Irvine median home price hits 9-year low in 2012
February is historically a bad month for real estate prices. The deals that close in February were negotiated in December and January, which are usually the weakest months of the year for real estate. And since this last fall and winter were particularly bad, the drop in February is not surprising.
Bottom for 2012?
Shevy tells me the low interest rates and relatively affordable prices are motivating many buyers. Shevy and his team have been very busy since the first of the year. With the declining inventory we witnessed in January — an extraordinarily unusual occurrence — conditions are ripe for a spring rally. If lenders release more product — which they should — I expect to see sales volumes up considerably this year from the recent moribund rate. Since prices are only now reaching the affordability of rental parity, I don’t anticipate a rally in prices, but we will get a bump off recent lows. Who knows, perhaps Calculated Risk is right and the housing market may bottom?
Look at the nosedive in that last data point. The last time the median was $431,000 was mid 2003.
Median home price measurements are often quite volatile (take a look at Turtle Rock or Turtle Ridge above). Median home prices says something about how much people are spending on properties in the market, but it doesn’t reveal the value they get for their money. For that reason I prefer to look at the $/SF measure.
Buyers in Irvine have been getting more house for the money for quite some time. As the high end continues to crumble the quality of what buyers obtain will continue to improve. With low interest rates, the high wage earners who tend to buy in Irvine will buy many $600,000 to $750,000 homes. These are still within reach using GSE-approved or FHA financing with less than 20% down. The jumbo market, which still requires a minimum 20% down, is effectively dead. The collapse of pricing at the bottom of the market means few buyers have the equity for a move-up, and despite contentions to the contrary, few people have saved $200,000 or more from their wages to buy a $1,000,000 house. For those who do have 20% to put down, prices in Irvine have not been this payment-affordable since the 1990s.
The situation is improving for FHA buyers as well, although upcoming increases in FHA insurance premiums are going to make affordability even more problematic for FHA borrowers.
I am not surprised the condos near the airport or in Orangetree would fall below rental parity. I am surprised Woodbury has become so affordable.
The pressures on rents is abating somewhat, but rents are still rising. The Irvine Company is about to complete several thousand more apartments, so perhaps this will keep rent increases to a minimum. But right now, MLS rents (which is what I measure) are going up.
The Orange County median has not taken out the 2009 lows yet, but it is very close to it.
The last year has been a steady decline.
Rents are still rising, but the rate of increase has slowed.
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