to be the top authority on all things Irvine real estate to you... take it up with him.

It also doesn't sound unbiased when somebody like me points out that Irvine is declining in value, and you get kind of upset about it.  That sounds like emotional attachment to your chosen city and home. 

Hah. When have I ever got upset about it? I've actually joined in with you on Irvine bashing. I always have contended that Irvine is overpriced... even CV quoted a post back from 2013 when I said that. You're projecting your own bias again.

Larry used to talk about confirmation bias all the time, and I think this is a prime example.  In your head, you have already concluded that Irvine outperforms all other markets, so you embrace any data that supports that position, and look to discredit any data that runs contrary to it.

Uh... already proved that Irvine outperformed all the safe haven coastal cities you listed. That was data... not my bias. That's when you started dancing... "Oh well... it was the FCBs!" and "Oh well... what about in the 90s?".

Have you posted any data to show me that Irvine did not outperform other markets in the last 2 downturns? Isn't that your bias?

When I realized my condo was declining in value in '06, I didn't try to avoid the bad news or rationalize it in my head, I went looking for information on why it was happening, which is how I discovered the Lansner blog.  Embracing reality helps you learn from mistakes and sets you up for future success.

And as I've said before... this is where I made a mistake. Instead of listening to my own bias, I sold an Irvine home looking at the data and thinking it would decrease in value. There were other reasons too, but that was one of them. Had we held it, we would have been in a much better position financially, but at the same time, we would have probably had to give up some other things to afford that mortgage at that time (private preschool)... so we don't consider it a net loss.

So that's the reality, Irvine is more stable than surround cities (as proven by both data and experience)... embrace it.

BTW: Like Steve Thomas, Lasner and even Larry have their own biases too. If you think Larry was totally right, I have 2 words for you... interest rates.

You seem to have misconceptions about my views on Larry. 

First of all, I never participated at IHB because I felt like it was too much of a bear blog and that didn't appeal to me.  The Lansner blog was where I hung out because he strove to be impartial and posted on both sides of the issue, letting the readers duke it out in the comments... and the readership was a good mix of bears and bulls.

Second, I only started reading Larry's writing after he left IHB because the Lansner blog was shutting down right about the time Larry launched OCHN.  So it scratched the same itch and that's when I first interacted with Larry.  I believe it was late 2010 when he launched that blog, and in 2011/2012 I repeatedly told him the bottom was in.  We had many disagreements about this, and he even made an example of me in a blog post by accusing me of being Kool-aid intoxicated when I told him my prediction for strong appreciation in the coming years based on historical housing cycles: 

http://ochousingnews.com/faith-in-home-price-appreciation-is-religion-in-california/ 

Well, by late-2012 he had come around to partially seeing things my way and declared the bottom was in, but he still predicted "flat" prices for the foreseeable future, which I refuted heavily, and led to the aforementioned blog post.

Third, the only prediction of Larry's that I've defended was that housing would be going down by a lot, which he made starting in 2007.  As for specific percentages, I wasn't even around IHB at that time.  I only agreed posthumously that he had gotten the general direction of the market right, when 99.9% of people thought that OC real estate was unstoppable.  He does deserve credit for getting that right based on sound reasoning and analysis, and in the face of an overwhelming amount of criticism from perma-bulls.  I wonder where you stood at that time?

Personally, I think he knew being a perma-bear was better for business than changing his mind too quickly.  When Calculated Risk called the bottom almost to the exact month, Bill McBride was roundly criticized as a sell out (even by Larry), and CR's readership declined precipitously.  Once Larry turned the corner, and said the bottom was in starting in late 2012, his readership also began a slow decline.  There was no longer that tension between bears and bulls to keep things interesting.  As time went on, Larry began to agree with me more and more on the direction of the market and the prudent course of action, which was to buy if you could afford it.  We still disagreed on a lot, but it became less frequent than early on, when it was nearly 100% of the time.

Since OCHN shut down, I have maintained contact with him, and occasionally send him an article or ask his opinion of something, but honestly, he's lost his passion for real estate, I think.  He's focusing on other things and doesn't want to engage much.  We did meet up for lunch earlier this year and that was fun, having never met him prior to that.

 

[usctrojancpa]

Thanks for sharing that story LL.  I came onboard to IHB back in 2007 when a friend of mine recommended that I join the site since I owned a condo in Quail Hill and IHB had an influence on me selling my condo in 2008 and still coming out with a small gain.  I ended up buying at the end of 2011 (basically the 2nd bottom) as I began to see the bottom forming and more importantly I felt comfortable financially to do so again. 

Also if anyone would have told me back in 2007 that I would have become a realtor, I would have laughed at them and thought that they were nuts.  Interesting how things played out but such is life.

 

[irvinebullhousing]

The buyers that bought in 2010 to today in Irvine (at least the ones that I've represented or seen on the listing side) are very conservative by nature and put larger than average amounts down on their purchase.  In my 12+ years of real estate, I can count on one hand how many buyers I've seen put down less than 20%.  Irvine prices may drop but it won't cause a tidal wave of foreclosures or short sales because there are many buyers sit on the sidelines waiting to jump in now they see a material price drop (5-10%).  Because lending has been so strict and due to the conservative nature of the average Irvine buyer (forget about the cash buyers), Irvine will decline less than other surrounding Orange County cities...I'm confident of that.

