Irvine Housing Market Predictions

[IrvineRenter]

I have made predictions for the Irvine Housing Market.

* Median sales price will decline approximately 40% from near $700,000 to near $400,000 over the next 5 years.
* There will be a multi-year flattening of prices at the bottom.
* Sustained appreciation will not return until 2013 or later.
* Peak bubble prices will not be seen until 2027 (unless we get another bubble).

I would enjoy hearing your input (links below).

http://tinyurl.com/2penea

http://www.irvinehousingblog.com/

[kev374]

I think national median price will drop significantly to around $180k or so (17% decline), I think OC median price will drop down to around $280-300k (51% decline) or so (170% of median). Irvine median may be slightly higher than that, about $320k or so.

The reason I say this is because inflation adjusted income growth has been MARGINAL or NONEXISTANT since 2000. Current income levels do not support anything more than the above price points. I don’t care about anything else, I firmly believe if people don’t EARN more then higher home prices are not warranted.

Just my $0.02

[no_such_reality]

Income is up up up. Haven’t you got the memos? JK.

I think the 2010 census will be rough. If the American community survey samples SoCal between 2007-2008, it’ll be interesting to observe what I predict will be an income drop in the area.

We’re way out whack on current income numbers which have benefited from a massive run up due to RE commissions, construction O/T and premiums and 30,000 anybody’s with a pulse being able to re-sell house in 6 months for a $100,000 profit.

[cashman]

It is my observation that incomes are indeed up, substantially, and not just mortgage bankers or loan AEs. Just look at the starting salaries of police officers, school teachers and the likes. I remember when they were pretty lowly paying jobs, but no more. I know a couple of highway patrol guys that make over $100K a year. And many teachers make over $60K for nine months of work. And don’t forget the hordes of mom and pop self employed. Much of their reported incomes are very conservative. Someone has been buying all these overpriced properties, and they’re not all subprime. Just something to ponder.

[kev374]

cashman, incomes of 100k are not as common as you think. Per official statistics about 30% of households have incomes over that figure, let’s say 40% just for argument sake and taking into account incomes from entrepreneurs may be under-reported. Even so, most of those families are already homeowners and not creating demand for homes..a small percentage of those may be trade up buyers. However, trade up buyers are dependent on selling their existing homes to first time buyers who are typically in their late 20s/early 30s. Most in this age group do not have established careers to earn such a high income!

Secondly, a mortgage is not the only expense, most families have kids, car payments, vacations, kids college expenses, emergencies etc. that are very substantial. A family making 100k with other expenses combined is completely priced out of even the median home.

[sdrealtor]

Put that 40% number up against the hoemownership rate of about 60% and things dont look so bad. Plenty of first time buyers have 100K HH incomes. Starting salaries out of college for many fields are over $50K. Put two of them together and you got………

[cashman]

Especially in the OC. Lots and lots of professional positions, upper management, and of course the two income family is the norm, not the exception. Meet Mr. and Mrs. Irvine: he’s in his mid twenties, working a few years at the OC Sherriff making $70K. She’s teaching at an Irvine middle school making $60K. Add it up, that’s $130K just like that! With mortgages still available at 6 percent or less, seems like there really are people able to buy at todays prices. What happens if rates go down too 5 percent, or less? They have been there before.

[bigmoneysalsa]

Median household income in Irvine is 83K according to the Census Bureau. Such households cannot afford a 600K home, even at 5 percent rates. Get your facts straight cashman.

[(former)FormerSanDiegan]

Median household income in Irvine is 83K according to the Census Bureau. Such households cannot afford a 600K home, even at 5 percent rates. Get your facts straight cashman.

Comparing median income to median priced homes is a flawed argument. 50% of people in OC make more than 83K. What is the home ownership rate ? Suppose it is 60%.
Therefore, it is not the median income family buying the median income house. The median income family is in the bottom 17% of homebuyers (assuming income proportional to price).

It would be more correct to compare say the 70-75th percentile income to the median price, if you want to take statistics and make an appropriate example out of them.

[(former)FormerSanDiegan]

According to the 2005 Census Bureau estimates …

41.2% of Irvine Households make more than 100K
21.1% make more than 150 K
10.2% make over 200K.

So, the typical median home buyer likely makes between between 100-150K, not 83K. Still overpriced at 600K, but not as out of whack as comparing median household income and median price makes it to be.

http://factfinder.census.gov/servlet/ADPTable?_bm=y&-geo_id=16000US0636770&-qr_name=ACS_2005_EST_G00_DP3&-ds_name=ACS_2005_EST_G00_&-_lang=en&-redoLog=false&-_sse=on
(NOTE: Based on Household Income… the Family income numbers also reported on the link indicate that almost 54% of Irvine families make more than 100K)

FWIW …

30% of Orange County Households make more than 100K.
13.5% make more than 150K
7% make more than 200K

[kev374]

San Diegan I know plenty of folks who are single income households, make around 75k and own a median priced home. This was very possible just 6 years ago. It’s only now that this is not possible due to the income/home price ratio going completely out of wack.

Remember, there are many retired homeowners with little income who bought 20 or 30 yrs ago that equally skew the statistics in the other direction, for example my Aunt is 70years old, owns a home worth $800,000 in Laguna Hills but earns like 35k/yr from her retirement and benefits! so your math is of little value!

[(former)FormerSanDiegan]

My point is that ultimately income drives how much house people can qualify for and/or afford (not always equivalent).

The median price home sales are for people who are buying today, not those already in during more affordable times.

I am not saying that prices are not out of whack. They are.
I’m simply stating that comparing median household income to loan qualification standards for a median priced house is flawed.

for example my Aunt is 70years old, owns a home worth $800,000 in Laguna Hills but earns like 35k/yr from her retirement and benefits! so your math is of little value!

Kev – Is she buying the home on her 35K income ? NO.
You have it backwards.

Your example has no relevance to the discussion.

[bigmoneysalsa]

Comparing median income to median priced homes is a flawed argument.

I didn’t say the median household should be able to buy a median home. My point was that cashman has mischaracterized the facts.

The median income family is in the bottom 17% of homebuyers (assuming income proportional to price). It would be more correct to compare say the 70-75th percentile income to the median price, if you want to take statistics and make an appropriate example out of them.

I don’t know what the median homeowner household income is and neither do you. Those stats are not readily available. The idea that you can derive it as being proportional to price is laughable. You are throwing out guesses. Also, there are a non-trivial number of households above the median who rent.

[(former)FormerSanDiegan]

I was responding to this …
Median household income in Irvine is 83K according to the Census Bureau. Such households cannot afford a 600K home, even at 5 percent rates.

[(former)FormerSanDiegan]

I don’t know what the median homeowner household income is and neither do you. Those stats are not readily available. The idea that you can derive it as being proportional to price is laughable. You are throwing out guesses. Also, there are a non-trivial number of households above the median who rent.

I was trying to make a concrete point via a thought experiment that required some assumptions.

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