patrick.net

hokies,

I think the operative word is "some" in your post relative to properties are selling. It is the larger market that is not. There are always anomalies, and that is all you point out, and that is why you are a labeled a troll. The larger trend is the point and the focus here. And that trend has become clear.

By the by, that is a pretty nice condo. If I had 1.5 mil cash layin' around, I'd buy it, if I didn't mind losing half of it.

Hokies posted a condo URL and wrote:

"Went 55K over asking and supposedly closed last week. People are still buying."

The deal did sell for above asking price and it recorded in early March. The title report said that the same unit sold in 2003 for $800K so it has appreciated by almost $200K a year since then. I wish I listened to my REALTOR friends and bought it so I can sell for $2mm in three years (or maybe wait another 5 years and sell for $3mm) since there is no such thing as a real estate bubble condos that were "selling" for $200K in the mid 90's will now "appreciate" by $200K per year from now on... At the current price the buyer will be paying about $1,800 per month in Property Taxes and HOA fees + a mortgage that may be as high as $8,000 a month. Sure you could rent a nice condo in Pacific Heights for $55K a year less but when you add the virtually guaranteed $200K appreciation (since there is no bubble) buying seems like a great deal...

Well said, AptBroker. I agree with you totally. But since I am a total loser without a half-million downpayment, if you buy it I will be more than happy to rent it from you for $1,800/month. Like I said, it's a nice place. I'll sign a five year lease TODAY! I'm a really, really good tenant. I promise. You don't need verification of income, or credit, or anything silly like that, right? Just think of it, you will be laughing merrily as I fork over my pittance to you month after month after month while you bask in the gluttony of never ending appreciation.

I'll buy when I'm darn good and ready to...and not a minute before. The more the realt-whores and trolls tell me to buy, the less likely I am to buy. Maybe it'll be one year...maybe five...maybe not until my kid goes away to college. I would have to find the right house , for the right price, in the right area.

I’m with SQT’s camp too. Using your assumption that the poor are permanently priced out and your point that rent is lower than ownership, it stands to reason that the rich are actually subsidizing the poor through low cost rentals.

Of course this is all true ceteris paribus. As you factor in inflation over time the value of holding real assets, even initially cash flow negative real assets (held long enough), becomes valuable. The proposition I'm forwarding is one of real asset accumulation over time, not one of short-term "point" cash flow analysis. The rich aren't subsidizing the poor at all when looking at it through this lens. The poor are being "taxed" by inflation that the rich have avoided.

Just to emphasize: I'm not denying there is a bubble; I'm a strong believer that theoretically supportable prices have diverged from observed prices. What I am saying is that rent-to-mortgage ratios may not be as useful of a metric as meets the eye. I'd hate to see anyone miss the "buy signal" because they're waiting for rent = PITI when it will probably never happen.

OwnerOccupier,

There’s a UCLA physicist who modeled the RE crash, and he was spot on in timing the turn of the market (first quarter 2006). He was using some kind of momentum/fluid dynamics in predicting when the market should turn, and I personally like his approach better than models with too many assumptions on a plethora of variables.

His name is Didier Sornett, he also has other publications regarding the crash of the stock market.

Thanks, I'll look him up. We talked a bit about fluid-dynamics models in our discussions. Fewlish was a big proponent for Brownian motion based models. I am a believer in any model driven by Cellular Autonoma algorithms, regardless of the underlying physics (I am not a physicist, so I leave this stuff to those more appropriated schooled).

PS
Well said.

Linda, why am I a troll?

Perhaps it's because you are? Then again you might just be a castrated turkey.

Watch when the wealthy start buying RE again. Just like watching the wealthy dump their RE in spring/summer of 2005 was a signal to sell.

