Aug222016
Seasonal home sales slowdown particularly harsh in 2016
Both the data and the anecdotes demonstrate a noticeable and significant slowdown in home sales. Is it merely seasonal?
I am moving out of my current rental and back to Orange County (more on that later). I agreed to allow my landlord to market the property for sale over the last month while I still lived there. I was worried about aggressive buyers peeking in my windows, but that isn’t what happened. So far, very few people came to tour the property.
I spoke with the agent (my landlord’s sister) about what was going on, and she provided a remarkably candid assessment. She said it was like buyer interest fell off a cliff in August. She said there are three model matches available in the neighborhood, and none of them are getting any traction. She also noted there was an overall abundance of inventory in the community.
A certain amount of slowdown is expected in August as those families trying to get in before the beginning of the school year already made their purchases. But over the last few years with low mortgage rates and an improving economy, sales didn’t drop off much during the off season. This year appears to be different — at least so far.
Real Property Report – California, July 2016
August 19, 2016
CALIFORNIA, AUGUST 18, 2016 – California single-family home and condominium sales were 37,823 in July, falling 10.4 percent for the month and down 12.8 percent from July 2015. Taking a longer-term view, year-to-date sales (January through July 2016) totaled 244,035 properties, down 2.0 percent from the same time period in 2015.
“At first glance, it looked like July sales fell off a cliff,” said Madeline Schnapp Director of Economic Research for PropertyRadar. “Looking closer at the data, we noted that July 2016 had two fewer business days than July 2015. That calendar quirk was enough depress July sales. When the missing days were taken into account, the sales decline was approximately 3.0 percent for the month and 5.0 percent for the year, in line with expectations.”
Whose expectations where those exactly? I fail to recall anyone predicting a 5% decline in year-over-year sales. With an improving economy and near record low mortgage rates, the predictions and expectations were for another banner year.
“With or without July’s calendar distortions, sales were tepid this past month,” said Schnapp. “June sales will likely represent the peak of the 2016 season and are expected to retreat from here on out.”
The number of homeowners in a negative equity position fell to 472,000, or 5.4 percent of all California homeowners. Since July 2014, the number of negative equity homeowners has fallen more than 50 percent. Currently, one in 18 homeowners are underwater, down from one in eight 24 months ago.
With fewer homeowners underwater, MLS inventory should increase. The lack of move-up equity will still keep the inventory down, but not as badly as the last few years.
The July 2016 median price of a California home was $438,000, down 0.7 percent, from a revised $441,000 in June. On a year-ago basis, median home prices were up 5.0 percent from $417,000. …
“The good news for California home buyers is that median prices fell in more than half of California’s largest counties,” said Schnapp. “Despite July’s pullback, we forecast prices are more likely to trend sideways rather than materially decline.”
With very low mortgage rates and little financial distress, a noticeable decline in home prices seems unlikely.
Home Sales – Single-family residence and condominium sales by month from 2007 to current divided into distressed and non-distressed sales. Distressed sales are the sum of short sales, where the home is sold for less than the amount owed, and REO sales, where banks resell homes that they took ownership of after foreclosure. All other sales are considered non-distressed.
This was not expected.
Foreclosure Notices and Sales – Properties that have received foreclosure notices — Notice of Default (green) or Notice of Trustee Sale (blue) — or have been sold at a foreclosure auction (red) by month.
Both notices and inventories dropped significantly in 2012 as lenders aggressively can-kicked bad loans rather than foreclose on delinquent borrowers starting in 2011.
Foreclosure Inventory – Preforeclosure inventory estimates the number of properties that have had a Notice of Default filed against them but have not been Scheduled for Sale, by month. Scheduled for Sale inventory represents properties that have had a Notice of Trustee Sale filed but have not yet been sold or had the sale cancelled, by month. Bank-Owned (REO) inventory means properties sold Back to the Bank at the trustee sale and the bank has not resold to another party, by month.
