At the end of 2016, will home prices in OC be the same, lower, or higher?

Submitted by jimmyle on February 23, 2015 - 8:54pm
Roughly the same
21% (9 votes)
A little bit lower (~5% drop)
10% (4 votes)
A lot lower (>10% drop)
5% (2 votes)
A little higher (~ 5% increase)
55% (23 votes)
A lot higher (>10% increase)
10% (4 votes)
Total votes: 42
Submitted by jimmyle on February 23, 2015 - 9:05pm.

I am watching this townhouse and like it a lot. It is closed to my friends and family, near Little Saigon, and has good schools. Currently it is priced at $494k. I can afford it, as my income allows me to borrow up to $450k but I will only borrow around $350k. Currently I am planning to buy near the end of 2016. My hope is that price for this townhouse would drop to around $450k, it would be much more affordable for me. What is your prediction? Many thanks,

https://www.redfin.com/CA/Fountain-Valle...

Submitted by CA renter on February 24, 2015 - 2:06am.

jimmyle wrote:
I am watching this townhouse and like it a lot. It is closed to my friends and family, near Little Saigon, and has good schools. Currently it is priced at $494k. I can afford it, as my income allows me to borrow up to $450k but I will only borrow around $350k. Currently I am planning to buy near the end of 2016. My hope is that price for this townhouse would drop to around $450k, it would be much more affordable for me. What is your prediction? Many thanks,

https://www.redfin.com/CA/Fountain-Valley/10598-La-Rosa-Ln-92708/home/3862279

That's a really cute townhouse. Why not make an offer of $475K or so to see if they'll bite? You've got nothing to lose if they don't accept it. If you wait a year, you have to consider the rent that you'll be paying between now and then, too. Will the drop be enough to offset that rent expense?

While I really like the look of the townhouse -- nice end unit with more light and one fewer neighbor, some patio space, looks fairly well-maintained, more distance between buildings than newer units, more vegetation, two story instead of tri-level, etc. -- just think about the detached garage a bit as carrying groceries and other stuff between the garage and house might get to be a pain, especially on rainy days. The bedrooms are a bit on the small side, too.

Other than that, it looks very desirable...AND it's close to good schools and your family and friends! You might not get something like that next year. Make an offer! :)

Submitted by teaboy on February 24, 2015 - 7:12am.

Also, I have it on very good authority (a realtor) that now is a great time to buy.

tb

Submitted by FlyerInHi on February 24, 2015 - 12:42pm.

I believe that as long as interest rates stay low and GDP grows, housing will continue to grow at about 3% or more, especially in the coastal metro areas.

The large metros are contributing larger share of GDP and attracting new residents, even as the Internet allows improved telecommuting. So I see bifurcation between the desirable areas, such as San Diego and Orange County, and other lesser areas.

I would guess housing appreciation will be more than the rate of GDP growth in the desirable metros.

Now, if you believe that the Fed is manipulating and running out of tools, that rates will shoot up and the economy will crash.... then house prices will drop.

Act accordingly.

Submitted by spdrun on February 24, 2015 - 1:30pm.

Looks like even low rates and loser-loans are losing their effect on housing... (and GOOD!!!!!!!!)

http://www.housingwire.com/articles/3302...

Home sales (and inventory) are about steady from last year despite lower rates and Mel the Skell's 3% down program. Prices are still going up, but for how long if demand isn't rising?

As far as the economy, it won't be what's expected that will lead to a recession (aka buying opportunity). It will be something unexpected by 99% of the sheep.

Submitted by FlyerInHi on February 24, 2015 - 2:18pm.

spd, I would grant you that lower rates did all they could for an extraordinary recovery from the trough.

Housing now depends on economic growth. And housing growing at the rate of GDP is not out of line, especially in the desirable metros.

On a local level, Fountain Valley is very desirable. One of my friends was bitching that the Koreans and Vietnamese are taking over. I tell him to be happy to watch property values rise.