I would defnitely recommend buying a house to the wife when:

1) Our PITI to income ratio for a 3/2 1800 sq/ft home in good condition that has a good view of the SF skyline is 20%.
2) A realt-whore says "prices have actually gone down 40% in the Bay Area for the past two years and if you adjust for inflation, it's actually gone down over 50%. Now may not be a good time to buy unless you want to be an owner occupier and are not looking to own for investment purposes"

We don't have a lot of HAHAs and we don't make all that much (for the bay area), so #1 is not too likely to happen unless/until a 40-50% correction occurs in the housing market or I get a hefty raise. I don't know if we'll ever meet a realtor honest enough to say something like #2. But, I do experience periods of optimism in my life, so perhaps #1 and #2 could occur sometime between 3 and 5 years from now. Although dreaming usually isn't considered rational, I am allowed to dream =)

Unalloyed,

Warren Buffet dumped his California coastal vacation property in 2003. He started hoarding silver in 1998. California didn't top out till 2005 and silver didn't bottom out till 2001.

I hope he will still be alive and healthy in 10 years. I will try to time it 2 years after his entry :-)

Another data point, he started shorting USD in 2005, but had to cover when the market went against his position. He is still negative, but has taken a different stragety instead of timing the fall - buying shares of companies that derive most of their revenue overseas. Given his great track record and a bit-too-early timing, we should expect the fall of USD in 2007 perhaps?

In Bay Area I'm waiting for 50% price reductions. Until then I continue to enjoy my cheap and comfortable renting in a beautiful neighborhood with excellent schools. No hard feelings. I'm kind of sorry though for my landlord who's watching the value of his property falling while subsidizing my rent. He probably keeps dreaming about RE prices going up 10%+ every year. Isn't it a cute dream?

Forget timing: nationalise real estate, fix interest rates, control prices and even out the boom-bust cycle! Publicly execute realtors on a weekly basis who have been found to misrepresent property or stretch the truth, to 'encourage' the others...

the really disgusting thing is that realtors and others in the industry are always offered the best deals, are the first to know of a bargain, are always sniffing the wind on pricing, are in bed with developers, etc.

there's been a few real estate agents prosecuted here for really obvious scams of little old ladies, there was recently a prosecution of a network of about 10 mortgage brokers and realtors operating in one area, basically buying property low and selling it high by misleading vendors.

who knows what they're up to? for every prosecution or public shaming, how many more scams and insider dealings are perpetrated at the consumer's expense?

I personally can’t see why a purely rational person would want to own rather than rent. Tying so much of my net worth to one un-diversified investment is not optimal, and there ought to be a discount for that.

that's true, astrid, a study showed that investment in shares outstripped one in property over 20 years. however, unfortunately, you're either choosing to put a big slab of your earnings into rent or a big slab into home equity. when you look at the % of your earnings that will ordinarily go into rent or a mortgage, putting it into a mortgage is probably a better option, except when prices are through the roof, or you just can't get into the market. it's only if you have massive discretionary income left after paying your rent/mortgage that other choices of investment make sense.

and what happens when you're still paying rent into your fixed low income retirement? the reality for renters is that a significant % of their weekly earnings went into rent, they didn't squirrel loads extra away for retirement. peoples' mileage may vary here...

one recent analysis of sydney property suggested you would would make a loss for 35 years of holding an investment property purchased with a 100% loan - after that you would just break even. of course, if you paid cash for a property, you might get a 3% return on it from Day 1 - lower than just about any other investment. the 'bubble' prices in CA, DC, etc, would suggest a similar low ROI...

lovy Says:
"Before this insane appreciation about between 1996 to 2005 what was the rent Vs Mortgage of a similar house for BA."

From 1970 to 1998 you could buy almost any "normal" home or condo in the Bay Area (not including 12,000 sf mansions in Pacific Heights or 500 sf shacks in Stinson Beach) and other than around the 1980 interest rate spike the fully amortized 30 year mortgage payment with a 20-25% down payment was almost always less than the rent you could get for the home or condo...

Different Sean Says:

“a study showed that investment in shares outstripped one in property over 20 years”

And

“one recent analysis of Sydney property suggested you would make a loss for 35 years of holding an investment property purchased with a 100% loan - after that you would just break even.”

How about some links to the studies?

I am certain that there is a Real Estate bubble, but:

1. No major stock market index has done as well as real estate over the past 20 years (sure some study may have found that if you bought Microsoft and Cisco 20 years ago you would have outstripped the returns of the guy that bought an Ohio apartment complex 20 years ago).

