Irvine Housing Blog

The more likely scenario is that much of SoCal becomes dominated by elderly retirees living in big homes filled with rooms they never visit. It’s already quite common to see hoods where new residents pay 10x the property tax compared to their older neighbors. Why would boomers give up their perceived “equity” and property tax advantage just to downsize? Especially the ones with tight fixed incomes. Meanwhile younger families will still have the choice of cramming into apartments or smaller houses, or taking on massive debt/tax burden for the bigger homes.

Even large houses are rather small in CA (comparatively speaking) so I would not bet on downsizing happening

We have had a similar issue on a much smaller scale.  We’ve been trying to fill an attorney position with a particular type of experience for months.  We have tried to attract attorneys we know well who live in other areas of the country.  The universal response is they’re nervous that the salary is high, but would not make-up for the other high costs.

Who knew $600K average homes would deter people from moving to the Irvine area?

The shock is your $600K average Ivine home is only $200K in Texas.  That’s $400K difference, meaning you have to save $600K+ to make up the difference since you buy your home with post-tax money.  So you end up giving up a couple years of salary to pay for the difference in home prices between Irvine and TX.  My prediction is that homes will continue to come down and jobs will continue to move out of state until the “Irvine premium” becomes more realistic.

Higher skills translate into higher wages.  The high-skill laborer might be in the Alternative Minimum Tax bracket.  In doing so, California’s high tax is just like money down the toilet for the ones relocating from Texas.

You must be fvcking desperate to move to Irvine.

Yes, but now the time scale is not 2 to 5 years but 15 to 25 years. So slow and gradual that prices are only drifting down, or not growing at some historical 3% that people seem to think is normal. I think that waiting for Baby Boomers sales driving prices down will be a long wait beyond anyone’s patience. Maybe good for their grandkids though.

...They (and those who are older still) will die…

I follow R/E in Turtle rock and Corona Del Mar.  I do see a fair number of R/E estate sales.  Hard to tell if the current rate of for sales are above the historical norm.

A related issue is the topic of “must sells”.

Must sells would include death, divorce, marriage and forced job change.

(i.e. husband/wife both have kids from previous marriages and can’t live in present household OR
husband/wife both each have 1 unaffordable home and must sell 1 to afford the other).

I have often wondered if the must sells will finally break the market loose.

My reasoning is that if a critical mass of homeowners die, get divorced, get married or change jobs it would force average prices down simply because they are on a very tight time-to-sell deadlines.  (As opposed to the banks which seem to be happy to let squatters squat.)

What number would constitute a critical mass?  It would certainly vary by neighborhood, but my hunch is that it wouldn’t take very many.

After all, it didn’t take very many sales in a rising market to force the neighborhood valuations up.

The R/E valuation knife cuts both ways.

They (and those who are older still) will die.

It’s an open question for me as to how many boomers will downsize.

Sure, there are those who simply must bail, because their retirement savings is nil, but I have no idea how many of those own in the top half of the market, which is the segmen still needing some help over the cliff.

And those who sensibly should sell will, indeed, die in situ. I have known wealthy people who downsized in favor of modest houses after 70, but many become emotionally immobile: Change is ruled out, no matter how sensible. A friend in social services in the Santa Barbara claims that much of the higher-end properties have old couples living in them - one or both impaired physically or mentally: why not die in the high-status neighborhood you were born into or worked to attain, even if you can no longer get to the second floor?

What will drive boomers to move is the higher costs of their current homes.  Take high HOA dues, living somewhere where lots of driving is needed, and more on utilities.  Even if they have equity, a lot of what might have been available through heloc is no longer.  My in-laws have a 4 BR home that has had just them, apart from visits from my family and my sister-in-law.  There is a hotel within walking distance, so I don’t know if the extra 3 bedrooms are really justified.  My father-in-law’s parents downsized in their mid-50’s to a small condo.  The different attitudes towards housing consumption are interesting to observe.

I heard this quote on TV a couple times last week, “Anywhere the olive tree grows, tax collection is not systematic.”

Pretty much covers Greece, Spain and Italy.