patrick.net

BTW, I won't consider Cupertino and parts of Palo Alto as good areas. The school premium has been fully-baked into the prices and further influx of new residents will only dilute that premium. Also, if we really towards a school voucher system the importance of school districts will further diminish.

Good areas have lots of big tress and no riff-raff.

Most Asians still don't get it. If they want more opportunities for their kids, they should network and make money. That is the only way to ensure "unfair" advantages for their offsprings right from the beginning.

Of course, any motivated kid with sufficient luck can always build that edge themselves with or without parental help. See, the world is fair after all. ;)

Location is not about the name of the city, it is just about... uh location.

Anything along the western foothill west of 280 or 85 is considered good area, be it western Redwood City (now Emerald Hill I believe), or western Palo Alto. There's location first, and then there is city incorporation, and then there are schools.

The exceptions to this rule perhaps include a few pockets on East Bay which again are in the foothills. When I first came here, my father-in-law, who has been here for almost 5 decades, told me, "if you follow the foothills up and down the peninsula and the valley, you can't go wrong." I have found this statement to be generally accurate.

Yes, I agree. Foothill means trees. Riff-raff people do not usually accumulate up in the hills.

There may be feral people though. :)

There is the Los Gatos Brewing Company.

I prefer the Tied House in SJ. Better beer and fewer yuppies.

Tablerock Brewery here in Boise is also really good. www.tablerockbrewpub.com

If they bought the house with a mortgage they could afford, why would the fall in house price matter?

I bought my house for cash here in Boise two years ago for $272K. It's now worth maybe $250K. Who cares. I paid cash and expect to live in it until they cart me off to the old folks home.

Feral people. You mean the homeless?

With feral cats it's considered humane to catch, sterilize, and release.

Feral people. You mean the homeless?

Hmm... more like Deliverance. :)

More like Deliverance? That's why 20% of Idahoans have concealed carry permits.

I like this post at the NRO....

http://corner.nationalreview.com/post/?q=ZWU1OGIzNmQ4ZGVmZmM2NDMxNTJkYWRjODZhN2Q5MDg=

"Whenever you hear the word "bipartisan," be sure to check for your wallet."

Super-SIV anyone? Banks and investment houses are moving their impaired assets off the balance sheet AGAIN!

http://www.ft.com/cms/s/0/7f7dc986-00dd-11dd-a0c5-000077b07658.html

Who thinks it will work this time?

Why do American Asians compete so fiercely with each other for the lowest markets? All I see are retail like furniture, convenience stores, swap meet stalls...etc. Even in our open culture Asians seem to only be able to streamline a market or to invest in a market. I may not be seeing everything but it just doesn't seem like Asians build large businesses in innovation from the ground up here. Is it a cultural thing or am I just wrong?

We're looking at home now in which the owner bought in 1998 for $450K, with a $350K mortgage. Not too bad, a normal, fixed mortgage as best I can tell.

They just kept refi'ing cash out and taking on revolver after revolver until they put it up for sale in 2006 for $1.5mm (in Novato for crying out loud). Well, it's still for sale after dropping price by $300K. But they're stuck. They owe $1.2mm and change in debt.

Oops.

My question is: did these people work? Or have they just been living large off their house for the past decade? WTF?

Did they refi to remodel or rebuild the house? I actually have several neighbors who refi'd over $500K to either rebuild or remodel the house, which is also partially the reason why a house bought for $450K in 1988 is asking for $1.5M 10 years later.

Man, remodel in the Bay Area is expensive. It runs $200-400 per sf, almost as much as rebuild. The average remodeling bill I heard is at least $100K. If they refi'd to remodel or rebuild (hence increasing the value of their home), then it is fine I guess.

Or have they just been living large off their house for the past decade?

It is on the house. :)

Anybody who watched the Bernanke testimony should now have no doubt in their mind that Ben is going to do everything possible to keep the housing price where it is, come hell or high water.

Monetary inflation here we come, oops, I meant stagflation. Unless Ben starts distributing $16K per household, not $1.6K, and on a regular basis, he is not going to see his housing price holding their value.

Part of the equity loss was credit bandits getting huge and/or multiple helocs up to or beyond true value of the home then skipping town.

A local guy paid 2.2m in 2001 (non bubble year) then heloced 1m on top in 05 and walked away, now for sale as reo at 3m ...wheres the money? wheres the bandit? no where to be found. very nice of GWB to pass the 'dont 1099 me bro' law to bail this guy out thats 1m tax free, money for nuthing and chicks for free! truly the land of opportunity here. hard work apparently IS for chumps. why rob a bank when you can just ask them for money and they rain it down on you all you want w/no consequence?(used to anyway)

Everyone was convinced that real estate would always appreciate. That's true ... except when it doesn't. Will the lesson be learned in other areas? The stock market is crazy. It's an emotional roller coaster, and people have their entire nest egg in it many times. The real lesson is that people need to realize that money is not wealth. Wealth is things you can touch -- gold, land, water -- but equity isn't something you can touch. It can vanish. Cash isn't wealth either. It can be devalued too.