2. Even using the lowest annual inflation that Australia has ever had and assumes that is stays that low for 35 years and the worst variable rate loan ever an investment property will cash flow a lot sooner. This does not make any sense at all…

There is a lot of good data in this HSBC document, including rent-to-[PITI] ratios on page 32/33.

@astrid:
You’re assuming that RE will be able to beat inflation more effectively than any other investment vehicle. [...]
As I see it, there are two logical reasons to price owning higher than rent, after factoring in inflation

The demand function for the rental market is different than the demand function for the homeowner market. Elasticities are different, transactional frictions are different, and capital budgeting concerns are vastly different. A rental-income operator can be free cash flow positive over the term even with rent-to-mortgage ratios being 0.5 or lower, primarily an effect of making smart capital budgeting decisions.

Don't forget that what drives rental market pricing is not SFHs or condos for rent by small speculators or distressed owners. Pricing in this market is driven by scale operators and smaller, hyper-efficient (smart) operators (like two regulars to this blog). Rental market pricing is far more efficient than housing market pricing.

These things alone, even without considering inflation at all, ensure that PITI will always be greater than Rent. I can't find the graph again, but I think the last time Rent was greater than PITI was during the Depression, and before that it was when only landowners could vote and only white men could be landowners.

Of course I agree that a properly financially engineered inflation hedge will beat home ownerships as a pure inflation hedge. The cost and complexity of such instruments is beyond most people. In normal, non bubble times, a home is a nice form of long-term inflation protected personal savings.

FAB,

1. No major stock market index has done as well as real estate over the past 20 years (sure some study may have found that if you bought Microsoft and Cisco 20 years ago you would have outstripped the returns of the guy that bought an Ohio apartment complex 20 years ago).

The "stock index beat RE" proposition is based purely upon primary residential home ownership as savings vs. stock index investment as savings, with no consideration given to other opportunity costs. I am not convinced that this will continue to be true in the future, but it has been (barely) true in the past. By barely I mean that, when considering margin of error, savings through home ownership is about the same as savings through a market index.

Since the above ignores taxes, RE is better because of the marginal tax benefit _over time_ and _in normal times_. Like you, I think the current bubble skews everything making all this analysis invalid for now.

Robert Campbell,

Just for clarity, our ideas are oriented towards creating an emergent behavior simulator which might hopefully show some interesting outputs. Since we're all deep in RE related data and thought right now, this seemed a tractable problem domain to explore.

In honesty, I think we're going to run into practical computational limits fairly quickly.

This chart was posted on Ben's blog:
foreclosureforum.com/mb/messages/16791.html

After digesting the details, what I found interesting is the overall (25-yr) downtrend. What does it indicate? It seems to mirror long-term downtrend in interest rates that I belive has occurred over similar period (going from memory on this)....

Bap33,

I don't think you're that far off, but I think your definitions of the 2 types of homebuyers is overly narrow. Homebuyers in your 1st group are not all alike; many are at different stages of life. For a young couple with their first home, perhaps many years from starting a family yet, and with reasonable expectations of income growth there is a very different importance put to resale value than to a midlife family with kids and roots, which is different than empty nesters looking to downgrade.

All of these people have different profiles but none are speculators, investors, or landlords.

Bap33,

I'm not a fan of regulatory solutions unless as a last resort or strategic policy. I'd rather the market be allowed to solve the problem since it is inevitably more efficient and creates less unintended consequences. I think once easy credit and exotic loans go away a lot of SFH rentals will become distressed and those houses should eventually re-enter the housing market (exiting the rental market). But, SFH rentals are always a very long overhang because people who bought these homes a long time ago can afford to rent them out for years to come, so perhaps there is no short/mid-term market based solution.

I don't like "excess profit taxes" of any type under any (fair) circumstances. Unless collusion or other outright illegal activity is uncovered, owners are deserved of any profits they earn. Taxing those for social engineering reasons will only create a whole bunch of unexpected results, probably punishing groups who were never a problem in the first place. I don't think outright banning of rentals is legal. Unless the homeowner enters into a CC&R up front, and those CCRs are legal, a city/county cannot simply prevent legitimate economic activity within zoning rules. And, zoning rules cannot be discriminatory, as rental prohibitions or limitations would be (economic discrimination is still discrimination).

