Jan112016
Will the slowdown in China hurt Irvine real estate?
A rising US dollar makes Irvine homes much more expensive for Chinese buyers, and capital controls makes it much more difficult to move money out of China for those inclined to do so.
Chinese investors buy a significant number of homes in Irvine. Anecdotally, 80% of sales in some new home communities are sold to Chinese Nationals. In fact, Irvine homebuilders depend on Chinese buyers to purchase their overpriced houses, which becomes a problem if this flow of money dries up.
Both homebuilders and real estate agents delude themselves with notions about the desirability of Coastal California to convince themselves the influx of Chinese money is based on sustainable fundamental factors. In reality, this is hot money escaping an unstable market, subject to the policy whims of an unpredictable totalitarian government. Chinese capital is an unstable source of investment, and it could reverse course in a moment based on policy changes in China.
Unfortunately, in the real world, for money to leave China, it generally has to pass through a Chinese bank and get wired to an overseas location. The Chinese government could easily stop the flow of electronic capital by decree. But will they exercise this power and really crack down? If they believed this flow of capital out of China was inhibiting domestic growth, the almost certainly would.
Why China is shaking global markets … again
Dominic Chu, January 4, 2016
In a new year for world markets, the same old story in China has traders on edge.
Investors are worried that China — the world’s second-largest economy — is slowing at a faster-than-expected pace. If the narrative sounds familiar, it is. The same fears about a Chinese slowdown riled global markets last summer.
Data from the Chinese economy has not proved robust.
The latest reads on manufacturing and industrial activity suggest a continued slowing trend. Add to that increasing tensions in the Middle East, and investors face serious headwinds.
So what does this mean for Irvine real estate? Weaker sales and more inventory.
And it’s not due to a lack of new home inventory, which has been piling up all year.
Typically, homebuilders respond to these conditions by first increasing incentives to drive sales while maintaining the illusion of firm pricing. Once a homebuilder starts lowering their prices, deflationary psychology sets in, and buyers lose all sense of urgency and sales crater.
The Irvine Company typically shuts down its operations for a year or so, then they hit the reset button and start selling again at lower prices — whatever price the market will bear. However, the Irvine Company is no longer the only game in town. Five Points Communities will probably follow the Irvine Company’s lead, but if they felt more pressure to sell, they might continue building and push prices lower, just like Lennar did in Columbus Grove back in 2007 and 2008.
China slowdown to hit luxury real estate
Robert Frank, January 4, 2016
Luxury prices for the world’s major cities are expected to slow by nearly half this year, from 3 percent in 2015 to 1.7 percent in 2016, according to the latest Knight Frank Prime Cities Forecast. The report said China’s economic slowdown is mainly to blame, although rising rates in the U.S. and a slowdown in other emerging markets will also add to the headwinds.
Knight Frank defines the “prime” or “luxury” real estate market as the most expensive 5 percent of homes in each city.
China’s slowdown is expected to hit its domestic housing market hard — as well as nearby markets in Asia favored by wealthy Chinese buyers. Price growth in Shanghai is expected to fall by more than half, from 10 percent in 2015 to 4 percent in 2016. Hong Kong is expected to see prices fall by 5 percent, making it the worst performing market, followed by Singapore, where prices are expected to fall 3.3 percent in 2016.
“What we’ve actually seen is that as you get more economic uncertainty within China, the desire of the wealthy Chinese and even the middle class to diversify their investments outside of China has increased,” Bailey said. “It’s a bit counter-intuitive but we’re seeing more demand for money moving outside of China.”
Desire is not demand. Many people in China may want to escape the financial devastation, but unless they can safely get that money out, the desire is not enough to create measurable demand in Irvine.
Along with Australia, the U.S. is also likely to benefit from Chinese flight capital. New York is expected to see prices go up 5 percent in 2016, according to the report, while Miami will see gains of 2 percent. The U.S. may also benefit from high prices and new, less wealth-friendly tax regimes in London.