There are larger houses and large lots in Fountain Valley without HOA (better than surrounding areas). The ppsf may be higher than Irvine (have not confirmed lately) because it's further north so it's better for business people who want to closer to North OC and LA. There are lots of Asian small business owners who need a place to call home.

Submitted by spdrun on February 24, 2015 - 2:55pm.

Well, good thing is that when (not if) the next recession comes, the Fed won't be able to lower rates much further ... buying opportunity, baby!

BTW - why was the recovery a good thing? If anything, it bailed out Gen-X'ers and Boomers who took on stupid amounts of debt at the expense of affordability for more deserving younger people. Basically, unless you have medical issues, a loss of job, or a death in the family, if you took on a loan without engaging your brain, you didn't deserve a bailout.

Submitted by FlyerInHi on February 24, 2015 - 3:25pm.

spd, going forward, I feel positive about America. We have energy, flexible labor markets and immigration.

We will see economies crash in Europe and China before here.

The recovery is a good thing because it's good for the country. It's not about punishing people who made bad choices. It's about the country becoming better off.

Do you want unhealthy people to become healthy for the benefit of us all? Or do you want to punish people who made unhealthy choices, to our overall economic detriment?

On a personal level, you act to your benefit. But on a policy level, we want our leaders to act to our aggregate benefit.

Submitted by spdrun on February 24, 2015 - 3:47pm.

Why do YOU want to punish/tax younger people who made responsible choices (via higher property prices) in order to bail out olds who made irresponsible choices and likely will do so again given the opportunity? Who says that the country will be better off if the olds get to keep their houses versus if young people (and immigrants) are able to buy at more reasonable prices? Cuts both ways.

Speaking only to San Diego, if anything, lower prices would be economically beneficial, even if some olds who bought at over-inflated prices in the mid-2000s get pushed out to Florida or Arizona or (Allah forbid!) have to rent.

Lastly, about the sick people, if they got sick through their own bad choices, it's their problem.

Submitted by FlyerInHi on February 24, 2015 - 3:47pm.

Spd, if you don't believe preserving and growing GDP is a worthy policy goal, then you clearly fall outside the mainstream.

Btw, the young lose their jobs sooner than the olds because they olds have "experience" and hold the levers of the establishment.

Also the young bitch a lot but they don't vote so they don't have much less say over policy.

Submitted by spdrun on February 24, 2015 - 3:57pm.

All the more reason why the young should be given a leg up over the codgers rather than bailing out codgers who should have known better and still fucked up bigtime :)

And no, increased GDP isn't always a worthy goal. It's only a good goal inasmuch as it increases standard of living. Expensive housing actually increases expenses without necessarily increasing productivity much and tends to benefit established people vs relative newcomers. Immigrants and newcomers tend to be driving forces in an economy. Especially an economy as based on knowledge and technology as San Diego's.

Submitted by FlyerInHi on February 24, 2015 - 4:08pm.

The Fed does not care about prices. They care about new construction.

Unfortunately, in many markets there is no profit in construction unless there are higher prices.

Submitted by spdrun on February 24, 2015 - 5:45pm.

And I disagree with construction as a welfare program for extreme southerners and high-school dropouts. Construction should occur where it makes sense. Demand will raise prices to where it does in places where it makes sense. If you have construction for the sake of construction, you end up with sprawled shitholes like the outer burbs of Phoenix and Vegas.

Submitted by The-Shoveler on February 24, 2015 - 6:09pm.

AS long as there is not a severe recession, I don't see a housing crash, and I don't see a severe recession coming without severe stupidity on the part of the fed (not likely IMO) or war (which is unfortunately somewhat possible IMO).

In absents of those two I think there will be demand until 2020 just based on demographics.

Anyway IMO.

Submitted by FlyerInHi on February 24, 2015 - 6:15pm.