FormerApt,

Australia taxation law is different from the US.

US has mortgage deduction for up to 2 homes per couple, for high-income families in high-tax states like California, that is a big saver. Australia ATO (equivalent of our IRS) does NOT allow mortgage interest deduction for your main residence, however, mortgage interest deduction for your investment property is allowed.

Australia does not have fixed-interest mortgage. If you look back the entire 90s on its RBA (Reserve Bank of Australia) site, the cash rate (equivalent of our Fed rate) was hovering at around 10%+ for a long time throughout the 80s and early 90s. Unlike the US home buyers, Aussies couldn't take advantage of lower-rate cycle to lock in a 30-year fixed mortgage.

Also, Australia has a much smaller population and economy compared to us, so the influx of foreign capital and immigrant money from UK, Singapore, Japan, Hong Kong and Taiwan were able to make much bigger swings both ways compared to the US. They have seen more spectacular RE busts in their major cities.

So combining all these factors, it won't be a surprise to me that Oz RE investment in general didn't perform that well over the longer term.

Linda,

thanks for the link, 3000 sf historical home, hmm, I am afraid the maintenance of this home will bankrupt me...

A Spring Bump?

Don't be surprised if there is one. Anecdotally, activity is picking up. I think that as long as mortgage rates stay low and the BA job recovery stays in gear we're likely to hear a lot on this board about how certain neighborhoods are started to appreciate again. We'll probably even see multiple offers for "good" homes. What I'm seeing in southern Marin is about a 1:10 ratio of good homes to crap for the same price. The good homes are selling fast still, usually with 1-3 offers and small premiums (over asking). Sellers seem to be favoring strong financing and all-cash deals. Inventory is growing fast, but 9 of every 10 homes are overpriced "me-too" properties which aren't moving at all. But good homes are gone sometimes before the first scheduled open house. I don't expect this dynamic to change until either a good old fashioned recession hits and/or the prices of the 90% crap homes starts to come down in earnest.

(This is a bit depressing to me because it means listening to the standard Realtor(tm) speil isn't likely to go away anytime soon.)

Down in the South Bay, competitively priced homes in a good location is still selling with multiple offers above asking, but the general market is still terribly slow.

A friend of mine was trying to bid on a Monta Vista school district home in Cupertino foothill area priced at 1.1M with a 1/3 acre lot, she lost out to about 15 bids, all above asking, it was sold within a couple of days. Then there was another listing which I felt was priced below current market, for a 2700-sf home on an acre view lot in Los Gatos priced at 1.6M or so, it was also sold within days. When I browse through listings, I have a pretty good feeling of which ones are good quality listings at a competitive price, and they usually sell within a couple of weeks.

However, 85% of the homes are just sitting and relisting with marginal reductions of 30-50K, or coming in and out of escrow. A realtor told me that nowadays, nobody is willing to pay above 2M for neighborhoods other than Saratoga and Los Altos Hills in Santa Clara County.

But good homes priced below market are always selling in good or bad times, so it is not surprising to me. As long as there are more good homes selling *below market*, that in itself will establish no comps on the way down.

astrid wrote:
"I believe you have to work to get section 8, so its at least not full fledged welfare abuse."

When I managed property not one of my section 8 tenants worked (but a small number of them do). My Dad currently has a few section 8 tenants and none of them work at all (even they all look like they should be doing something)...

"I don’t feel anger towards welfare mothers, vast majority of them are there because the choices of others in government and their life experience have lead them there".

With very very few exceptions welfare mothers are on welfare because THEY (not others) made very very poor choices (I dated a SF assistant who got in to law to help women before she quit in disgust). I heard story after story of stupid women who thought that their drug dealing abusive boyfriends would "change and marry them if they just got pregnant...