By that reasoning, Irvine should do well. If this money can escape China, and if Chinese investors don’t consider the prices too high, then Irvine should see one last push of sales before this supply of buyers runs dry.
The question, he said, is whether those U.S. gains will continue, given the potential for higher interest rates and a stronger dollar, which makes real estate more expensive for overseas buyers.
I think there is no question the demand will taper off. It’s only a matter of when.
So the real question is what happens to Irvine real estate when the flow of Chinese money stops?
[dfads params=’groups=3&limit=1&orderby=random’]
[dfads params=’groups=23&limit=1&orderby=random’]
[listing mls=”NP16001314″]
New home sales in Irvine are definitely depressed. Some builds are still selling relatively well, many seem like they are struggling, and some are just failing badly.
Previously hot builds like Hidden Canyon have slowed down and is now with standing inventory (this was a build where people were literally waiting in line for). Other builds like Capella in Orchard Hills are just pitiful. Multiple price drops and they still cant sell. Some of their homes are now cheaper than phase one. Of course most of Beacon Park builds are also dismal.
I suspect as you state in your blog today, much of this may have to do with decreased buyers from China. The demand from China is what has propped up Irvine prices and without them, there are not enough buyers who can afford these homes at these prices.
I see two scenarios playing out. Either more Chinese or foreign buyers will have to enter the market to keep these prices propped up. Otherwise prices will have to drop to make it affordable for everyone else.
Went to an open house in costa mesa yesterday. 335 flower street is the location. House has heavy wear and has not had any updates since before many of us were born. The carpets were gross. Had a marginal addition that was very old. Size is 1700 square feet. Priced at $1,200,000.
The open house was full of serious lookers. Forget trying to get the attention of the agent. Several lookers were discouraged at the intense interest. This kind of over the top activity on an old home that needs everything tells me any slowdown in sales is inventory related.
When I see a 1700 sq foot house in Costa Mesa listed for 1.2m, I know exactly where the house is without looking at the address. Why? because Ive looked in this area too. This is where all the people wanting to live in or near Newport beach go to that cant afford the upper 1 million price for Newport beach itself. On one side of the street are Costa Mesa addresses and the other Newport Beach addresses, hence the higher price for this house.
My only comment to you would be that taking one or even a few anecdotal evidence of a buying frenzy is not a strong argument compared to a whole city of builders showing decreased sales. Furthermore, slow sales in new builds directly contradict your theory of low inventory. Builders have the inventory… they currently have a lot of it.
Accurate representation, but I would just add the context that Capella’s prices started in the $1.2Ms in late 2015, and quickly moved well above $1.4M. They now have sitting inventory in the $1.2Ms. Who knows what pricing strategies work best in a given time and place, but Capella seemed to get too aggressive. Maybe they shouldn’t have raised prices so aggressively, and rather kept the sales momentum going through 2015.
It’s the same mistake all homebuilders make. Their mentality is to maximize short-term gains and not to worry about tomorrow. It’s a policy that barely works when markets are stable and appreciate slowly, but it’s a dismal failure in the face of market volatility.
Oh. cnbc.com has a story in the real estate section. If you care to look at it, their reporting says that real estate in the united states will see a big boost from chinese investors because of the chinese economic problems.
A short-term boost followed by an abrupt end.
This is exactly how I see it. Mad scramble in China to get money out now. The money is drying up and the window is closing. By summer the money outflow from China will be a fraction of what we’ve seen over the last 5 years.
The 10 year US Treasury has dropped to 2.11 but I haven’t seen mortgage rates drop very much.
Why is that?
Hmm, Wells’ rates appear to be consistent with their yearlong correlation to the 10Y UST:
https://www.wellsfargo.com/mortgage/rates/
When the 10Y UST is in the ~2.10 range, Wells’ published 30Y jumbo rate is 3.625%.
I’m in the industry and get daily rate updates and they have been inching down for the past 5 business days or so. The panic selling in stocks is nudging people back into bonds.
