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Get comfortable until Spring '08 (Bay Area)


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2007 Sep 11, 8:30am   53,612 views  262 comments

by Randy H   ➕follow (0)   💰tip   ignore  

I know other markets have already started correcting at a healthy clip. Others might even be nearing the end of the cycle. But much of coastal California, and especially the San Francisco Bay Area, have barely begun to see the downward hill in residential real estate prices.

It is my current opinion that nothing significant will break in prices -- and I mean significant -- until next Spring. In fact, I really don't expect the nicer areas of the Bay to start going down meaningfully until early Summer, '08.

My reasoning is that everyone who can, by any means possible, will hang on until next Spring's "selling season". They're being told by a lot of pretend "professionals" that they should hold out, that by next Spring the storm will be over and they'll get their price, or better.

There will, of course, be plenty of foreclosures and the sporadic forced-sales (divorce, job change, etc.), and some of those may be good deals on prices, but they'll be very hard to come by, in my estimation. Agents are doing everything they can to hide the real sales prices of those deals with some agencies outright not reporting those sales to the CAR statistics because they don't qualify as "standard sales". Foreclosures may not even be priced all that attractively. A lot of banks are still trying to figure out what to do with their growing inventory of houses on their balance sheets. Right now banks aren't really in a position to start marking down hard assets, and they don't have enough inventory to make a material difference yet anyway.

Cometh the Spring I expect that prices will be right around where they are today, maybe a few points lower, but nothing major. On the ground we'll all see the same old houses sitting there, or relisted, for the same prices they left off at after the Summer of '07. Then the real fun begins, as I finally expect by the end of Spring a number of sellers will capitulate and take their lumps. Once price cuts really start, then it should turn into more competitive pricing by sellers, each trying to out maneuver the other as they all chase each other down the market.

I should briefly qualify what I mean by "lower prices". I mean price cuts from the true peak, which given your specific area should be anywhere from Q4-2005 to Q4-2006, even Q1-2007 for a few super prime areas. Fantasy wishing prices listed between your area's peak and today are nonsense, and cuts off of those prices are essentially not cuts at all. Assume the price is listed at your area's peak price, and ignore any goofball premium some real estate party latecomer tried to squeeze out of the waning days. For example, there's a home here in Mill Valley the current owners bought the end of 2005 for $1.895mm, which they listed the Summer of 2007 for $2.45mm. In my mind, that home peaked at $1.895mm, and is at best likely to sell again for around $1.48mm, the price a nearly identical home on the block sold for in early 2005.

--Randy H

#housing

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235   Peter P   2007 Sep 13, 4:23am  

Correct Astrid, innovation comes from commercial (taxable) ventures. Charities are not formed for innovation, they are formed to carry out public purpose functions.

I would never trust anyone who claims to be void of the profit motive.

236   Peter P   2007 Sep 13, 4:27am  

You’re too dimwitted to realize all you’re doing is describing stickiness over and over and over and over and then authoritatively proclaiming it’ll be sticky until it’s not sticky, and therefore it isn’t sticky.

Perhaps he should have some mango sticky rice. That should inject some sense into him. :)

237   DinOR   2007 Sep 13, 4:27am  

One firm I used to work for (back in the day) had a phone number that was (1) digit off from the Portland Opera. Usually it was grandparents calling to see if "we" were still open so they could take the kids to see it one time before it closed for good.

238   skibum   2007 Sep 13, 4:27am  

When I said that prices would lose their stickiness, the argument is that while they may be sticky for a while (because of their own internal logic), they will eventually break and prices will collapse. Once some of the sellers decide to cut their price, driving comps down in the area, I believe others will panic and cut as well.

Allah (and Randy),

I think some of the disagreement is semantic. This statement above is exactly the "stickiness" that Randy is describing - prices stuck for a while, and then sudden lunges downward once in a while. Perhaps a better term than "stickiness" would be "herky-jerkyness."

239   Duke   2007 Sep 13, 4:37am  

SFWoman,

I am sure you know this, but just an FYI to everyone else: Props 60 and 90 can possibly allow you to move and keep your prop 13 basis.

240   Bruce   2007 Sep 13, 4:39am  

Randy H,

I like attending recitals or chamber concerts held at college or conservatory campuses. They're pretty much come-as-you-are, the programs are often more interesting and varied, the attendees are generally there for the music, and the performers are usually really fine rather than merely famous.

I do attend opera here, but I know what I'm in for when I do - just as you describe.

241   Allah   2007 Sep 13, 4:55am  


Allah (and Randy),

I think some of the disagreement is semantic. This statement above is exactly the “stickiness” that Randy is describing - prices stuck for a while, and then sudden lunges downward once in a while. Perhaps a better term than “stickiness” would be “herky-jerkyness.”