I dont think anyone will disagree with your statement here.  However I would argue that the Chinese buyers may be a potential liability in the future for Irvine home prices. If there is ever a situation where the Chinese sell in mass that would be disastrous for cities like Irvine.  I truly believe that Irvine housing has cooldown and that the drop in Chinese buyers are a big reason why.  However what would cause a mass sell off?  I dont know. 

No doubt that the slowdown in the higher end home is partially due to less FCB activity but they are still out there and now using asset based loans to buy versus going all cash because they can't get all their money out of China in large chunks.  What would cause a mass sell off?  A deep recession with massive layoffs will fuel a mass sell off...what will cause that is a big question.  Deep trade war?  All out war in the Middle East with Iran?  Who knows.

U.S. home values reach a record high of $26.1 trillion in Q1 of 2019, Fed says

Home equity rises to the highest level since 2002.

Even if there is a massive layoff, homeowners, have an option of taking out equities in investments to carry them through the rough patch. If a recession protracted years after years, and economic GDP retreat deep into negative territory then that is likely the end of the world event then yes, I can see a rush to dump everything.

 

[eyephone]

If crap hits the fan. I hear it will be worst than last time.

 

[irvinehomeowner]

@LL:

I remember that post. I think you even linked me to a few of the disagreements you had with him.

I forgot where it was but he accused me of trying to discredit him and his blog at one time and when I asked him how, he backpedaled. Larry got very defensive about his views but I don't blame him because his rep is what drove his readership.

Third, the only prediction of Larry's that I've defended was that housing would be going down by a lot, which he made starting in 2007.  As for specific percentages, I wasn't even around IHB at that time.  I only agreed posthumously that he had gotten the general direction of the market right, when 99.9% of people thought that OC real estate was unstoppable.  He does deserve credit for getting that right based on sound reasoning and analysis, and in the face of an overwhelming amount of criticism from perma-bulls.  I wonder where you stood at that time?

I've also met him although I doubt he remembers me. I actually bought his book twice to support him, PDF form and the actual hard copy at one of his signing meet-ups at JT Shmidt. While I agreed that there would be drops, I couldn't see anything like 40% and beyond like everyone was predicting for Irvine. As I said, I thought 20% was reasonable, to the point where we sold our home (data based decision vs bias based one) thinking that we could buy a similar one at a 20% discount (among other things like we were not really happy with the location and the school tied to it).

I guess we were too picky but I know from my experience (!) that similar 3CWGs in the areas we were looking for had very few homes that dropped 20%, there may have been some but they were either in worse locations or worse conditions than the home we sold. I was actually a proponent of renting during that time (which we did), doing exactly what everyone wanted to do... trying to time the bottom. As I said before, my lesson was we should have just bought instead of waiting for the perfect house *and* the perfect price. Through the years, I've learned that getting what you want and having to pay more for it (as long as you can afford it) is better than getting a bargain for something that didn't check all your boxes... especially a home.

 

[irvinehomeowner]

If crap hits the fan. I hear it will be worst than last time.

How? Most of the owners today are well-financed since ninja loans are not rampant.

 

[zubs]

Ray Dalio thinks 1929 and 2009 are part of a 75 year long term bust and boom. 

Here is his youtube video talking about it once more:
https://www.youtube.com/watch?v=PHe0bXAIuk0&t=5s


So if you believe this billionaire, our next recession won't be that bad because it's only part of the short term cycle, not the once every 70 year long term cycle.

 

[eyephone]

If crap hits the fan. I hear it will be worst than last time.

How? Most of the owners today are well-financed since ninja loans are not rampant.

NBC OpEd Article: If a recession is coming, everything Trump has done on the economy will make it worse

Trade war rages! Stocks sink! Yield curve inverts! The financial headlines can be pretty alarming right now ? but that final bit of jargon is particularly concerning to experts, because it?s a pretty consistent indicator that a recession is coming.

Of course, for all the red downward lines on charts and shrieking commentary, no one knows for sure if a recession is imminent. There is, as ever, a plausible case to be made for both panicking and chilling out.

That said, if the economy is indeed headed for a downturn, many Americans are about to experience some economic pain. And, if and when that happens, a big problem is that there?s little indication the political system is capable of doing anything to ameliorate it, mostly thanks to President Donald Trump and the Republican Party.

Case in point: One of the more economically damaging things occurring at the moment is Trump?s haphazard trade war; his tariffs are causing American farmers real pain, and the fact that his decisions about when to implement them are based on nothing but his whims understandably leaves businesses wary. Given that raising tariffs is one of the few economic policy actions in which he seems to genuinely take a personal interest, and that he is terminally incapable of admitting a mistake and reversing course because it would undermine his ?brilliant businessman? shtick, there?s little reason to believe he will stop punching his own economy in the nose.
https://www.nbcnews.com/think/opini...-trump-has-done-economy-will-make-ncna1055551

Step back and filter the bias. But it seems quite true.