I would just like to say thanks again to all the despotic dictators and dysfunctional centrally-planned governments around the world. They have been propping up the mortgage refinance business for at least 6 years now.
Every year the pundits predict the end of the refi boom, and every year it keeps chugging along.
Unfortunately since incomes have been stagnant, the mortgage refi binge has been America’s top economic driver.
It’s not as bad as during the housing boom, but I’m sure people have been taking advantage of the reflating housing bubble — at least those that aren’t still tapped out from the last go-round.
Our central planners will do there best to keep rates exactly where they are. The market is running out of steam and rates can’t go much lower. Looks to me like stalemate over the next 12 months. Sales will continue to suffer while prices remain stable or slightly dip lower.
Curve ball would be some sort of macro-economic wildcard that causes the Fed to lose control. Then all bets are off the table and housing crashes.
Many fail to see how fragile the housing sector really is. We are now dependent on accommodation.
Been watching the HY cracks that are showing. That may be something to pay attention to. The commodity bust is real and is starting to show up in several ways.
The high yield loans are packaged up and bundled with many other loans. The package is rated as a single unit. As the commodity bust progresses many of these loans go bust but the package rating never moves. hmmm… rating agencies must be too busy to pay attention. Ever heard of this before? 😉
A global slowdown may cause many many corporate loans to fail. This slow train wreck is gaining momentum.
Housing is not the only factor. Don’t lose sight of the big picture.
China stocks start new week with 5.3% drop
Chinese stocks plunged deeper into negative territory Monday after a brutal first week of the year.
The Shanghai Composite closed down 5.3%, and the Shenzhen Composite ended 6.6% lower.
The grim day of trading followed steep declines in Chinese stocks last week amid worries over the country’s slowing economy and weakening currency.
The turmoil in Chinese markets rippled out around the globe: the Dow lost 1,079 points, or more than 6%, over the week — the index’s worst five-day start to a year on record.
The chaotic trading in China was made worse last week by a so-called “circuit breaker” mechanism introduced by authorities in an effort to reduce the volatility that had characterized the country’s stock market rout during the summer.
But regulators ditched the new measure, which halted trading for the day when stocks dropped 7%, after only four days because of concerns it was fueling trading losses rather than reining them in.
Analysts say they expect the rocky start to the year for Chinese shares to continue, though.
At the heart of the tumult are a series of drops in the value of the country’s currency, the yuan.
In recent weeks, the central bank has attempted to guide the yuan lower against the U.S. dollar, a move that many analysts have interpreted as an effort to aid Chinese exporters and prop up weakening economic growth.
But the bank’s approach has alarmed investors who have aggressively sold the currency, believing its declines will continue.
Economic Depression … just like 1929.
This next one will make 1929 look like a single dip recession!
I don ‘t think China’s stock market will stabilize until all the gains of 2014 and 2015 are totally wiped out.
China is doing every thing it can to hold the Shanghai st 3000. Not a lot of support below that until you get to 2000, which would indeed knock out all of the last year and a half gains.
Problem is that there is so much over capacity in China that it will take years to absorb it. Welcome to global re-balancing.
A New Economic Era for China Goes Off the Rails
HONG KONG — When President Xi Jinping of China convened a group of top officials to discuss the economy last month, the highly publicized meeting was seen as a moment of triumph.
A stock market plunge last summer, and a messy currency devaluation that followed, had faded from global view. In the relative calm, he seemed to usher in a new era of economic management, promising policy coordination at the highest levels to prevent another bout of turmoil.
Less than three weeks later, his plans have been derailed as China’s stock market and currency once again rattle investors around the world. The latest rout sets up a challenge for Mr. Xi, who has positioned himself as the master of the country’s economy.
At every turn, the president’s efforts to manage the economy, market and currency have been undercut by global headwinds and haphazard policy making. Three initiatives this week, involving currency depreciation and two sets of stock market rules, have been particularly discordant. All three were hastily suspended after China’s stock market plunged on Thursday morning.