...but are willing to manage their own interest rate risks...

Huh? How are you supposed to do that? Buy swaps? What percentage of the population even knows what a swap is, much less how to purchase them?

I knew Greenspan was smoking crack at the time, we all did, here at least. At that point, I think he was just openly shilling for the banks.

wow, I hate to admit it but it's a pleasure watching the smug FB's in my neighborhood eat crow and commit to doing their stupid grunt labor well into their 70's. They deserve to suffer for being so f-ing cocky about all their house wealth and taking credit for the rise in value. I'm sitting back loving every minute of this. I dance around my cheap rental every night just thinking about it. Let it crash, let it crash hard!

At that point, I think he was just openly shilling for the banks.

Well, we agree on something :-) I have about had it with these "His highness was innocent, his remarks have been taken out of context and he was only postulating" type of apologies. But I am also tired of saying the same thing over and over again. But "shilling for banks" is quite apt.

We’re looking at home now in which the owner bought in 1998 for $450K, with a $350K mortgage... They just kept refi’ing cash out and taking on revolver after revolver until they put it up for sale in 2006 for $1.5mm (in Novato for crying out loud). Well, it’s still for sale after dropping price by $300K.
Hey don't do this to us... I used up my 5 free Property Shark reports trying to figure out which home you're looking at. Oh well, there is some pretty nice RE porn in that range.

Huh? How are you supposed to do that? Buy swaps? What percentage of the population even knows what a swap is, much less how to purchase them?

I actually tried to see if this is possible for a retail trader (using exchanged-traded bond and swap futures). My conclusion was that the hedge would probably create more risks than the ARM payment shock itself.

It would be ironic to go broke hedging.

I hesitate to defend Greenspan for a variety of reasons, but in the interests of balance.

One clearly might pose a defendable argument that lower payment schedule over the initial several years of an adjustable rate mortgage works out to a buyer’s advantage under conditions of a short (several year) stay in a property and in appreciating, even mildly, market. So some percentage of consumers clearly did benefit from these products.

Of course, most here understand that this argument fails in respect to the larger macro effects of bubble run up caused by these very same ARM products.

How much an effect did the largely *hidden* frauds of no doc etal contribute to flawed economic analysis hitting Greenspans desk?

He did an amazing job of providing stability and confidence in his leadership on Wall Street and capital hill. Almost superhuman. What are the metrics under which one judges his performance?

This said, personally I give him a thumbs down but largely due to his role in extraneous factors including a general distaste for the casino aspects of Wall Street, the thievery of fractional banking system, and the general ineffectiveness of our democratic leadership with respect to massive regulatory failure.

I really like the helpful advice in that Bankrate story on today's news page...

Solutions to a frozen HELOC

• Appeal the lender's decision.
• Search for other lenders who may offer HELOCs.
• Amass emergency cash reserves.
• Reduce spending on luxury items.

Justme,

Ah yes. Just as I wrote. It is inevitable that people will spin these units off and chose not to engage in amrket that burned them so badly. With the new implicit backing of the governemnt, whomever buys these spun-off units will likely do pretty well. Lets see, who would that be? Ex-CountyWide execs perhaps?
In any event, your pension funds, municipalites, foreign investors, etc are all backing away from securitized debt backed by US real estate. With the recognized price inflation, and the recognized effort by the US governemnt to curtail the drop (or at the very least the pace of the drop) it will be, umm, never before we see mortgages spreads as low as we have seen in the last few years.
The government is going to have to get into the mortgage business becasue they are setting the price of housing and they have chased everyone else away from the market.
As for unfairness. Yes. In the age-old parable of the grasshoper and the ant, the government is now guaranteeing we should all be grasshopers, because they will rain mana down on everyone should times get lean.

"and taking credit for the rise in value"

The WORST aspect of smugness. Too bad we couldn't lock up their computer to where no matter what they did good old Mr. "over-valued-blogspot" popped up huh?

Yeah, the mania was so widespread that people were flipping condos that aren't even built yet, crapshacks in the desert are going up 100K a year and homes with bars on the windows are going for 599k but... YOU'RE A GENIUS!

"Location is not about the name of the city"

Is that why every once in a while you'll see a home that sticks out like a sore thumb and wonder to yourself how a nice home like that wound up in a place like this?