Skibum (not Randy),

I was just proving that I understood what stickiness meant. Forget about stickiness anyway, it is redundant; the point I was making is that IMO the prices will fall sharply and steadily when they do. I don't think it will be even "herky-jerkyness" as you describe. I really enjoyed the serenity and peacefulness of when Randy filtered me out with his rss filter allowing me to voice my own opinion for the last year and a half or so. I wish he didn't break that code of silence like he did in this thread. I don't see anyone else complaining about my opinions.

242   SP   2007 Sep 13, 4:59am  

Glen said:
Again, I am not saying that people shouldn’t contribute. Give all you want! But why should I pay more taxes so that you can give *extra* money to the “Hour of Power”? If you itemize deductions and you are in the 40% bracket, then your $600 after tax contribution becomes a $1000 contribution. If I do not itemize (because I rent) then my $600 contribution remains a $600 contribution. Does this make any sense? Why should only itemizers get this benefit of directing their charitable money?

Glen, firstly, thanks for your patient response. You do have an excellent point, but this problem really is the issue of 'itemizing'. The direct way to address this would be for all charitable contributions to be deductible, regardless of itemization. Letting the government take the $600 and piss it away on the Politico-Bureaucratic Industrial Complex is pointless, nor the answer to this problem.

SP

243   DinOR   2007 Sep 13, 5:08am  

Just look at the numerous attempts to resuscitate the symphonies?

The Jan Hammer Group plays the Beatles greatest hits (w/the New York Philharmonic)

Celine sings her greatest hits w/the Montreal Symphony

The Moody Blues themselves... could not save "strings"!

Numerous attempts were made to "update" and as far as I can tell have failed. We just need to let it go...

244   SFWoman   2007 Sep 13, 5:13am  

Duke,

My husband and I don't qualify for either prop 60 or 90 for many years. They are only applicable to people over 55.

At least they allow people to downsize without taking a tax hit. I told my husband that if our kids look like they are going to try to keep living with us after grad school we'll downsize into a nice one bedroom in a doorman building. We'll use our prop 60 then.

245   SFWoman   2007 Sep 13, 5:16am  

Wow, I just saw this:
http://news.yahoo.com/s/afp/20070913/ts_alt_afp/useconomyproperty

"With a population of nearly 300,000, Stockton has acquired the unfortunate distinction of having the highest foreclosure rate of any US city, with one in 27 households left counting the cost of the credit crunch, according to Realtytrac, an online marketplace for foreclosure sales."

1 out of 27?

246   StuckInBA   2007 Sep 13, 5:19am  

DinOR and Malcom :

Thanks. There is always something new to learn.

247   skibum   2007 Sep 13, 5:20am  

DinOR,

Thanks for pointing out some of the more horrid examples out there. Imagine it from the pov of one of the musicians. They probably keep barf bags at their sides as they churn out yet another rendition of that god-awful theme from "Titanic."

There's still a place for symphonies and operas. It's just not globally relevant anymore. Ever listen to new composers? They fall into 2 categories: cliched rehashes of themes from the 19th century, vs. atonal stuff you can't listen to.

248   lunarpark   2007 Sep 13, 5:21am  

http://www.dqnews.com/RRBay0907.shtm

Bay Area home sales slowest since early 1990s, flat prices

249   StuckInBA   2007 Sep 13, 5:26am  

Seems like not just the gold and oil, but all agricultural commodities are rising too. Ain't it real nice that we don't consider these useless things in our core CPI ?

I mean imagine this. Fed cuts the interest rate and the next day CPI screams higher. Without this core CPI to hide under, how can Fed save its face ?

250   EBGuy   2007 Sep 13, 5:52am  

lunarpark,
As always, you are (data)quicker on the draw.
Sale numbers down by 1/3 in Marin County, but median up by 12.4%...
For those of you who don't understand the mystique of the BA, SF is starting to see increased instances of vigilante justice as the DA doesn't seem to want to lock up repeat offenders. And the SFPD has recruiting ads plastered on AC Transit buses in the "affordable" East Bay. Michael H. where are you....

251   DinOR   2007 Sep 13, 5:57am  

StuckinBA,

Not a problem. The more you scroll down and read the more you're convinced you might want to get someone else involved. I believe that Sched. A is specific in asking; "Points reported to you on 1099". Yet people think if there's a 1 in a 100 chance that you might qualify they'll throw their hat in the ring!

Hey, if they catch it, they catch it, right?