Not my cup of tea, but the outer suburbs of Vegas are better than the close-in burbs. Look up summelin and herderson anthem. High end 4000sf houses abound. Vegas had a phenomenal crash but also an awesome recovery which still hasn't made everyone whole on a nominal basis.

I hate McMansions but they do provide jobs and lots them.

Submitted by spdrun on February 24, 2015 - 6:26pm.

Places like Summerlin are the exception. So you support over-building where there's not much demand in order to provide jobs? That's not terribly productive nor good for the environment.

Last I checked, people in a given industry (construction workers, auto workers, etc) aren't entitled to jobs just because they've always worked in it.

Submitted by FlyerInHi on February 24, 2015 - 6:43pm.

Not over building. There's plenty of demand otherwise the houses would sit unsold.

Btw Howard Hughes got the land for almost nothing. One of the best land deals in history.

Submitted by spdrun on February 24, 2015 - 6:48pm.

Vegas and Phoenix areas have no shortage of vacant buildings in areas that were overbuilt.

http://lasvegassun.com/news/2015/feb/22/...

Submitted by FlyerInHi on February 24, 2015 - 6:57pm.

Irrelevant. The new ones are selling.
When it comes to houses, builders buld only when there's a buyer.

Submitted by spdrun on February 24, 2015 - 7:15pm.

Maybe the new ones are selling now. Presumably, they took a crowbar to the yarbles in 2009 and are being a lot more careful about where, when, and how to build. But your quip about building only when there's a buyer is factually incorrect. There have been many buildings and developments that have ended up unsold. Builders build when buyers are forecast, generally not after they've all paid.

A return to the conditions of 2005-2007 (which is some idiots' idea of a "full recovery") would be idiotic.

Submitted by FlyerInHi on February 24, 2015 - 7:23pm.

Bulilders no longer mass build on spec. Inventory is low. And building is not robust like in haydays.

also sometimes developers got projects for pennies so they can afford to be patient. look up the gramercy complex in Vegas.

Submitted by spdrun on February 24, 2015 - 7:29pm.

Exactly -- they've gotten a lot smarter. For now.

Submitted by svelte on February 24, 2015 - 10:36pm.

Get a room, you two!

Submitted by Jazzman on February 26, 2015 - 11:29pm.

You can't predict how severe a recession will be but one is due. You also can't predict how much of an effect it will have on housing, but recessions impact prices negatively. As worrying are levels of debt globally, and the effects of QE on asset values. Although Greenspan has lost credibility, he recently said he believes there is no exit from QE without severe consequences. Prices increased very rapidly in 2013/14 and that seems to have been driven by low interest rates, low inventory, and high investor activity. None of that seems 'normal' to me so I'd argue it is unsustainable. We've seen a slow down in prices more recently, and I don't think it would take a lot to turn the tide. If affordability measures still indicate values are on the high side, its seem reasonable to assume some kind of reversion to the mean is written into the script. So late 2016 gives plenty of time to see how all these elements play out. I'd keep a close eye on sales, inventory, prices, price reductions, days on market, list to sales ratios for any other signs of an end to the sellers' market.

Submitted by FlyerInHi on February 27, 2015 - 1:14am.

QE lowers rates for sure.

But don't higher levels of debts equate to higher levels of savings? Debt to one party is savings to another. That could just be indicative of a larger global economy.

Submitted by CA renter on February 27, 2015 - 4:33am.

FlyerInHi wrote:
QE lowers rates for sure.

But don't higher levels of debts equate to higher levels of savings? Debt to one party is savings to another. That could just be indicative of a larger global economy.

No, because of fractional reserve banking. There is always more debt in the system than real money (however one might want to define that). When debt levels and debt ratios are high, problems usually follow.

Submitted by Jazzman on February 27, 2015 - 11:59am.

CA renter wrote:
FlyerInHi wrote:
QE lowers rates for sure.

