patrick.net

cvoc13 says

Say we have enough healing to have interest rates at say (Fed Funds) 6.25%

Healing to me means getting rid of debt burdens somehow. Repayment, default, forgiveness, or inflation. With the amount of private debt we have now (mortgages, student loans, credit cards, ...) , now more ever before in history as compared to the economy, that is going to take a long time. Longer that 2016. The stimulus minded Democrats are about to be swept out of power, so deflation is very much in the cards.

I think you're right to look at oil costs and wonder what that means. I never hear the media talk about it ever. Some people think that's due to monetary policy and "inflation", but they are idiots. It's diminishing supply, and growing demand. It's econ 101.

Cost of energy and food growing, while crowding out and causing deflation everywhere else? Very possible, and that's my long term outlook. Commodities have been in a 50 year bear market due to cheap energy, and that that trend has clearly reversed in the last decade. It's uncharted territory, though, and something unseen will likely intervene before the inflation/deflation scenario fully plays out.

Serpentor says

I know all about the Asian culture.

People come here over the past 10 years and see Asians yaking away in native language, unaware these same people have been here for decades.

PS. Dont let my logon fool you, im a white guy...LOL!

MarkInSF says

I think you’re right to look at oil costs and wonder what that means.

For many, it means they load up car with gas on weekend, do some grocery shopping and head back home. They are done spending.

Lol@ the screen name if you really a white guy.
Yes the ones that have been here for decades are probably faring the best demographically. They're the ones who can afford their kids driving expensive cars, go on vacations, and designer cloths because they've worked hard and saved. they lived through the growth of tech and saw their homes values explode while their tax base remains low thanks to prop 13 It's not rich foreigners with unlimited wealth back home.

sybrib, the market is determined by the people that buy and sell, not by the people who are "set" in their homes. Those long established immigrants do not set the price of the market. By the large explosion of prices in the fortress areas during the bubble days and the frenzy of sales activity during that time, there are plenty of "NEW" people in the "fortress" areas who are hanging on for dear life. Even if a young couple each make $120k, $1.2M mortgage payment is pretty tough to make with the traditional 20% down 30yr financing. It has been said time and time again that the Alt-A type resets typically recast in 5 yrs vs 1-3 years for the sub-primes explain why the higher prices haven't gone down yet. What happens when that dual income couple decided to have kids? What happens when one of them gets laid off? Have you priced child care in the Bay Area? There are a lot of young families who appear "well off" but in actuality hanging on by a thread. True, many of them have some family support, but the ones that are going to determine the market are the ones that are house poor with no savings and live paycheck to paycheck while making 6 figure salaries.

Serpentor says

sybrib, the market is determined by the people that buy and sell, not by the people who are “set” in their homes. Those long established immigrants do not set the price of the market.

Agreed, that is what I am saying. The recent buyers on the other hand must be loaded, it is the only rational way to sustain all that spending. And as I said, I personally know some such examples for whom that is indeed the case.

My partner and I paid 20-child years of high quality childcare. The overall cost was on a par with a private university tuition. It ain't cheap, you pile that on a Fortress Property Tax bill, and well, you get the picture.
Loaded.

1. One anecdotal case does not make it a trend.
2. the one rational explanation is Alt-A interest only loans, cheap credit, Helocs, no retirement savings and living to paycheck to paycheck.

btw, regards to people thinking you are rock star because you are from California. They are most likely thinking of Hollywood, Beverly hills, Malibu etc. I know when I first moved from the East Coast to CA, thats what most people thought I was going to, I had to explain that not all California is movie stars and Bay watch.

Bay Area Prices in 2012 will be 30-40% LOWER with ease, then likey 1-4% declines a year for next ?? X Years likey till 2018 then the Avg will be under 200 as it should be.

I have a colleague who bought a 1.3 million home, in my 4 years of working with him i have never seen eat out.
what kind of richness is this ?
I don't think that most chineese and Indians are so called "loaded" , they sacrifice their life for living in Cupertino/Saratoga/Los-Altos

But is this kind of life sustainable ?
If more and more people start to live their lives like this then how the heck the restaurants etc are going to be in business any more ?

cloud13,
some of them probably are in hock up to their eyeballs,
But many of them are not. Remember, that area you mentioned is very small compared to the massive urban cities of Asia. And remember, a very small portion of the homes in the small area you mentioned change hands each year. For them it is not a sacrifice.
Back to those poor fools hocked to their eyeballs: many of them are suffering under the assumption that they can buy their kids a better life by living in the enrollment area of public schools with High Standardized Test Scores. They may think they are helping their kids but they're not: those kids would be high performers anywhere they go, and by sending their kids into "ghettoes of like minded kids from like-minded families" they are actually denying their kids an opportunity to learn to live and achieve and perform with exposure to broader cross section of our society. It is not a choice between going to a school with nothing but like minded 4.2 GPA academic superstars versus going to one where gangsta thugs that will beat / drug / impregnate their youths. There's a lot of other possibilities between those two extremes.
What is important is that the kids have the opportunities to excel in high school, meaning that there's enough other high performer kids in the school to set the demand for a broad offering of challenging courses. This is routinely achieved in high schools and middle schools all over California, not just in the schools that have High Median Test Scores / "API".
Throwing money after chasing after enrollment in schools with extreme API's is kinda like lazy parenting, kinda like worshipping the "median house prices" is intellectual laziness about the individual valuation of an individual property.
Their kids would do just as well academically in schools with API's a notch below; the API score is about other people's kids, not your own. And then living in a school enrollment area like that, there would be cash left over for college or fun or savings or whatever.

sybrib says

That very small number of homes changing hands, at Fortress prices, is a huge bargain (as SF Ace pointed out) for the (as Serpent pointed out) small percentage (but huge in numbers compared to the size of The Fortress ) elite from “back home”. A small minority of homeowners being recent buyers, yes, but a small number of homes changing hands in recent years, which sets the property values for everyone else in The Fortress. It’s not about the “typical resident”, it’s about the “typical buyer in recent years”. That is why The Fortress is a Fortress and that is why it is propping up home prices in it and in the areas nearby.