He also cannot move forward on the bolder actions needed to head off a more serious economic slump, such as forcing hopelessly indebted state-owned enterprises to stop borrowing money and shut down. Otherwise, he risks further eroding short-term confidence and growth, which have depended heavily on this borrow-and-spend mentality, and mass layoffs could follow.
Mr. Xi’s options are also more limited than in the past. He and his aides engineered the elevation of the renminbi to the ranks of the world’s leading currencies, a status bestowed by the International Monetary Fund in November. But in doing so, he gave up some control, allowing market forces to play a bigger role.
In the last couple of years, China had begun allowing, even encouraging, companies and people to invest more of their wealth overseas. Doing so helped reduce deflationary pressures at home from chronic overinvestment and overcapacity.
But a trickle of money leaving China to buy houses and other overseas investments has become a flood this winter. The central bank has responded by trying for the last three weeks to slowly guide the currency down as a way to help bolster exports and also make overseas investments seem more expensive and less appealing.
In other words, the Chinese government’s official policy is designed to discourage continued homebuying in Irvine.
How China could trigger a global crisis
When China sneezes, the rest of the world might not catch a cold, but it does feel bad for a couple of days. The question, though, is whether China is sicker than it seems and how contagious that would be for the global economy.
In other words, is China’s latest stock market selloff — the Shanghai index lost 15 percent of its value in the past six days — and currency devaluation just a blip or the beginning of a bust? I say latest because the same thing happened in August. That was our first real inkling that Beijing might not have as much control over its economy as it seemed. And now we know: it doesn’t. It’s made one ham-handed attempt after another to prop stock prices up to unsustainable levels—buying shares itself and banning others from selling—which only works as long as it keeps doing so. But more than that, it’s the fact that the government either can’t decide whether it wants a cheaper currency or can’t stop it from happening that hints at bigger problems under the economic hood. It’s enough that no less an authority than George Soros thinks this could be like 2008.
What’s going on? Well, China is trying to manage a slowdown that was always going to happen at the same time that it deflates a credit bubble that it wishes hadn’t happened. Either one would have been hard enough on its own, but together they might be too much for even the most competent government to deal with. That’s because Beijing needs to intervene even more to keep the economy growing today—at least as much as it wants—but loosen its grip on it to keep it growing tomorrow. So there are two dangers. The first is that a tug-of-war within the government leads to half-measures that don’t solve either problem. And the second is that fears over a tug-of-war might make these problems harder to solve than they already are. Still, we shouldn’t overstate this. It’s not like China’s economy is about to collapse. Its growth is real, if not as spectacular as it was before. It just might slow down further or faster than we thought, grinding down to 3 or 4 percent growth instead of 6 or 7 percent.
But let’s back up a minute. Why was it inevitable that China’s economy would shift down to a lower gear? Simple: its old growth model had run out. There are only so many people you can move from the farms to the factories—especially when you only let them have one kid—and so much infrastructure you can build before you run out. Now, China hasn’t quite reached that point, but it has gotten to the one where there aren’t as many people moving to the cities as before. And that’s enough. It not only makes it harder for the economy to grow as much, but also makes it harder for companies to export as much now that, without a steady stream of would-be workers holding down wages, they have to pay people more.
You can probably see where this is going. If workers are making more, they can spend more—and that, rather than selling things to foreigners, can power the economy. But that’s a lot harder than it sounds. First, you need a stronger safety net so people feel more comfortable splurging. Then, you need to give them time for their habits to change. But, most importantly, you need to keep adding higher-paying jobs.
It’s this last part that would force Beijing to do what it doesn’t want to: give up at least some of its control over the economy. Think about it like this. In the short-term, wages are going up because workers have more bargaining power, but, over the longer-term, that will only continue if productivity increases. Workers, in other words, have to make more or better stuff to make more money. How do you do that? Well, the government would have to start deregulating the economy so businesses could expand where they had to and stop supporting zombie companies that were blocking the way. Beijing has actually talked about this quite a bit, even commissioning a rap song about supply-side reforms, but, as we’ve seen with stocks, this determination to give markets a “decisive” role in the economy has only lasted as long as they give the “right” answer.