But don't higher levels of debts equate to higher levels of savings? Debt to one party is savings to another. That could just be indicative of a larger global economy.

No, because of fractional reserve banking. There is always more debt in the system than real money (however one might want to define that). When debt levels and debt ratios are high, problems usually follow.

That is my interpretation as well. Debt and savings sit on different sides of a balance sheet so are opposites. Higher levels of debt equate to higher levels of consumption, spending, and investment, which is not quite the same as 'cash' savings. If you borrow to buy a used car, that money goes into the seller's pocket, which he may save, spend or pay off a loan. You could argue either way it goes back into the economy, and that even 'cash' savings are circulating. The distinction has become somewhat blurred I suppose, but I see savings as fenced off in terms of proprietorship. It represents the most fundamental individual right to value ('backed by the full faith etc...').

Levels of personal debt to income expanded during the debt crisis, and although de-leveraging has been impressive, it is still high and needs to be viewed in the context of the cost of borrowing, which as we know is very low. Levels of debt to income and GDP vary globally and some countries seem to court disaster. If central banks worry about one thing, it's probably not so much asset bubbles, but levels of debt.

I don't know how interconnected the world is in terms of personal debt, but we've already seen the results of exported collateralized risk around the world.

Perhaps it's old fashioned to want to go back to the days when people saved, banks lent based on savings, and productivity grew the economy. If the last couple of decades is the new normal, we still haven't got to grips with it ...IMHO. Any that to me represents volatility.

Submitted by CA renter on February 27, 2015 - 9:20pm.

Agreed, Jazzman.

Submitted by FlyerInHi on February 28, 2015 - 1:12pm.

Someone owns the debt that someone else incurs.
Remember your college accounting class?

The problem is when value of the collateral drops and debts aren't repaid which lowers the value of the debt (savings for whoever owns the debt).

It doesn't matter if the money was created through fractional reserve banking.

Plus higher levels of consumption, spending and investment are good to improve our standards of living.

Cash savings as a store of wealth sucks as it should be. You should rightly be required to do some work and purchase assets that do store value.

Economics is an evolving field of study. And I believe that economists understand a lot more today that then did a few decades back.

Back a few decades ago, only the "first world" practiced good economics. The "second/communist world" was managed through crazy 5-year plans. And the "third world" was dictatorships by uneducated strongmen/revolutionaries who had just come out of jungle.

Now, the whole world is becoming integrated in a worldwide economy.

Submitted by spdrun on February 28, 2015 - 4:30pm.

And that's where we disagree. Humans shouldn't be required to work for work's sake. A truly evolved economy would follow Keynes' prediction of a 15 hour work week.

Submitted by FlyerInHi on February 28, 2015 - 7:19pm.

I don't think we disagree on economics. Maybe we disagree on happiness. I just assume that more economic goods and services such as massages and vacations equal more aggregate happiness.

Free stuff such as walking around don't count because that what unemployed people do which don't contribute to the economy. Unemployed Italians walk around Rome practicing thievery. But a paid trip to Rome is great for the world economy.

There is more money now and more savings/debt sloshing around the world. A lot of wealth was created when the Second and Third worlds joined the global economy, esentilaly since the 1990s. With lots of savings around low rates are the new normal.

Want to earn more on your savings? Don't hold cash. Do something with it. I think economists would agree that's the way it should be.

Submitted by spdrun on February 28, 2015 - 8:05pm.

Nothing wrong with just walking around -- it's healthy. I try to walk at least 6 miles a day. Personally, I think that a lot of the US's woes would be solved if people took the time to walk one or two hours out of the day.

Not every activity that promotes human happiness and health needs to involve the exchange of money.

It might even render a few doctors, personal trainers, and liposuction specialists unemployed, but if so, good riddance. On the other hand, sales of comfy walking shoes should go through the roof!

Submitted by scaredyclassic on February 28, 2015 - 8:40pm.

All of man's unhappiness stems from his inability to sit quietly alone in a room.

