Irvine Housing Market Predictions

[Cow_tipping]

CA has a huge underground economy. But of course that is where the liar loans comes.
Cool.
Cow_tipping.

[(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.

If we assume that people have to actually qualify for their loans based on income, I would conjecture that the buyers of median-priced houses are those above the median in income.
Would you agree ? disagree ?
Any realtors have insight into this ?

Regardless, here is another shot at getting my point across with a simpler example and fewer assumptions …

You are right that the median household income of 83K cannot afford the 600K house. However, over 21% of the households in Irvine have incomes over 150K and could easily afford the 600K house. In fact over 41% of Irvine households have incomes that exceed 100K per the 2005 Census bureau. These households would likely afford homes in 470K + range, assuming 20% down.

I believe that these incomes (if sustained) would support the median price in the 450-550 K range going forward.
Obviously this will be lower/higher depending on incomes, interest rates, unemployment, psychology, etc.

[DaCounselor]

1. “Median income” – per Census definition, includes income earned by anyone 15 yrs old and up. So a 15 yr old working 2 nights a week at Blockbuster is factored in to the median income stats. Think that might drag down the median a bit? Or is it offset by the billionaires in The OC?

2. The calculations in this thread appear to relate to the first time buyer only. For instance, and $83K household income can certainly afford a $600K house if that household has already made $250K profit on a prior home purchase and they roll that profit into the $600K purchase.

[kev374]

Your example has no relevance to the discussion.

I was just making the point that not all renters are below the median income and all homeowners above the median like you’re making it out to be. There are plenty of homeowners who are way below the median income.

[lendingbubblecontinues]

Bottom line for anyone sharing an optimistic viewpoint is this..

Logic and reason went out the window on the way up during this boom and logic and reason will go out the window on the way down.

Sorry, but I am not buying any of the “it’s different this time and here’s why” arguments, as I have heard them all before and seen them all fail to hold up. At the end of the day, the pendulum will overswing on the downside, regardless of your optimism.

Goodbye housing market…farewell “Carnage” (Orange) County…you are headed where no-one but a few of us housing “bears” have predicted.

[bigmoneysalsa]

Yes, median homebuyers probably have above median income. But I disagree that people have had to qualify for their loans based on income. Loose lending standards and liar loans are a big part of how the bubble formed. So although homebuyers make more than median, the cost of homes doesn’t provide much useful info about how much more.

To be fair, I suppose I was making a stupid guess of my own with the 600K number (which is about 100K below the Irvine median).

It just gets annoying to hear people try to paint Irvine as more affluent than it really is based on untrue stereotypes like Mr and Mrs Irvine. Irvine is not Laguna Beach or Newport Coast. Once the bubble bursts, I strongly suspect that median households will be able to afford more than a humdrum 2 bedroom condo, because they were able to before the bubble.

[(former)FormerSanDiegan]

bigmoneysalsa –

I agree with you that loose lending standards led to excessive home price appreciation.

Based on rational lending standards, in my view the current (well almost current since the numbers are from 2005) income profile of Irvine is consistent with median house prices near 470-550K. That means they are perhaps 25-40% overvalued based on my guess-timate using half-baked assumptions.

[cashman]

I don’t think the average couple I painted of Mr. and Mrs. Irvine is that out of line, bigmoneysalsa. A police officer and a school teacher seem pretty average to me. I grew up in Woodland Hills, an LA suburb in the valley similar to OC’s Irvine, and my father was an aerospace engineer and my mother a school teacher. We were very middle class. Certainly Irvine has couples above and below this example, but for the most part, Irvine is a middle class, family oriented city of professional-type couples. I’m certainly not trying to boost Irvine’s image above what it is, but you must admit OC as a whole is considered an affluent area, and housing prices have always supported that perception. Therefore it must be fact.

[bigmoneysalsa]

My mistake cashman. Clearly your anecdotal evidence is far more accurate than any objective statistics I could muster. Your words are the epitome of truthiness.

[(former)FormerSanDiegan]

I have to agree with B M salsa on this one.

If you scroll down to the bottom of this page you will note that it reads “In God We Trust. Everyone Else Bring Data.”

When you look at the data, it is interesting to note that as of 2005, according to the census bureau, 53.75% of families in the city of Irvine make over 100K. The Mr and Mrs Irvine example of a couple making 130K is not really too far out of line with what these data show.

[bob007]

Other than those sellers who need to sell …
Is there anything else that will force sellers to reduce prices in the short run ?

[Anonymous]

My side neighboor is a business owner of fast food restaurant in a mall, the front neighboor owns a small biotech startup, i live on the corner lot, we are both scientists with combined income 300K, not counting stock
options.

Income Down Income Up No Change

kev374 X
no_such_reality X
cashman X
sdrealtor(biased) X
big_money_salsa X
formersandiegan X

Each one of you won the argument, Congratulations! =)

Now go back do some work…

—
i bought my home in 1998. I have lots of cash on top of home equity. if you are one of the ones who outbid my offers for the last 3 years, I am just laughing at you and how does it feel now to be a sucker?

[bsrsharma]

Carnage at High End

This is from an Irvine blog:
http://www.redfin.com/stingray/do/printable-listing?listing-id=775175&rc=blg_irvine&utm_source=irvinehousingblog&utm_medium=blog&utm_nooverride=1

New Asking Price: $1,950,000
Old Asking Price: $2,249,000
Purchase Price: $2,206,500
Purchase Date: 6/15/2006
Address: 19 Fresco, Irvine, CA 92603

1st Loan $1,544,232
2nd Mtg. $220,600
Down payment $441,668

The seller may end up losing it all. And all this in a year. Pretty dramatic. One would think someone with half a million $ cash has a little more sense!

[bsrsharma]

Carnage at High End

This is from an Irvine blog:
http://www.redfin.com/stingray/do/printable-listing?listing-id=775175&rc=blg_irvine&utm_source=irvinehousingblog&utm_medium=blog&utm_nooverride=1

New Asking Price: $1,950,000
Old Asking Price: $2,249,000
Purchase Price: $2,206,500
Purchase Date: 6/15/2006
Address: 19 Fresco, Irvine, CA 92603

1st Loan $1,544,232
2nd Mtg. $220,600
Down payment $441,668

The seller may end up losing it all. And all this in a year. Pretty dramatic. One would think someone with half a million $ cash has a little more sense!

[patientlywaiting]

Thanks for bring an old thread back to life with a nice illustration. Quail Hill is not even worth $1 million in my view.

[Author]

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