252   skibum   2007 Sep 13, 6:03am  

lunarpark,

As of 12:45pm, the DQ numbers haven't hit the Chronicle or Mercury web sites yet. After a bit of lead time, we should expect to see one of our friendly trolls saunter by and tout how MEDIAN is up yoy again... Same old bullshit coming our way. Brace yourselves.

253   Peter P   2007 Sep 13, 6:05am  

SF is starting to see increased instances of vigilante justice as the DA doesn’t seem to want to lock up repeat offenders.

I am also against locking up repeat offenders. Prison is not the solution.

Repeat offenders ought to be swiftly executed.

254   Peter P   2007 Sep 13, 6:06am  

BTW, the only one thing about Ron Paul that bugs me a lot is his stance on capital punishment.

255   wtf33   2007 Sep 13, 6:07am  

Wow! using words like "sheeple" or "knife-catchter" get you in trouble in these blogs... but calling latinos "cockroaches" who are fat dumb and happy sucking welfare is ok cause its just an opinon?
all i can say is wow :-)

256   Bruce   2007 Sep 13, 6:07am  

DinOR, Skibum . . .

You wouldn't bait a person just because they're a musician, would you??

257   KT191   2007 Sep 13, 6:11am  

WTF?

http://tinyurl.com/2bvxxz

He didn't know until 2005/2006???? As long as I can remember back to when I was a teenager I knew you don't borrow more money than you can pay back. Also don't borrow money if you don't have to. My parents taught me that when I was young, but he didn't know? Give me a break

258   speedingpullet   2007 Sep 13, 6:14am  

"... Ever listen to new composers? They fall into 2 categories: cliched rehashes of themes from the 19th century, vs. atonal stuff you can’t listen to."

Hear, hear.
Still, you have to hand it to people like Elvis Costello and the Chronos Quartet for at least trying to make decent modern classical music.

259   Glen   2007 Sep 13, 6:19am  

Glen, firstly, thanks for your patient response. You do have an excellent point, but this problem really is the issue of ‘itemizing’. The direct way to address this would be for all charitable contributions to be deductible, regardless of itemization. Letting the government take the $600 and piss it away on the Politico-Bureaucratic Industrial Complex is pointless, nor the answer to this problem.

This still won't solve the problem. If you are in the 40% bracket and I am in the 15% bracket then you are able to direct 67 cents on every dollar (40/60) which would otherwise be paid in taxes to the charity of your choice, while I can only direct 18 cents of every dollar (15/85) to the charity of my choice. There is no way around it as long as income taxes are progressive.

Are charities favored by high income taxpayers more important, dollar for dollar, than charities favored by low income taxpayers? If not, then you either need to advocate a flat tax along with eliminating the itemizer/non-itemizer distinction.

Bottom line is that the charitable deduction is a hidden benefit for high income itemizers, who are able to leverage their charitable contributions more than non-itemizers and low income itemizers.

Like most IRS rules, it is messy and opaque. The alternative is NOT to let the government collect more tax revenues to waste on boondogggle spending. The alternative IS to just lower taxes across the board and let people donate however they see fit.

260   DinOR   2007 Sep 13, 6:21am  

Bruce,

Not at all! I are one (kinda?) My guitar heroes growing up were Buddy Guy, Albert (The Ice Man) Collins and Johnny Winter! I've just always felt that the music needs to stand on it's own two feet. Guys that suck on guitar (like me) won't fill bars (let alone stadiums). It's not that I suck THAT bad it's that I can't "deliver" w/consistency like an SRV or his multitude of clones. I've seen guys that do SRV better than SRV!

Guess that explains why I'm not an "opera fan". Oh and Dick Dale (King of the Surf Guitar) will be in PDX on the 28th!

261   FormerAptBroker   2007 Sep 13, 6:29am  

Peter P Says:

> BTW, the only one thing about Ron Paul that bugs
> me a lot is his stance on capital punishment.

In theory it makes sense to kill all the violent scumbags out there to make the world a better place, but in reality capital punishment is a big waste of time and money that removes a very small number of guilty scumbags from the planet. Not even considering that capital punishment does end up killing a few innocent people every now and then, we would be better off spending the money that we give every killer to pay for a decade (or two) of court appeals to the cops to catch more criminals and put them in jail…

262   Randy H   2007 Sep 13, 6:33am  

Retirement

This will be my last thread article. I trust that everyone will be happier with Allah and my other "haterz" of late than with I. I think I've offended a few readers and thereby caused too many complaints. For myself, life is too short to waste precious cycles. Anyone interested save for the Trolls are welcome to visit my blog from time to time.

Best of luck and regards,

Randy H

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