I see no reason to believe the unexpected drop in sales is anything more than a seasonal phenomenon; however, the economy is improving, and mortgage rates are near record lows. Given those circumstances, for sales to be lower this year than last, something is holding back the market.
What’s the most likely culprit? High prices.
Without affordability products and lower mortgage standards to qualify more marginal buyers, rising prices are hurting sales. If mortgage rates were to rise, sales would decline further. Let’s hope that doesn’t happen.
[listing mls=”OC16184824″]
$500 million project planned for former oil tank farm near Huntington Beach coast
Irvine developer Shopoff Realty announced plans Monday to build a $500 million resort and mixed-use development on a former oil-tank farm near the Huntington Beach coast.
The company paid $26.5 million last week for the 28.6-acre site near Magnolia Street and Banning Avenue inland from Huntington State Beach and the Magnolia and Brookhurst marshes. That’s equivalent to spending $21 a square foot, or $927,000 an acre.
The site now has three 500,000 barrel tanks shrouded from view by trees and grass, with a capacity for storing 63 million gallons of oil.
“We intend to have the oil tanks removed and take additional efforts, if needed, to clean up the site, and provide a development that really enhances the local community,” John Santry, executive vice president of Shopoff Realty Investments Land Division, said in a company statement.
Company CEO William Shopoff said his firm expects to spend $500 million on the project, building a hotel, homes and a commercial area with retail and restaurants.
The site is just over a mile north of Banning Ranch, a controversial housing and commercial development site now facing review.
Shopoff projected the project will take years to complete, including a lengthy approval process that will include reviews both by the city and the California Coastal Commission.
“It’s got lots of opportunity, and it’s going to require a lot of effor to get it there,” Shopoff said.
This might help HB look less like Wilmington.
These tanks are not visible from the street, so in effect it will be replacing the view of a tree-filled park area near Magnolia with homes and a hotel. That’s probably a good trade off in exchange for getting the oil tanks cleaned up. The thing I can’t fathom is wanting to develop right next to the landfill just North of the site.
Many of my friends that attended Edison High School reported unusual health problems like rashes and breathing ailments from going to school next to this site. I’ve also talked to the guy whose house looks like a medieval castle right across Magnolia from this site and he told me that there is a high incidence of cancer in their neighborhood.
http://www.ocregister.com/articles/landfill-262877-rats-menaldi.html
I was involved with the design of the landfill to the north. It’s actually a toxic waste site that’s been polluted by years of oil company drilling. It’s so bad that the landfill solution is an attempt to trap the poisons in a big clay sarcophagus. It’s unbelievably toxic.
There is no way I would want to live on a former oil tank farm. Without doubt that land cannot be very clean. Its insane people would even consider it. I question the same thing with the developments in Irvine but the people there are just so happy to live in Irvine, they seem not to care.
On that particular site, the oil tanks haven’t leaked, so they may not be the source of the problem. The site next door may have been leaching deadly chemicals into the groundwater for half a century or more, and that would be a major concern.
The fact that large amounts of known carcinogens were stored on that site would be enough for me. I dont think anyone can prove or disprove anything was ever accidentally spilled at one time or another, especially during the many years that oil was stored here or was transferred in and out and around this site. Furthermore if neighboring properties were known to be leaching, then I definitely live there. Why risk living there when there are plenty of other areas to choose from?
This is the same issue I would have with living near the great park and other parts of Irvine.
I have listened to William Shopoff speak in the past and he is an interesting guy. He looks for underutilized commercial property and tries to re-position it for maximum value creation. His company raises capital through investments from accredited investors, so if anybody wants to own a piece of a local development project, here is your chance.
I worked for Bill. He is a great guy. He’s involved in a lot of charity work, and he’s a biking enthusiast.
He is brilliant, and he has nerves of steel. The risks he is willing to make would stress me into a coma.
Yes, these are high risk, high reward plays that usually have some kind of zoning hurdle to overcome.
Something happened in the latest home sales figures: Biggest national sales decline since April 2011.