In addition: add impeachment inquiry, Fed overnight repo bailout

 

[Kings]

counterpoint: trump has a huge lever to pull in the event that things go bad - he can sign a neutral / status quo trade deal with china where we go back to how things were before the trade war.  imagine this: the economy is sandbagged right now by negotiating hard for a trade deal.  markets would be up another 10% if things were hunky dory with china.

 

[eyephone]

Maybe maybe not re: trade deal (I don?t know China)
A person can say Interest rates cut too soon. (Who wanted it cut badly?) That could of been used as a tool.

QE here we come?

 

[Kenkoko]

counterpoint: trump has a huge lever to pull in the event that things go bad - he can sign a neutral / status quo trade deal with china where we go back to how things were before the trade war.  imagine this: the economy is sandbagged right now by negotiating hard for a trade deal.  markets would be up another 10% if things were hunky dory with china.

It's more than just the tariffs.
People should consider the anti-Chinese political rhetoric, a clampdown on visa processing, and the looming Chinese tightening of capital flight (claw-back is now on the table)

The Trump effect is undercutting some of the primary drivers of Chinese demand for U.S. property. On top of that Trump has really hastened the decline of the Chinese economy. The Chinese FCBs may not come back in droves (2014-2016 style) in a long time.
If you are still on the sidelines, you should consider staying there.
There's a lot more possible downward potential than upward.

Just toured Great park last week with a friend and prices are down incentives are up.
I think more and more people are having second thoughts about burning 2% on new home prop tax every year in a flat market.

 

[Liar Loan]

Maybe maybe not re: trade deal (I don?t know China)
A person can say Interest rates cut too soon. (Who wanted it cut badly?) That could of been used as a tool.

QE here we come?

QE is already in full effect.  Check out the repo market.

 

[Kings]

counterpoint: trump has a huge lever to pull in the event that things go bad - he can sign a neutral / status quo trade deal with china where we go back to how things were before the trade war.  imagine this: the economy is sandbagged right now by negotiating hard for a trade deal.  markets would be up another 10% if things were hunky dory with china.

It's more than just the tariffs.
People should consider the anti-Chinese political rhetoric, a clampdown on visa processing, and the looming Chinese tightening of capital flight (claw-back is now on the table)

The Trump effect is undercutting some of the primary drivers of Chinese demand for U.S. property. On top of that Trump has really hastened the decline of the Chinese economy. The Chinese FCBs may not come back in droves (2014-2016 style) in a long time.
If you are still on the sidelines, you should consider staying there.
There's a lot more possible downward potential than upward.

Just toured Great park last week with a friend and prices are down incentives are up.
I think more and more people are having second thoughts about burning 2% on new home prop tax every year in a flat market.

unrest in china could certainly cause another 2014-2016-esque fcb flight to the us.  one example being the human rights atrocities happening as we speak with millions of uighur muslims and falun gong having their organs harvested.  but everyone turns a blind eye because china makes everything for everyone with cheap slave labor.

china's day will come, perhaps sooner than we think

 

[Kenkoko]

unrest in china could certainly cause another 2014-2016-esque fcb flight to the us.  one example being the human rights atrocities happening as we speak with millions of uighur muslims and falun gong having their organs harvested.  but everyone turns a blind eye because china makes everything for everyone with cheap slave labor.

china's day will come, perhaps sooner than we think

It would be more true if money can actually get out of China. It has gotten 100 times more difficult (and also more expensive)according to my parents' business partners in China. This is why the Hong Kong situation has a lot of wealthy Chinese folks nervous. 95% of Chinese capital still floats out of Hong Kong.

 

[irvinebullhousing]

Trump maybe the most hated president in China, although money will seeks safe haven, and there is no place safe than the U.S. right now in term of Global Market, both equities and housing. Therefore, the well to do abroad such as China still continue finds way to bring their money over and they will continue to buy.

 

[Kings]

unrest in china could certainly cause another 2014-2016-esque fcb flight to the us.  one example being the human rights atrocities happening as we speak with millions of uighur muslims and falun gong having their organs harvested.  but everyone turns a blind eye because china makes everything for everyone with cheap slave labor.

china's day will come, perhaps sooner than we think

It would be more true if money can actually get out of China. It has gotten 100 times more difficult (and also more expensive)according to my parents' business partners in China. This is why the Hong Kong situation has a lot of wealthy Chinese folks nervous. 95% of Chinese capital still floats out of Hong Kong.

money will find a way

 

[zubs]

Hong Kong is the main route rich Chinese get their cash out of China.
As the trade war grinds on, the RMB is going from 6.9 to 7.0 to 7.1 to 7.2 for 1 USD.  Today it is at 7.14.

New tariffs are set to begin at the end of this year...which will put more pressure for China to depreciate their currency.

What are the wealthy people in China gonna do?  Sell their homes in Irvine and change the money back into a depreciating currency?  You gotta remember that they spent quite a sum to change it to USD in the first place.  No one wants RMBs.