Is Irvine about to Play a Bigger Role in the Great Unwind in Housing Prices?
As everyone knows by now, we are on the bursting side of a housing bubble. During the bubble, housing prices soared to a level that was not in line with most incomes. Now that the bubble has burst, we are in a deflating period that will bring housing prices down to a level that is a reasonable income-to-housing-price ratio.
Like other Orange County cities, Irvine has been affected by this drop in home prices. However, prices in Irvine have experienced more immunity to the price deceases than other cities–especially in the mid-priced range. Will this immunity continue in 2010?
Larry Roberts (aka IrvineRenter) of the Irvine Housing Blog makes some interesting predictions for the 2010 Irvine housing market. Here they are:
Inventory will increase in 2010.
Eventually, lenders are going to have to foreclose on properties, kick out the squatters, and resell the houses in the resale market. Inventory is coming; how much of that we will see in 2010 is anyone’s guess, but I believe we will see much more than we saw in 2009.
Affordability will improve as mid to high end properties are released to the market, and prices of the houses of greatest interest to buyers in Irvine should come down because, despite the buyer interest, there are more properties in distress than there are buyers interested in obtaining them.
Prices in Irvine will fall 2%-5% in 2010.
Increasing interest rates will decrease affordability, and increasing supply will force sales onto the market. The combination will cause prices to begin a multi-year slow decline similar to the 1994-1997 period. The price decline will not be orderly, and the relative stability in the median will mask seismic shifts within the market at sales composition changes (more mid to high end properties will sell) and prices of individual properties decline.
Properties selling at or below rental parity become the norm in 2010.
As I have noted on other occasions, many properties, even in Irvine, are trading at or below rental parity. This will happen more often, and it will happen at higher and higher price points.
What do you think? Will Irvine home prices continue to hold up relatively well? Or is Irvine housing about to play a bigger role in the Big Unwind in Housing Prices?
See Roberts’ IHB post for more 2010 housing predictions. You will also see how his predictions for 2009 panned out.