The housing recovery has really been an odd one. It has been driven by low inventory, anxious builders, and an army of investors. In the end what has occurred is that the homeownership rate is near a generational low, we have 10 million new renter households over the last decade, and home prices are up on relatively low sales volume. How can there be big sales volume when inventory is so constrained? It is a good question to ask. In any market you will have periods of capitulation, where people simply give in. You see it happening in this market where people purchase crap shacks as if taking their medicine when they were a child. The place physically sucks and is overpriced but hey, you need to do it because mommy told you it was the right thing to do. We’ve been in a holding pattern for a couple of years yet last month, sales did take a rather big drop. It was the biggest drop since April 2011. Is this simply an anomaly or are people priced out?
The latest dip in home sales
It should be noted that sales volume drops before any impact is reflected in prices. This is simply the way things go in housing. In fact, you’ll need a good year or two of lackluster sales to really have any pull on prices. Any journey needs to take a first step and it is abundantly clear that housing values are being jacked up in manic ways in many areas.
First, let us look at the drop in sales:
http://www.doctorhousingbubble.com/wp-content/uploads/2016/08/US-home-sales-Redfin-2016-07.png
Clearly something occurred last month. Of course one month does not signify a trend. And this would be an odd time for it to occur since summer is generally a good month for home sales. The stock market seems fine and employment seems okay on the surface as well. But turning points usually happen when folks least expect it.
Anaheim won’t fine websites like Airbnb for illegal short-term rental listings
ANAHEIM – Anaheim officials have reversed course on requiring short-term rental websites such as Airbnb and HomeAway to remove illegal listings or face hefty fines, the city confirmed Monday.
Those provisions are part of a divisive city ordinance that will ban short-term rentals in Anaheim, the county’s largest city. The penalties will remain on the books, but won’t be enforced, city spokesman Mike Lyster said.
“After considering federal communications law, we won’t be enforcing parts of Anaheim’s short-term rental rules covering online hosting sites,” Lyster said in a prepared statement. “Instead, the city will continue to identify and take action against un-permitted short-term rentals operating in Anaheim.”
The crux of the home-listing ordinance, however, remains unchanged: Property owners who have existing city-issued permits to operate as short-term rental landlords will have 18 months to wind down their operations. At that point, more than 360 permits will expire.
The city’s about-face came shortly after it was sued by Airbnb and HomeAway over the penalties for hosting illegal listings. A group of Anaheim short-term rental owners have filed their own lawsuit, demanding the new ban be overturned.
Airbnb, which dropped its lawsuit Monday, said forcing home-sharing services to pull illegal listings violated the First Amendment and the Communications Decency Act. Airbnb argued the decency act prevents governments from “holding Internet platforms liable for content created by people who use their website.”
“No criminal or civil penalties will be issued against hosting platforms under the ordinance,” said an Aug. 10 letter from Acting City Attorney Kristin A. Pelletier to Airbnb’s lawyers.
Airbnb spokesman Nick Papas said in an email to the Register: “We need new rules for home sharing, and we want to work in a collaborative fashion with city leaders to craft rules that work.”
Anaheim’s short-term ordinance, which was passed in July, also limits occupancy, extends quiet hours and provides residents a contact to field neighbor complaints.
This is why investing in short term vacation rentals is so risky right now. These types of rentals have been quietly operating for decades in Anaheim and other popular tourist cities, but AirBnB has really opened it up to the masses and now the cities are trying to decide how best to profit. Some cities are taxing short term rentals directly with occupancy taxes, and others are deciding to quash the vacation rental market altogether to drive up local hotel occupancy rates. In this case, Anaheim has decided to side with the hoteliers.
I hear the teachers union also had a lot to do with blocking this. They want higher head counts in the school since money is paid out per head counts in schools. The more short term rentals = less families with kids going to local schools.
Are Millennials Flocking to SoCal’s Inland Empire?
SAN BERNARDINO COUNTY, CA—Millennials and young families have flocked to Southern California’s Inland Empire increasing its population, which in turn has attracted employers and companies due to its low cost of doing business. So says CBRE’s 2016 2Q retail report.