Bap33,

Like, what if Bill Gates bought every home in Modesto. Then just rented them out even money. Meaning the sum total of all rents services the note on the X Millions used to purchase the town. After a while he buys every home in Fresno and rents them out for even money. There is nothing that can be done? No limits in place? Just asking folks.

I don't think there are any regulatory limits in place which would prevent this. Although, there may be some kind of old laws in place in old rust-belt cities which were put in place either during the Great Depression or perhaps even early during the era of Industrialization. I know that, for example in Michigan, certain laws were put in place limiting what "Company Towns" could get away with. These are big-society kind of questions that probably get handled in state supreme and Federal courts (and don't happen too often, I suspect).

More importantly, Bill would have a hard time moving into even a small area like Modesto and buying up all the housing stock because of simple micro economics. After he begins buying (since he can't buy all the stock in a single transaction), the supply will go down and prices will rise. He will very quickly experience a disequilibrium point (picture a sloped supply and demand "X" graph, but then there is a break, like a stair-step in one or both lines). Owners of remaining housing stock realize their assets are much more valuable than before, and prices vacillate wildly. Bill says "screw this", and then things suck for a while before it all settles back into equilibrium. If he just tries to use his irresistible wealth to buy everything at any price, then see the above paragraph. (I don't think this would happen because, imagine you are the owner of the last home in Modesto. You rationally charge Bill a price exactly equal to what you expect his maximum remaining wealth is. This is the beauty of market economics in action).

Bap33 wrote:

"My sister inlaw is a prime example. Prego at 16, 17, and 19. Same POS doper dude for all 3 kids. She would have more kids but complications from a miscarrige resulted in tubes tied. She has never worked a day nor graduated school. Not because she was stupid, only lazy. Then she found drugs."

Sleeping with a "doper dude" at 16 = Stupid
Not getting on birth control when you are sleeping with your dude = Stupid
Not making your doper dude wear a condom (since many doper dudes are HIV positive) = Stupid
Having a second kid with doper dude = Stupid
Having a third kid with doper dude = Stupid
Not getting an education = Stupid
Using drugs when you have three kids to raise = Stupid

You don't have to say this in front of your wife, but it is hard to argue that your sister in law is "only" Lazy...

"The State sends her THOUSANDS of dollars every month. My mother in-law has the kids full time but she wont do the legal work to take the kids so she has to support them on her retirement pay. So my sister in-law gets free housing in a nice big 4dr home in Los Banos, in a great neighborhood, with free medical and dental, with a free bus pass, she bought her doper lover a pretty nice VW Jetta"

Last week I posted my idea for a boot camp (run by former Marine drill instructors) where we would stick all the guys who don't pay child support. I want to have a similar dorm style "boot camp" for the welfare single moms. Every day they would wake up at 5:00 am and after the morning workout and chores they learn job skills so they can interview for a job and eventually support themselves...

Bap33,

Unfortunately, game theory behavior would kick in and Bill's grand scheme would be doomed before it ever started. Since at least one owner is likely to realize they can increase the value of this scheme to themselves by holding out on Bill, many owners will be forced to also hold out on Bill. Your idea of "all or nothing" has essentially given every single owner a holdout "kill switch". Bill's deal is not worth the same to everyone (even if everyone owned only exactly one house, and even if everyone's house was worth exactly the same fair market value) because not everyone perceives the same economic benefit from selling to Bill. So...if I'm sitting there claiming that the deal isn't worth to me what it is to you and others I demand some kind of compensation either from Bill directly, or more likely from you motivated sellers in order to prevent me from killing the deal for all of you. In fact, even if Bill's deal is great for me, someone like myself will claim it sucks and I can live without it. I'll try to make credible threats to walk away, forcing you to pay me if you want the deal. Others will just start acting "irrationally" (or maybe they are just irrational). Now you have to pay them too for fear that they kill the deal because they hate Bill or hate capitalism or hate squirrels.

What ends up happening in about 2.6 seconds is the entire thing unravels. You have to figure out these kinds of economic problems by reasoning backwards. Start with the end result and move each step back to figure out how rational people will probably behave.