That brings us to problem number two. Everything we’ve been talking about, this shift from a saving to a consuming society, well, takes time. So what is China supposed to do until then? Beijing’s answer has been for everyone to run up a lot more debt—and by “a lot,” I mean four times as much. Indeed, between 2007 and 2015, China’s total debt, including the government, households, and corporations, increased from $7 trillion to $28 trillion. That’s 282 percent the size of its economy, which is more than we have relative to ours.
China’s credit binge is the real concern
The volatility in China’s equity and currency markets in the first week of 2016 was reminiscent of August 2015, but more serious.
Even though the Chinese equity market doesn’t actually matter that much fundamentally to China or to the global economy, financial policy and the drip-feed depreciation of the renminbi matter a lot. There is a rising anxiety about the credibility of policymakers and regulators, and also about the state of the economy, the reform agenda and now a looming credit crisis.
Curiously, even though December’s early readings for both manufacturing and services were disappointing, infrastructure and other policy support programmes have helped to moderate the downtrend in growth for the moment. The beleaguered real estate sector has seen higher sales, even higher prices, in large cities, and some tumbling industrial indicators have stabilised. Yet, we should not be distracted.
The end-year Economic Work Conference that concluded last month agreed an implicit 6.5 per cent economic growth target, supported “as necessary” by accommodative fiscal and monetary policies. In spite of well-meaning statements about cutting overcapacity in industry and real estate, neither the state of the economy nor the country’s politics suggest much will be done.
Important economic reforms to the real economy and state monopolies have stalled, or succumbed to inertia and pushback. Policies designed to develop new sectors have not been matched by those needed to tackle problems in larger ones, such as poor productivity, chronic overcapacity and now a fourth consecutive year of producer price deflation. Tellingly, China’s most serious problem — the relentless accumulation of debt — received passive attention at most.
The growth in Chinese non-financial debt has been widely analysed since the 2008-09 bank lending stimulus programme. It has risen from about 100 per cent to about 250 per cent of GDP but far from slowing down with the economy, the pace of debt accumulation has actually picked up in the last one to two years.
Even though government officials speak occasionally about the need to allow corporate defaults and restructuring, and recognise bad debts in the banking system, the political and institutional blockages to such outcomes are formidable. If they could be overcome, adjustment might be softened, for example, by significant tax cuts for households and spending transfers from the state to the private sector. But the political will is not there.
Instead, all we are likely to see is more credit easing, in the wake of the six initiatives since late 2014 to cut interest rates and banks’ reserve requirements, albeit to no economic effect. The credit binge, then, will continue until it can’t.
It’s a giant Ponzi scheme.
1980s Japan 2.0?
After 30 years of a one-child policy, they will even have the same demographic problems of a declining population to contribute to the deflation.
NOPE … 1929 USA
China Disappears Information
Analysts trying to understand the volatile Chinese stock market should pay a visit to a gritty building on Lockhart Road in Hong Kong. They’ll find a reminder of the risks of operating in an authoritarian country where providing information is a crime.
On the second floor is Causeway Bay Books, long a popular destination for mainland visitors looking for information banned at home. It’s closed, at least temporarily, after five owners and employees were “disappeared”—apparently snatched and detained by mainland security forces—for selling books that offend Beijing.
The case shows Beijing is willing to create international incidents to control information. Just before the store closed, its two best sellers were “2016: Collapse of the Communist Party of China” and “Shen Bing’s Account: My Story With Zhou Yongkang,” in which the author, a state-TV anchorwoman, describes her affair with Mr. Zhou, a former Politburo member now imprisoned for corruption. There’s speculation that the disappearances are meant to stop a planned book about the love life of President Xi Jinping.