Or go for a simple walk.

Submitted by NotCranky on February 28, 2015 - 9:17pm.

I walked 9 miles yesterday and didn't steal anything. Of course , I wasn't in Rome.

I like your lifestyle attitudes SPDRUN, a lot of really important things wouldn't get done if everybody lived by them though. It truly takes all kinds. A lot of the economy is driven by war machines , toxic shit, and conning the "consumer", bullying the little guy, and more, more, more, types like, Brian. it's good that some people refuse to get real into those things. We need honest people who sometimes refuse to play. They , we , are an important part of nature's checks and balances.

Submitted by spdrun on February 28, 2015 - 9:24pm.

I'm going to jump to Brian's defense here and say that while cynical, I don't think he's a bad type.

Maybe he was thinking of the Romani (not so much from Rome), which have a reputation for certain activities?

Submitted by FlyerInHi on February 28, 2015 - 10:12pm.

People say they want the simple pleasures of life. But when money/goods are in short supply, all hell breaks loose.

Walking is not at odds with good economics and capitalism: New York and London.

But another example: Hong Kong. People over there walk miles and miles everyday, but they are busy and have places to go. When I last visited, I did not see any free public or private bench for resting (except at the park). There are acres of malls and shops to through. But want to rest? You gotta pay! (American malls have benches everywhere).

40 years ago, HK was a Third World place producing cheap toys. Now, one of the wealthiest on earth, on par with NYC, and always ranked near the top on OECD reports. And frequently declared by Cato as a example of good economics, with the highest degree of economic freedom.
http://en.wikipedia.org/wiki/Economy_of_...

Submitted by FlyerInHi on February 28, 2015 - 10:11pm.

spdrun wrote:

Maybe he was thinking of the Romani (not so much from Rome), which have a reputation for certain activities?

Italy has always been known for pickpockets.

Maybe it's worse now with freedom of movement in Europe so the Romani have come to various capitals. I don't blame them because they don't have economic opportunities (read money). Too much idle time combined with desires for consumer goods is a really bad situation.

Submitted by CA renter on March 4, 2015 - 1:12am.

scaredyclassic wrote:
All of man's unhappiness stems from his inability to sit quietly alone in a room.

Or go for a simple walk.

And be content with what he already has.

The #1 way to guarantee unhappiness is to always wish for more than what you already have. There is a lot to be said for low expectations and simple desires.

(I know you already know this, scaredy; just chiming in to back it up!)

Submitted by CA renter on March 4, 2015 - 1:17am.

FlyerInHi wrote:
People say they want the simple pleasures of life. But when money/goods are in short supply, all hell breaks loose.

Walking is not at odds with good economics and capitalism: New York and London.

But another example: Hong Kong. People over there walk miles and miles everyday, but they are busy and have places to go. When I last visited, I did not see any free public or private bench for resting (except at the park). There are acres of malls and shops to through. But want to rest? You gotta pay! (American malls have benches everywhere).

40 years ago, HK was a Third World place producing cheap toys. Now, one of the wealthiest on earth, on par with NYC, and always ranked near the top on OECD reports. And frequently declared by Cato as a example of good economics, with the highest degree of economic freedom.
http://en.wikipedia.org/wiki/Economy_of_Hong_Kong

If people feel safe and secure, you'd be surprised how content they can be with relatively little. I think the tendency to hoard, including the impulse to constantly shop for new things, is due to a feeling of vulnerability.

It's true that we need those ADHD, Type A folks to really grow the economy, but one can also grow the economy to the point of extinction if we use up resources in an unsustainable manner, or if we create such inequality/oppression that non-stop wars become inevitable.

We need to find a sustainable middle ground, IMHO.

Submitted by Jazzman on March 5, 2015 - 12:30am.

FlyerInHi wrote:

Want to earn more on your savings? Don't hold cash. Do something with it. I think economists would agree that's the way it should be.