Located within the Inland Empire, San Bernardino County, comprised of 24 cities and over 20,160 square miles of land, is the geographically largest County in the nation. According to the California Department of Finance, San Bernardino County’s population grew by 0.9% from 2015 to 2016, going from 2,121,088 to 2,139,570.
“Affordable quality single family housing and higher-end multifamily communities in denser urban environments are attracting today’s younger demographic. Investors, developers and city officials are taking notice by providing greater retail diversity, walkability, and a range of new housing product that fits social and lifestyle demands,” said Elisa Laurel, Economic Development Coordinator, San Bernardino County Economic Development Agency.
A number of San Bernardino County cities are recognizing the increasing needs of this growing population with more than 1 million square feet of new retail development in planning and under construction, with many cities pursuing entitlement planning to add more service and lifestyle retail and dining options.
CBRE’s retail report also noted that changes in market fundamentals echoed the overall progress of the region with declined vacancy, strong positive absorption, and continued job growth. To that end, Inland Empire retail vacancy decreased 50 bps from Q1 2016 to 9.6%. This rate is among the lowest recorded for the Inland Empire since before the recession began and is a further sign of positive progress for the region.
“If you are looking to locate in Southern California, San Bernardino County should be a top choice. That’s why new retail and specialty grocery concepts such as Whole Foods 365, Aldi, Big Al’s sports bar and entertainment , and Rock & Brews, among others, are moving into the region,” Laurel adds.
Good to know. The problem is the amount of crime that goes on out there. There are also limited job opportunities for professionals but that is being addressed in the article, however back to my point, they don’t mention how bad the crime really is.
Crime tends to be concentrated in the poorest areas. If you are living in a newer community, crime won’t be a big issue. It’s like LA that way. There are good areas with low crime and bad areas with high crime.
I think the Inland Empire will see a resurgence of homebuilding and development when Millennials start buying homes. Very few will be able to afford Orange, LA, or San Diego Counties, so the cost will push them inland.
A lot of the lower income people forced out of LA due to gentrification or high RE prices in general end up in San Bernardino. It also doesn’t help that inmates are often times released and resettled in San Bernardino. There are still some good pockets, but you have to be extremely careful when purchasing in SB county.
U.S. economy providing ammo for higher interest rates
As the dog days of summer draw to a close, the economy appears primed for somewhat faster growth in the second half of the year that’s likely to pave the way for higher U.S. interest rates.
Hiring has accelerated after a spring pause, consumer spending is steady and shows no sign of slowing, the housing market is the best it’s been in years and even the struggling manufacturing sector appears to have stabilized.
A raft of new reports this week is likely to underscore a picture. Sales of new and existing homes recently hit fresh post-recession peaks, and although the main buying season is coming to an end as school starts, sales are expected to remain strong if a toucher lower in July. Orders for long-lasting or durable goods probably also rebounded in July after two straight declines.
Not all the news is cheery. Business investment, one of three key pegs holding up the U.S. economy, has been weak since 2015. It’s likely to be soft in July as well.
Core durable orders “have been dismal for the past year and we have not observed any signals that suggest a pickup is in sight,” UBS analysts wrote in a report.
Against that backdrop, Federal Reserve Chairwoman Janet Yellen on Friday is expected to signal that an increase in interest rates is coming — soon. She is the headline attraction in the resort town of Jackson Hole, Wy., the site of an annual central bank retreat.
Whether investors believe the Fed this time, however, is far from certain. The Fed has gone to the brink of rate hikes several times since 2013 — most recently in the spring — only to pull back.
“By now investors know the doves rule the FOMC henhouse,” said Sal Guatieri, senior economist at BMO Capital Markets.
The Fed’s biggest worry is not the U.S. economy, but the global one.
China is still expanding but at the slowest pace in years. Europe has shown improvement but it’s still a lackluster performer, and U.K. Brexit vote continues to hang over the region like a dark cloud. Japan has stalled again.
On one hand I really think interest rates need to be raised to bring down some of these OC RE prices.