Been there, done that. For all your best efforts you'll NEVER be able to elevate the "neighbors" to your standards.

FuzzyMath Says:

> I’m pretty much convinced that the powers that be are
> going to find a way to take all of my generation’s money
> anyways.

I just found out that some of my former tenants in Sacramento are “victims” of the housing crash (and I’m sure that the government will find a way to “help” them with our tax money).

The “victims” were renting one of my apartments for $900 a month when they “bought” a home for about $300K with no money down and an option ARM. The low payment aka neg am payments were just about $1,000 a month.

When the home went up in value they got a HELOC and bough 24” rims for their truck and other stuff. Today they owe about $400K on a home worth about $200K and have no chance of making the payments since the “option” to make the neg am payment has gone away.

Their friends that still live in my building have been in a little apartment saving for a house the last couple years watching interest rates on savings drop while the “victims” that the government wants to bail out have been living in a big house spending thousands of HELOC cash…

The only possible victim in any economic "crime" is the taxpayer.

While the government must serve to enforce contracts, it should not seek to "protect" losers.

There are *always* winners and losers, and people became "victims" on their own free will.

We were listening to NPR yesterday and they had a debate on "torture" and interrogation.

All sensible and reasonable arguments came from those who support using stress in obtaining vital information. Yet the liberal audience would blindly oppose anything that benefits America. They would rather protect the metaphysical "rights" of a probable terrorist and the survival and well-being of innocent Americans.

When the home went up in value they got a HELOC and bough 24” rims for their truck and other stuff.

You know who tend to be the perfect customers? Poor people on credit.

I think it is the moral duty of any capitalist to empty the wallets of these people (legally, of course). They have willingly chosen financial stupidity.

Hey don’t do this to us… I used up my 5 free Property Shark reports trying to figure out which home you’re looking at.

We're looking at that one and a couple others as potentials to short, otherwise I'd give you the MLS#. Though I don't mind being non-anonymous, I'm not sure I'm prepared to tell everyone where I might end up living. Anyway, I don't want to invite competition...lol.

The problem is that the banks still aren't there yet. They're getting there, but so far they're not fully absorbing the market reality and dropping prices of their inventory (or the value of preventing foreclosures with shorts).

24" rims aside I'm starting to think that using HELOC cash for any thing other than "my roof was leaking" or "my kid was facing a death sentence for drug smuggling in Malaysia" is pretty much indefensible.

"You know who tend to be the perfect customers? Poor people on credit.

I think it is the moral duty of any capitalist to empty the wallets of these people (legally, of course). They have willingly chosen financial stupidity."

Sometimes you strike an almost poetic cord.

"24″ rims aside I’m starting to think that using HELOC cash for any thing other than “my roof was leaking” or “my kid was facing a death sentence for drug smuggling in Malaysia” is pretty much indefensible."

I'm still trying to figure out the thought process there... I have no problem taking on a debt. But once I do, it becomes my life mission to pay it off. In what world does it make sense to pay off most of a loan, then INCREASE the loan from the original all the way back up to some fragile bubble price?

I'd wager that even the really stupid people knew they couldn't get away with that forever.

What, no jokes about HELOCopter Ben? :)

I guess they really are cracking open the mines up in Silver Valley.

www.nytimes.com/2008/04/03/us/03wallace.html?adxnnl=1&adxnnlx=1207239423-JWkG0/H3Sw72T27tHzq2sg

"The problem is that the banks still aren’t there yet. They’re getting there, but so far they’re not fully absorbing the market reality and dropping prices of their inventory (or the value of preventing foreclosures with shorts)."

One fun part of this whole thing for me is watching the banks squirm. Now that their own risk models have changed, their inability to offer lower interest rates to borrowers is decreasing the value of their exploding inventory of houses.

I love circles.

Fuzzy Math,

I'm trying to figure it out too? The only case I can make for that is a senior on a reverse mortgage. Even then just b/c you've paid off the loan doesn't necessarily mean it's the right approach.

Other measures could/should have been taken.

But once I do, it becomes my life mission to pay it off.

Why? If you have a low-interest fixed-rate loan, there is really no reason not to delay paying it off.

Debt is a form of leverage. It is just a tool. There is nothing scary about it.

Stigmatizing debt is no better than worshiping debt.

24″ rims aside I’m starting to think that using HELOC cash for any thing other than “my roof was leaking” or “my kid was facing a death sentence for drug smuggling in Malaysia” is pretty much indefensible.

I wonder how much HELOC was involved in foreign real estate investment. Home prices in British Columbia are surreal.

A nice-ish condo in Victoria now costs CAD $2.5M.