Irvine Housing Report for October 2013
No Fall this Fall 2013 in the Irvine Housing Market
As we enter the last quarter of 2013, we continue to see a strong desire for Buyers to purchase at healthy prices that Sellers have set which we have experienced all year. In other words, the rebound continues
While the naysayers continue to blast that the housing bubble is fast approaching, the Buyers that are on board are enjoying new ownership in their replacement home, and Sellers are celebrating their fully valued prices, which eighteen months ago would have been far-fetched fantasy.
The real estate market continues to exhibit the health, breadth, and vitality that is symptomatic of better things to come–albeit at a slower rate of acceleration–but still at higher prices.
The large builders, locally, previewed eight new home developments in the Five Points community at the north end of the Great Park last weekend to upwards of 5,000 visitors according to the Orange County Register. Many were eager to enter into a purchase contract immediately and the salespeople expected to be fully sold out of their first phase within days–rather auspicious opening. We can recall when Laguna Altera debuted in May of 2011, it took nearly eighteen month before the demand was created.
The Portola Springs community, according to the Irvine Company’s developer, is experiencing such increased demand as to requiring the Irvine Unified School District to speed up their plan to open a new school to service the expanding community by 2015–two years earlier than initially projected. Further, the District plans to open an interim school in Portola Springs in the fall of 2014 to alleviate capacity issues at Stonegate elementary school which is fast approaching its capacity.
With approximately 5,000 homes already scheduled to be built in the Five Points community, plus an additional 4,900 under consideration by local officials, the future of housing in Irvine is responding in a in a big way to the improved fundamentals.
While most casual observers would deduce that more supply equals pressure on prices, the opposite is true in that mega builders with deep pockets build out areas with their marketing expertise and create heightened demand. In addition, builders do not cut prices. Each phase has a higher price point to get potential Buyers excited, and previous Buyers satisfied.
When builders see a slow down in aggregate demand, they build at a slower pace or they add features that were previously options to sweeten the pie. In sum, real estate prices in Irvine will be appreciating for the next eighteen to twenty-four months.
The local Real Estate Market is already up 25% year-to-date in many neighborhoods which translates into over a 30% annual growth projection. We recall that at the beginning of the year, the Irvine Company expected 4.5% to 6% growth for the entire year. The price appreciation would double what was predicted, and, with the 20+% growth in prices in calendar year 2012 locally, the 30% appreciation would be completely unpredicted, unexpected and match 2004-2005 run up in prices.
What can we expect?
The real estate market is strong and remains strong. Prices are stable currently. Orange County real estate prices were up over 20% year over year. Irvine real estate prices are up over 25% year over year. All twenty cities in the Case-Schiller Index were up four months in a row for the first time in eight years and the Nationwide gain was 12% year over year.
The active inventory has ceased increasing by 5% per week these last six weeks, and has increased by less than 5% in the last month. The inventory seems to have reached a temporary equilibrium point. The demand which had remained stationary between 330 and 370 for the last four months is now slightly declining, which can be attributed to the recent large spike in interest rates and seasonal slow down of buyers. (The school year has started.)
The prices of homes entering the market are still increasing, but the speed in which they are selling has slowed down. In addition, we have seen a lowering of prices of some homes which have been on the market more than 30 days.
Even with an increasing number of homes coming on the market, at what appears to be overly optimistic prices, homes are still receiving offers. The selling prices have surpassed 2005-2006 levels in many neighborhoods of Irvine.
We expect the “new normal” to be altered slightly in these next few months. As we head toward the end of the year, prices should flatten as they do seasonally. The Sellers, who remain on the market, will be more motivated to sell, while their will be less aggregate demand for Buyers. Consequently, the next three months should not see as much price appreciation. In sum, we expect a pause in the price appreciation of homes, but not the end of the boom locally.
As the new homes market gears up to accommodate the demand, plus as the resale market has added additional inventory, we expect the supply to start to satisfy the potential pool of Buyers, and we would expect the appreciation of prices to slow as we enter the fall.
Take a look at the current charts below to get a picture of what have outlined for you.
We are including our FREE market report, so that you may keep abreast of the conditions impacting your local neighborhood in Irvine. We believe our city is a unique real estate environment. While macro economic conditions impact our local housing market, we cannot and should not rely solely on National and Countywide news sources for our local housing trends. These broader housing statistics do not accurately reflect what is happening in your local neighborhood. While the nation had 12% growth year-over-year, according to the Case-Schiller Index, we had 25% growth.
Our monthly reports track your neighborhood’s inventory, median price, price per square foot, median sales price, average days on market and more. Our market reports are updated regularly, and are FREE to you, so that you can stay “ahead of the curve” as to the direction in which the housing market is heading throughout the year and at absolutely no risk.
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Cheers and best wishes from our home and hearth to yours.