The outrageous pricing feels like it will only return to normal if rates are raised higher or China’s Economy falls apart.
The problem is that higher rates will make the houses more expensive to own even at a lower price, assuming the purchase is financed. The collapse of the Chinese economy could reverse the flow of capital the currently inflates prices. That could make local house prices fall even if rates remain low.
But I’ll feel better knowing I paid $1M for a house that was $1.25M a year earlier, even if my monthly net housing cost is exactly the same; and feelings matter more than facts.
You’re probably not alone in feeling that way. Emotionally, I would feel better about paying the low price too.
I guess you are forgetting about the mortgage interest deduction? So, yeah I would rather pay less even if my mortgage is the same as long as I am getting a bigger tax benefit.
Plus, if your home was $1.25M a year earlier and paid $1M today, chances are it will get there again in the future. But if you paid $1.25M today, you are banking that it goes up to $1.5M one day.
So facts also matter.
We would have to evaluate a specific situation to determine which was more beneficial – the high price/low rate or lower price/higher rate.
I’m not betting my house appreciates or depreciates.
Agreed with your first point, even though we both know the answer is more than likely low price/higher rate.
If you aren’t betting on your house appreciating/depreciating then buying cheaper is probably the best bet.
All things being equal, I would take low price/low rate as it was from 2009-2012. Barring that once in a generation opportunity, I would take low price/high rate because the mortgage can always be paid off at an accelerated pace. Plus higher rates imply higher inflation which means home prices and hopefully incomes are appreciating at a faster rate.
Agreed, for my situation/circumstances. I like the idea of retiring the mortgage debt, and the higher the effective mortgage rate, the more incentive their is to eliminate it.
Middle-Income Jobs Finally Show Signs of a Rebound
The American economy is finally creating more middle-income jobs, according to a new analysis released Thursday by the Federal Reserve Bank of New York, in a turnabout from the feast-and-famine pattern earlier in the recovery, when hiring was strongest at the bottom and top of the wage scale.
The findings suggest that it may soon be time to retire a familiar criticism of the long but lackluster economic rebound that has been underway since the end of the Great Recession in 2009: the hollowing out of the American middle class.
Between 2013 and 2015, employers added nearly 2.3 million workers earning from $30,000 to $60,000 a year, primarily in fields like education, construction, transportation and social services. That was roughly 50 percent more than in either the high-wage or low-wage categories during the same period.
By contrast, the Fed researchers found, of the nearly 7.6 million jobs created from 2010 to 2013, only about a fifth fell into the middle-tier category, with the largest number instead coming from lower-paid sectors like food preparation and health care support.
“The tide has begun to turn,” said William C. Dudley, president of the New York Fed. “For the first time in quite a while, we are seeing gains in middle-wage jobs actually outnumber gains in higher- and lower-wage jobs nationwide.”
Although the economy has created nearly 15 million jobs since employment bottomed out in early 2010, the gains in the recovery have been noticeably uneven. While many cities along the East and West Coasts have been prolific job creators, parts of the Midwest and South have not experienced similar improvements.
Yo irvine renter and other writers. It seems like when you post a bunch of articles in the comments which are not related to the subject of the post, it dilutes (or kills) the comments section. Just a suggestion, but can we stay focused on one topic at a time instead of posting a ton of different articles in the comments ?
I kind of agree.
When I’ve tried that in the past, the comments rarely remained focused on the topic at hand. They tend to have a life of their own. Plus, if there are other interesting or important things happening in real estate that aren’t the subject of the post, people may not know what’s going on.
I will focus the articles I post for a while and see if anything changes.
I used to feel like Shadendude that it cluttered the comments, but I’ve just kind of gotten used to it over the years. There have been times when it spurred the conversation that otherwise might have been pretty quiet, so I can see both sides.
It’s avoiding the quiet days that largely prompted me to start posting articles not directly related to the post. I always hope a thread will start focusing on the article, but some days, that doesn’t happen.