That is central bank speak for invest is risky assets as a rising equity market is good for the economy …or so Ayn Rand disciples thought. What it means is the economy is in dire straits and is the equivalent of a financial 'draft'. A monetary Vietnam if you will.

Submitted by Jazzman on March 5, 2015 - 12:47am.

FlyerInHi wrote:
Someone owns the debt that someone else incurs.
Remember your college accounting class?

Plus higher levels of consumption, spending and investment are good to improve our standards of living.

Cash savings as a store of wealth sucks as it should be. You should rightly be required to do some work and purchase assets that do store value.

Consumption is not what used to drive economies. A trade surplus was the goal. Think where it ends with finite resources. If Chinese consumers have what US consumers have, we would very quickly run out of natural resources. Make no mistake, they want it. Now add in India.

Cash savings were always put to use. It was how banks lent money and enabled home ownership. A debt dependent system is a zero sum game. Ownership is substituted for debt enslavement. It drives up the real cost of living. Look at house prices and education.

Submitted by FlyerInHi on March 5, 2015 - 2:04pm.

Absolutely, everyone in China and India can enjoy a high standard of living. The future won't be what we have now.... lifestyles evolve.

debt is savings. you cannot prove otherwise. the only problem is that during recessions, debts go unpaid, so savings lose value, thereby resulting in a contraction in spending.

Also, some accounting standards are unhelpful, requiring markdown of debt assets, even though default has not yet occurred.

Submitted by Jazzman on March 6, 2015 - 11:02pm.

Ultimately, it will depend on your definition of 'savings'. Borrowed money is purchasing power, but that is where the similarity ends. Doing the same thing doesn't mean they are same the thing. Savings guarantee certain rights. Debt reverses those rights.

Submitted by svelte on March 7, 2015 - 12:23am.

I've got realtor friends in San Diego and they say the traffic through model homes and tour requests through other homes is off the hook right now.

Multiple offers on every offer they write.

That can't help do anything but raise prices.

Can't speak for OC, but I doubt it's much different.

Submitted by spdrun on March 7, 2015 - 12:33am.

What kind of homes are they selling. This doesn't appear true for the market as a whole...

http://www.utsandiego.com/news/2015/feb/...

Submitted by svelte on March 7, 2015 - 12:45am.

spdrun wrote:
What kind of homes are they selling. This doesn't appear true for the market as a whole...

http://www.utsandiego.com/news/2015/feb/17/dataquick-january-realestate-home-sales-mortgage/

Those are lagging indicators.

Check back on what is written two months from now...

Submitted by spdrun on March 7, 2015 - 1:16am.

It's also spring, we'll see.

Indicators (and markets) have been all over the map since October 2014.

Submitted by fun4vnay2 on March 7, 2015 - 8:30am.

If properties have multiple offers, it reminds me of the days of 2004/2005, at the top of the bubble.
Are we back to bubble territory ? The wages have not grown for sure..

Submitted by svelte on March 7, 2015 - 8:43am.

Rising prices are also being confirmed by Jim the Realtor:

http://www.bubbleinfo.com/2015/03/06/nsd...

http://www.bubbleinfo.com/2015/03/04/ver...

Submitted by fun4vnay2 on March 7, 2015 - 8:54am.

I remember a realtor predicting a 21% increase for SD for 2014 in a news article.
The prices may be going up. Personally, I think the SD home prices are over the roof for working families. The wages have not grown fast enough.
My gut feeling is: a correction is coming. No one knows when.

People may argue with "this time is different". I was told similar story in 2006 when I was looking for a house. Everyone told me that unless you buy now, you'd be priced out for ever.
They had facts in their side about SD home prices never going down: awesome weather, zoning restriction, good job market blah blah blah..
But in 2007/7 looking at the state of the housing market, I decided to wait for the madness to cool down and finally bought in 2011.

Let's see. Uncertainty is another name for fun