With very very few exceptions welfare mothers are on welfare because THEY (not others) made very very poor choices (I dated a SF assistant who got in to law to help women before she quit in disgust). I heard story after story of stupid women who thought that their drug dealing abusive boyfriends would “change and marry them if they just got pregnant…

well, we only just came down from the trees, you know...

Basically, can anyone show how allowing the “haves” to set up a string of rentals for the “have nots” will soon result in a society of non-owners and the results that are likely? DS, you can do this right?

bap, this is absolutely right. spot on. it's a doomsday scenario which may well come true inside a generation. nobody knows how 'the market' will be used and abused, because it is not regulated or controlled in terms of favouring owner-occupiers over investors - if it creates a class of 'property barons' and their heirs, no-one cares to intervene. no-one cares who is actually doing all the buying - it could well be bill gates for all we know, one place at a time. it's like a regression to feudal relations with one lord and many serfs all paying liege. the only thing that can stop it is political will and government intervention, or else, more roughly, built-in limits in the market. but if no law is passed designed to safeguard housing ownership, the rudderless market sure isn't going to make it happen by itself. that's the trouble with markets - they're comprised of atomised individuals acting in unenlightened self-interest. too much 'greed is good' and '(personal economic) success at all costs' conditioning in our society will only accelerate the final position.

but economic modelling is not my strong suit, i have something of a distrust for it, in fact - i'm too post-scientific, heh... however, look at the history of the run-up to the Great Depression and the fact that housing exploitation was being conducted similarly, speculators were everywhere, then there was a credit squeeze... the other posts about excessive borrowing and national debt levels may give us a clue too... and this whole housing speculation thing has gone right down to the middle-middle class...

which is why i eschew market modelling in favour of simple govt fiat which just spells out a positive social settlement, a reachable social contract to encourage the so-called 'welfare dependents', and puts a lid on inflationary activity as undesirable and unethical. (when was greed elevated from a vice into a virtue, exactly?) this would involve land resumptions, cost-controlled PPP developments, price covenants with rises linked only to CPI, and market controls on inflationary activity. the cost of housing construction is now minor compared with land costs. but realistically i think positive change will happen only in the most fabian way...

Just furthering my edumication on the causes of the Depression (I favour 2 and 3):

In general, theories of the Great Depression can be classified into three groups: 1) orthodox classical liberal, Keynesianism, and neoclassical economics, which focuses on the macroeconomic effects of money supply including production and consumption; 2) Marxist economics, which argues that the root causes of the Depression are based in the fundamental production relationships of capitalism; and 3) structural theories that point to underconsumption and overinvestment ("bubble"), or to malfeasance by bankers and industrialists.

Easy credit fueled the consumer driven economy of the 1920s, and following the depression, credit availability began to tighten, both for business and consumers. With lenders restricting their credit availability, and moving quickly to secure their liabilities, employers who were hurt by the ripple effect of Wall Street were the first to be liquidated. As employers closed their companies, the ranks of the unemployed grew, which further complicated the banking situation by reducing income from credit lines, which cascaded into a liquidity crisis leading up to the banking panic of 1933.

Consumers who had taken advantage of credit sometimes were unable to meet the monthly payment and repossession of automobiles, furniture and household goods became common.

Foreclosures on home mortgages rose throughout the period, and affected people in all income brackets. In a few localities the forced sale of personal property drew neighbors who attempted to disrupt the proceedings as a form of protest of the action and support of the family under the eviction notice. The angry crowds also had the effect of scaring off potential bidders for auction goods. While this allowed neighbors to pay pennies on the dollar for their neighbors' possessions (which were usually given back to the family following the sale), it also did little to reduce the debt of the family being evicted.