I really like these articles when they relate to housing. Just my 2 cents.
I see your point(s). I suppose it could go both ways. Today there seems to be pretty robust commentary.
Just something to think about anyway.
I do agree with you that sometimes the dialogue here goes tangential. I made a comment a week or so ago about all the political jabbing going on that was completely unrelated to housing. Its a blog, I suppose its up to the individual to focus on what one wishes.
Managing the comments is a bit like herding cats.
The housing market isn’t insane, like our Presidential election, which explains comments related to that. I don’t remember much discussion at all four years ago when the two candidates were Obama and Romney.
I appreciate the links unrelated to the day’s topic – keeps you informed of many things you may not have seen elsewhere. The alternative would be adding multiple new posts daily. Then the comments might be more tied to the initial post.
I tried multiple daily posts briefly when I first started this blog after leaving Irvine Housing Blog. The second post confused people and hurt the conversation. One daily post provides a stable place where people can return multiple times per day and continue a conversation.
High engagement is generally a desirable thing in politics.
Apparently, new home sales are bucking the trend. But then again, these numbers are extremely volatile.
New home sales post biggest July gain since the housing bust
New home sales kept up the strong pace from June and soared in July, and while the news didn’t come as a surprise, it’s definitely welcomed.
According to the latest estimates released jointly by the U.S. Census Bureau and the Department of Housing and Urban Development, new home sales in July were at a seasonally adjusted annual rate of 654,000, which is up 31.3% from July 2015. This is also 12.4% above the revised June rate of 582,000.
Note: The margin of error on these findings is 12.7%
That’s a huge error margin. Any data on only Orange County’s new home sales?
Went to some models last weekend and they were pretty empty.
I will have some good data soon. I just accepted a job with a company that compiles this kind of data.
There are significant demographics at play. The Baby Boomers are no longer drivers in the housing market (76 Million people), the Millennials (about 90 million people) are just reaching purchasing age – born 1982(ish) to 2002(ish) so the oldest are mid 30s and the youngest are just learning to drive. GenX (about 55 Million) is similar to the Silent generation in the aspect of size. With the GenX age bracket (35-53) being 30+% smaller than Boomers/Millennials, and having been hammered by the great recession (cloud inventory homes) it is unsurprising that real estate will grind until more of the Millennials hit their 30s and start forming families / second child.
We simply do not have the demographics to drive housing for a few more years.
Yes. Very good analysis. Everyone working in the homebuilding industry is holding their breath waiting for the Millennials to finally start buying homes because GenX is played out.
They can keep holding their breath. I’m a millennial who is ready to buy but these prices are ridiculous. I’ll keep renting till they come down.
I honestly don’t expect another huge crash but I do expect some type of correction. Current prices in the OC are unsustainable.
I basically mentioned the same thing you just said above on another irvine housing blog and got attacked by the people on that blog. They definitely do not want to hear people say anything about housing being too expensive.
I think context matters here.
Awesome-X’ comment here comes off as, “Man, I’m never getting married. Women are crazy, and marriage doesn’t last most of the time anyway.”
Your comments on Talk Irvine come off as, “Your wife is ugly and a witch. You should divorce her before it’s too late.”
I’m exaggerating for effect, but just trying to illustrate how the comments read.
By the way, why are prices in OC unsustainable Awesome-X. They appear to be pretty study without exotic mortgages nor liar loans.
I feel like they’re too high also. They were bid up to stratospheric levels before 08, and they’re right back where they were again. My wife and I waited out the last crash, and due to personal reasons didn’t buy near the bottom and have been renting for the last 8 years. We’re in a really lucky place as far as renting (knocks wood) as we love our place, are way under market, have never seen a rent increase and know the landlord very well. We recently went looking, and kinda fell in love with a place, but have decided not to buy right now despite the fact that we can easily afford it simply because we don’t want to see our downpayment evaporate if/when the next correction is about to happen. Our total cost to own would be 50% more than our rental cost, so for the time being, we’re just going to keep saving and watch the market closely. I certainly don’t see any signs that it’s going to start taking off again. In fact I see the opposite happening. Stuff seems to be sitting for much longer than it used to, but that could just be the areas we’re looking (Trabuco, lake forest, north tustin).