Four bookstore employees disappeared in October, three while visiting the mainland and one in Thailand. Last month co-owner Lee Bo vanished. “I am not worried,” he had told the South China Morning Post. “I have avoided going to the mainland for years.” It turned out he wasn’t safe in Hong Kong. British Foreign Secretary Philip Hammond last week complained in Beijing about the snatching of Mr. Lee, a British citizen, calling it an “egregious breach” of China’s commitment to respect Hong Kong’s rule of law and freedom of speech.
There’s a connection between Beijing’s repression and last week’s collapse of its stock market. International investors have long trusted Hong Kong as a haven for information about China. The Communist Party has always censored political speech in China, but until recently the Politburo understood that being part of global markets requires an open flow of information. Beijing’s censorship now suppresses economics as well as politics.
Chinese share prices have fallen 40% since summer. Beijing is eager to stop the decline, with the government buying shares directly as well as through pensions and pressuring patriotic brokers. It bans large owners of a stock from selling more than 1% of total shares at once and requires them to inform exchanges three weeks in advance to sell shares at all. The official mouthpiece Xinhua warned that “malicious” short sellers must be dealt with in a “firm-handed manner.”
The bellwether was the arrest of Wang Xiaolu, a financial journalist at Caijing, an independent Beijing-based magazine, who reported in July that the government planned to pull back on propping up the stock market. Mr. Wang was detained, then forced on national television to confess that he had published “private information” and brought “great losses to the nation and investors.”
Publishing private information about markets is central to financial journalism. Mr. Wang’s reporting about government plans was accurate, which was no defense. Instead, Beijing used his case to instruct other journalists it is now a crime to report accurate information about markets. The Chinese propaganda ministry issued a directive: “Do not use emotionally charged words such as ‘slump,’ ‘spike’ or ‘collapse,’ ” it instructed. “Do not conduct in-depth analysis, and do not speculate on or assess the direction of the market.”
Chinese controls on capital could affect Canadian property
On Friday the Shanghai correspondent for the Financial Times, Gabriel Wildau, reported that China is moving to step up capital controls in an effort to stem the flood of cash out of the country.
The idea was that fixed exchange rates between countries, pegged to gold or the U.S. dollar, were a force for stability. In the simplest terms, countries feared that cash moving from one country to another robbed value from the home country and made everyone poorer.
One of the effects of the rush of money out of countries like China, Russia and those in South America has been a surge in developed-country real estate. If a trend toward currency controls develops suddenly, that growing flood of money could turn to a trickle.
How Is the Economy Doing? It May Depend on Your Party, and $1
Did unemployment get better or worse during Ronald Reagan’s presidency? In a 1988 survey, some 80 percent of dedicated Republicans accurately said it had improved, compared with 30 percent of loyal Democrats. In the 1990s, the pattern reversed on a range of factual questions about economic and fiscal issues. In a 1997 survey, for example, Republicans were far less likely than Democrats to acknowledge that the budget deficit had declined during the Bill Clinton administration.
As an economics writer, I see the same thing anecdotally. When I wrote articles recently about the unemployment rate’s dip to 5 percent, I received vehement responses from conservatives convinced that the Obama administration was cooking the numbers. They were not so different from responses I received from liberals when the jobless rate was at that level in 2005, during the George W. Bush administration.
In other words, when you ask people about the economy, the answers are less a statement of objectivity and more like what they’d say if you’d asked which pro football team was the best. That has important implications for democracy. How can people judge whether a party is effective if there is no sense of objective truth? And it could even have implications for the economy itself if, for example, conservative-leaning business executives freeze hiring or investment when the president doesn’t share their politics.
But new research from two teams of political scientists adds a wrinkle to these findings. It turns out that the partisan bias in how people answer factual questions about the economy is diminished by this one weird trick: Pay people.
That is a conclusion reached in two new papers in The Quarterly Journal of Political Science, one from four scholars led by John G. Bullock at the University of Texas at Austin, the other by Markus Prior of Princeton and two colleagues.