http://en.wikipedia.org/wiki/Great_depression

Hmmmmm... when would I buy? Well, the short answer is when I could realistically be able to afford mortgage payments on a traditional 30 yr loan with enough left over to save for retirement, and enjoy life a bit more than simply scraping pennies together. As it is now, prices would have to come down almost 45% in order for this to be remotely possible to me and my wife at our current salaries.
There are other concerns that I have though if there is indeed a tremendous crash in home sales. For one, I think that the state of California's economy is heavily tied to the sucess of RE. More so than even we who have firmly believed in the housing bubble for years. Add to the fact that many homeowners( debtors) who bought in the last 4-5 years were relying on the overinflation of their homes to provide their financial well being. If the crash occurs, these people will be in some serious trouble, hence a double-whammy to the economy. If a miracle happened, and prices did fall say 40-45%, I would probably still wait and see for six months to gauge the damage the bust caused to the local and state economy. It's my belief that a bust could very well set off a domino effect in the entire ecnomic structure of the state that could potentially alter the job market for years. California is already hemmoraging jobs and entire industries to other states and countries at a regular pace, and due to the over-prolonged duration of this particular bubble, the trend to outsource and relocate has set a precedent that I doubt even a crash in housing will stop. So even if I could afford in a few years, what would be the point if the economy and possibly my livlihood are down the shitter? Thus I would want to asess this aspect first. Secondly, if there is to be a national crash, as it appears to be, then what I have saved up now- money that would easily buy a home in any number of up and coming regions now, would buy even more once these prices come down as well, or better yet, I could spend half on the house, invest the rest, and be set. Simple. I think more than anything, living in California for 7 years during an insane housing boom has made me come to appreciate other places and the fact that you do not have to suffer and squirm in an area if you don't want to.

Talking about renting, it does concern me that while the Bay Area does have amazingly cheap rent compared to buying, but all one has to do is look at LA and see that rents rose almost 10% this year, and the supply is tightening. This corrolates with their slowdown in housing sales. This is a classic case that's well known: Housing sales slow, rents rise. What's troubling is that the rates in LA are rising remarkably fast. This could cause rents and ownership costs to meet eye to eye sooner than time requires in order for the prices to fall signifigantly. I hope the same does not happen in the Bay Area. If rents rise to the point of being as expensive to own, and those prices haven't dropped signifigantly, I will move at the drop of a hat.

astrid Says:

"I do wonder what happened to all that rhetoric about “ending welfare as we knew it.” "

In California they changed the name of "welfare" (a program where tax dollars are given to lazy stupid people who sit around doing nothing) to "Cal Works" (a program where despite the name we still give tax dollars to lazy stupid people who sit around doing nothing)...

P.S. one of my Section 8 tenants also gets SSI Disability since he is totally "disabled" with the horrible disease of ...... alcoholism. Yesterday he came home early from a fishing trip due to the rain towing his little fishing boat with his new (used but new to him) truck...

SF Woman/Ha ha,

I've been so busy watching the bubble turn bust I lost track of the weather. There is a belief that we are heading into a PDO or Pacific Decadal Oscillation meaning a 10-15 year period of wetter, cooler weather. According to the Old Farmers Almanac "Zone 15" stretches from the BA to BC and west of the Cascade Mountains. Start liking it! I don't think I could deal with another year of "appreciating" home prices AND crummy weather! Last summer in the Portland area was a total drag. After a decent week in March it rained up until the 4th of July then a few nice weeks but the week after Labor Day the rains came again. My wife and I have even resorted to what we call the "sun chasers" where you get in your car and drive until you see the sun. Sad really.

SFwoman... Yes.. the rain is driving me INSANE! what's worse is that it did this last year too. I figured it was a freak year, and this year would be back to normal. Now it's worse! I'm so sick of my folks calling asking how the weather is then bragging about running around in t-shirts.

Dinor,
What's ironic is that when I was a kid, TN had a 5-6 year period of almost drought like weather, with hot summer and somewhat mild( and dry) winters. THat's all I remember as a kid. Then from the time I was 15-the time I left, it rained for months on end year round. Now that I've left, the weather there is back to a warmer, dryer pattern. So basically, I traded one wet climate for another. Oh well. Might make my decision to move a little easier.

nomadtoons2,
The same thing has probably happened with a lot of BA folks' short memory span re: weather. Remember the early 90's here? Several years of drought, the landscape was brown everywhere, the Oakland Hills fire happened (we could see it across the Bay on the Peninsula), the skiing in Tahoe was crappy, but the weather was nice. Hopefully if you move back to the SE, it won't be just when the weather changes back to being wet there...