I think there’s risk in buying now. If we didn’t have the rental situation we have, that might change our calculus.
There’s always risk, both buying and renting. Your rental situation sounds comfy – no real pressure to buy a high priced house. Prices are high in LA/OC. There’s no debating that. Were I on the sidelines renting, I wouldn’t be worried about prices getting out of hand from here either.
You’ll need some catalyst to cause a decent downturn in house prices. A deep recession could do the trick. Foreign cash evaporating would help. Just don’t count on toxic mortgages exploding as a potential factor pushing house prices lower.
Yea, what he said 😉
http://www.ocregister.com/articles/percent-646488-county-orange.html
From the article
“Millennials also are earning less than their predecessors. For people in the 18-to-34 group, the median income in 1990 was $43,395. In 2000, it was $42,156. Over the last five years, it’s dropped to $37,392.”
Prices are going to experience a pull back. Considering how old the county is getting there is going to be more people dying than buying.
Accepting this premise as fact, what should someone do? Sell their house and rent? Rent for the next decade? What’s the probability of a pull-back? How far will it pull-back and when?
Don’t become over leveraged and keep your total cost at less than 25% of after tax income.
Does anyone else find it odd that perspective is asking for context but in the next paragraphs he exaggerates to make a point?
In typical lawyer fashion, its not about the truth but rather the perception.
You were involved in the dialogue so you know exact what was said, so it would be nice if you would actually quote what I said instead of make up insane analogies for “effect”.
The truth is, I said pretty much exactly what Awesome-X said, but I do not see you attack him like you do in the other blog.
I find there are a few house horny bloggers on the other site who take it personally when anyone mentions anything negative about housing. They are the same people that criticize Larry for his comments on this blog. Its like mob mentality there with some people and if you disagree with the mob, they attack you by making up insane things. For example, without knowing anything about me, I am now a renter seeking for price crashes because I missed the boat on housing there in the last downturn. Perspective, unfortunately you are one of them…
That type of mentality among housing bulls was prevalent from 2005-2007. They used to attack anybody that predicted housing was in for a crash, which is why it was so hard to take that position. They were literally up against mass hysteria in those days. Larry and the few others that weathered that storm of criticism deserve credit for sticking to their belief that fundamentals actually DO matter.
I would like to read that. Can you link to the thread?
The Talk Irvine crowd is generally bullish on housing, and a large segment considers their personal residence as a great investment that will outpace other investments. There are threads devoted to specific housing developments where owners and prospective owners discuss the development. When you comment to this crowd, on specific development threads, sharing that these houses are over-priced and ripe for correction, you should expect the comments to be received as threatening/offensive.
Yeah, I was active over there for awhile but it just got too annoying. It’s hard for me to relate to people who’s greatest life achievement is buying a house in a particular city. I think a lot of it derives from hard-driving Asian parents making their kids feel worthless.
I went to high school in an area with lots of high achieving Asian students. I’ll always remember sitting in Denny’s with a Korean friend of mine at the end of our senior year as he literally was crying about being the #2 student in our class and his sense of failure about only making it into Stanford. He has not been heard from since although I saw that he is an attorney now in our home town. None of the high achievers have shown up at class reunions and my guess is it’s because they still feel like they don’t live up.
I don’t know if you’re right or not but it sure agrees with my experience. I was the only white boy in the top 10 of my high school and I remember many of the other top students thought I was crazy to turn down UC Berkeley in exchange for a scholarship to a lesser-known but still pretty good school. (this was 25 years ago)
Of the others in my high-school top ten that I’m aware of (at the 20-year reunion or still friends) I’m the only one who isn’t a doctor or lawyer and the only one who doesn’t own a home. I probably also have the most free time and I just might be the happiest.
Pressure sucks.