When survey respondents were offered a small cash reward — a dollar or two — for producing a correct answer about the unemployment rate and other economic conditions, they were more likely to be accurate and less likely to produce an answer that fit their partisan biases.
In other words, when money was added to the equation, questions about the economy became less like asking people which football team they thought was best, and more like asking them to place a wager. Even a little bit of cash gets people to think harder about the situation and answer more objectively.
“People are not telling you what they actually believe in ordinary surveys,” Mr. Bullock said. “With a payment, we’re eliciting not necessarily thoughtful responses, but more sincere responses.”
The effect was even more pronounced when respondents were rewarded for honestly answering “I don’t know” when they didn’t have enough information. Otherwise, it appears that people will respond objectively to questions when they know the answer, but revert to their partisan biases when they don’t.
Who knows what percentage of home purchases in Irvine are completed by Chinese nationals? It’s certainly clear that a large percentage of Irvine home purchases are by adults whose first language is Chinese. They could be US citizens, or in some stage of becoming citizens, rather than foreign nationals making investments in Irvine real estate.
In any event, this is the big wild card. If China’s economy seriously struggles over the next few years and the flow of money out of China into US real estate becomes a trickle, then you have to think this place downward pressure on house prices. A 10% drop seems completely reasonable. A 20% drop doesn’t seem too difficult to reach either.
I doubt we see much of a decline in price because relative to rent the prices are still affordable to native owner-occupants. I could see a dramatic decline in home sales, and less competition for resales from Chinese nationals.
Do you think the Trulia market summaries are accurate?
Trulia shows Irvine down for YOY median price, YOY $/sq ft and YOY transaction volume.
Worse in Yorba Linda.
“entry level” communities seem to be holding up pretty well. Big money CdM doing fine. Laguna Beach transactions off a cliff but prices up. Granted, some communities have a huge range of prices coupled with a small number of sales so the stats might mean little.
I have no idea what the futures holds, but it looks to me like there’s a bit of a standoff between buyers and sellers just now–lots of WTF priced premium prouct perpetually parked.
Scottnyc
These charts confirm what you saw in Trulia.
http://www.corelogic.com/downloadable-docs/dq-news/southern-ca-home-resale-november-2015.pdf
http://www.corelogic.com/downloadable-docs/dq-news/ca-home-sale-activity-by-city-november-2015.pdf
My reports still show Irvine prices increasing, albeit at a very slow rate. Trulia’s numbers may include new homes which mine don’t. I show the resale market up 3.7% on a $/SF basis.
I believe new home prices will drop. They’ve built too much product at prices people simply can’t afford. Resale prices may continue to rise or not depending on mortgage rates.
New to the site, really appreciate your insights. How much in your opinion the new home prices will drop in Irvine before they go flat? Some of the builders in Beacon park have already dropped 50K-80K or are offering 20-30 K price drops plus upgrades. You think its wise to wait, or if getting around 2550 sq ft SFR for around 1.1 to 1.115 mil with very nice upgrades, should take the plunge?
Are the Irvine new home developments really comparable with rent though?
When you adjust for the mortgage interest deduction and consider the marginal brackets buyers of these $1M+ homes are in, yes.
Our net housing cost is probably slightly lower than for what we could rent it. I’m using rental listing rates I’ve seen over the last few months on nearly identical properties. I’m guessing they rented for near ask, because they weren’t listed for more than a couple weeks.
I would use more than one timepoint for ent data in a thirty year calculation.
Are stocks and housing off on another bubble?
http://econbrowser.com/archives/2016/01/are-stocks-and-housing-off-on-another-bubble
When low rates reflated the old bubbles, nobody complained too much, but now that these prices are correcting, I expect a lot of I-told-you-sos from the peanut gallery.
I am sure the correction has not even begun in ernest. First the stock market, then employment, then housing. I have seen this carnival before.
The actual name for this phoenomena is a dirty word in the financial industry and never used.Back in the day it was called a depression.Firm up investments or get ready to say goodbye to your assets.
+1