I think being happy supersedes everything else. Glad to hear that you’ve achieved that.
http://www.talkirvine.com/index.php/topic,11339.960.html
Here you go. This argument literally started because someone asked if a particular house was overpriced. I said it was and explained why I thought so…
Wow… The Kool-aid runs deep in that crowd. One guy actually made the “OC has unlimited demand” argument that used to be popular in 2006. On a fundamental basis, that house is overpriced. I’m estimating the monthly cost of ownership to be $9,000 where as the rent is estimated to be $5,000 by Zillow. I wouldn’t want to own it, but those that believe it’s a fair value should at least admit they are speculators at this point.
We have been ready to buy for 20 months, after several offers and some negotiations throughout the last year we just gave up. If we end up having another baby, we may just both take 6 months to a year off. The economy is set for a reset and the value of our dollar goes down by the day. As much as we want to keep saving we also want to enjoy life.
Our agent looks for us but she knows we aren’t going to jump at anything that will make us house poor.
I concur with Awesome X and FutureBuyer. Seems like a lot of people learned about being a knife catcher during the last go around. I think there is a fairly sizeable buyer pool out there if prices dumped 20%. Price elasticity may not be rapid with housing, but it still exists.
Property taxes
Home bias
A taxing problem for foreign buyers
http://www.economist.com/news/finance-and-economics/21703381-taxing-problem-foreign-buyers-home-bias
EVEN in hot markets like Vancouver, property sales normally slow in the summer. But for Sonia Prasad and other estate agents, the last days of July were a blur of hurried sales and paperwork as buyers and sellers rushed to complete transactions before an August 2nd deadline.
On July 25th the provincial government of British Columbia decreed that, after that date, foreign buyers must pay a new 15% tax on any residential purchase. The tax is aimed at stopping these buyers from pushing up prices in Canada’s most expensive residential-property market.
Ms Prasad’s last-minute buyers included a couple from China who were purchasing a C$400,000 ($305,000) condominium in the suburb of New Westminster for their son, a student starting college in September. The extra $60,000 they would have had to pay might have killed the deal, Ms Prasad says. Indeed, the tax seems likely to have prompted some foreign buyers to walk away from deals agreed, but not completed, before the deadline.
Governments at all levels, from municipal to federal, have been under pressure over the past two years to curtail foreign ownership in Vancouver. Michael de Jong, the finance minister of British Columbia, says foreign nationals invested more than C$1 billion in the province’s properties in the five weeks between June 10th and July 14th. More than C$860 million of that was spent in metropolitan Vancouver.
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Back in 2011 the median price of a detached home in Vancouver was C$933,000; now it is C$1.56m. Household median incomes in the city have been rising only gently, from C$69,000 in 2011 to C$76,000 by 2014. Sherry Cooper, chief economist at Dominion Lending in Toronto, says Vancouver’s inflated prices are higher than anywhere else in the country. “When everyone is screaming about affordability, the government has to look like it’s doing something,” she says.
Other jurisdictions have also implemented policies and surcharges to reduce foreign ownership in their residential markets. In December Australia’s Foreign Investment Review Board started to charge application fees for foreign buyers. Hong Kong, the most expensive real-estate market in the world, has added a 15% surcharge on home purchases from non-permanent residents. Britain has raised the stamp duty on homes worth more than £1.5m, the kind of properties bought by rich foreigners.
To some, however, British Columbia’s move was poorly thought out. Under the Canada China Foreign Investment Promotion and Protection Agreement which took force in October 2014, foreign investors must be treated as favourably as locals, says Barry Appleton, a trade lawyer. The new tax, which targets all foreigners and not just Chinese buyers, will also violate the terms of the North American Free Trade Agreement, he alleges. This policy could end up being settled in the courts.
What are the odds something like that would happen here?
I think this is a great move for Vancouver. It’s the only way they can make housing affordable for local residents, and it still might fail.
It could happen here if Trump wins in a wave of protectionist fervor. Stopping the flow of foreign capital from jacking up home prices for US citizens is a populist issue that so far hasn’t caught fire.