A very vague commentary. Very little substance.
It does not sound like you did some basic research or analysis before making such a claim.
Define Fortress Area. You say "very small number of homes changing hands". Please quantify. Is Palo Alto considered Fortress Area? Atleast one year back it did. I already gave an example to demonstrate how price is sliding.
So, before making such a vague commentary like "home price won't drop because so many buyers and such little inventory", please define neighborhood/city which you consider Fortress Area. Let's see how it is doing. I also would like to checkout how many Chinese, Indians, aliens, extra-terrestrials are buying in those neighborhoods.

cloud13 says

I have a colleague who bought a 1.3 million home, in my 4 years of working with him i have never seen eat out.
what kind of richness is this ?
I don’t think that most chineese and Indians are so called “loaded” , they sacrifice their life for living in Cupertino/Saratoga/Los-Altos
But is this kind of life sustainable ?
If more and more people start to live their lives like this then how the heck the restaurants etc are going to be in business any more ?

All they did was over pay the seller so the seller will be well off and retired years earlier.
There will be plenty of soul searching for years to come.

robertoaribas says

with all of the ‘bay area is different’ clung too like a mantra, you’d think data showing bay area home sales slump just like everybody else after the tax credit ended would draw some responses…

Well, it was different, for good reason, but that was some 20-30 years ago.
Not many people paid much attention back than. Now they pay attention,
but its too late.. there isnt any good reason to justify prices today.

Seems most people are late, really late, to the party!

sybrib says

cloud13,

some of them probably are in hock up to their eyeballs,

But many of them are not. .

and I'm saying exactly the opposite of that , there are only very few who really well off but most of them are really screwed and waiting for things to get better for them.

Speaking of corporate acquisitions (3PAR, above):

Intel buying McAfee for 7.x billion is just mind boggling. Really stupid, if you ask me.

But perhaps there is a clever plan behind it all. Most AntiVirus software is a huge consumer of CPU cycles, churning through the hard disk looking for real and imagined threats, and setting off false alarms left and right. In this picture, what is not to like for Intel, who would be happy to sell you more CPU cycles, at a price.

Sometimes I think Antivirus software is more security theatre than anything else. Sort of like some of the airport TSA screening procedures.

..."Those who chose option (c) will not be purchasing another home for five to seven years."

I wouldn't be too concerned about tomorrow's personal credit judgement day or being shut out of the mortgage market due to a exit decision taken today. The mounting pressure on the economy to breathe correctly, due to propping an economy up on policy, ensures they'll need you more than you need them.

"More Price Stabalization in Bay Area (Worried calls to 1170-AM radio station)"

Back a few years, 2006 or 07, Michael Finney, on KGO 81 stated SF (City) home prices have never fallen. Wrong then Wrong now... many of these radio people just havent a clue. They are in one industry disconnected from all other major industries.

Common Sense says

I wouldn’t be too concerned about tomorrow’s personal credit judgement day or being shut out of the mortgage market due to a exit decision taken today. The mounting pressure on the economy to breathe correctly, due to propping an economy up on policy, ensures they’ll need you more than you need them.

Dude(fist pound)

thomas, I remember hearing Michael Finney say all that crap too. During the same weekends I would hear Bob Brinker parse his words very precisely so as never to say that house prices were too high, though anyone listening between the lines would understand his point.
I also remember lots of radio ads for real estate, mortgage services, etc. during those broadcasts. Not disconnected industry, but too well connected industry (connected to advertisers).

define fortress: it seems to get smaller and smaller. If by Atherton, Hillborough etc then yeah I agree (Although there also a few well publicized foreclosures in areas of the same caliber)

Concord is definitely not fortress. (although its pretty well crashed so the downside is not as bad as say, Mountain View, RWC, or San Mateo)

Nope, Concord is not the Fortress. (Nor is the part of San Jose where I live). The Fortress is ya'know, those places where the house prices are still high like some of the ones you mentioned, because of the supply and the demand. It is an abstraction also including similar such neighborhoods in the other big city areas along the coast (Nomograph mentioned, for example, La Jolla).

sybrib says

The Fortress is very small, someone on this thread even proved my point about the kinds of people buying here, one of them was SFAce talking about his father in law and the other one was someone else who’s college professor parent employed servants waiting on them.

If the bold letter words are about me, you grossly misunderstood my point. I don't think you comprehended what I said.

sybrib says

Nope, Concord is not the Fortress. (Nor is the part of San Jose where I live). The Fortress is ya’know, those places where the house prices are still high like some of the ones you mentioned, because of the supply and the demand. It is an abstraction also including similar such neighborhoods in the other big city areas along the coast (Nomograph mentioned, for example, La Jolla).

Good to know that the in 2010 the closest Fortress Area from bay area is La Jolla. :)

sybrib, you say you are a housing skeptic but everything else you post contradict that. By the way the subject we are talking about is "Price Stabilization in the BAY AREA", not "price stabilization in FORTRESS AREAS." First you argue "foreigners are going to prop prices up", then you say you agree that Concord and San Jose are no fortresses. Well guess what, San Jose is in the Bay Area.

Just a couple years ago, the entire northern California was considered "Fortress", then it shrunk down to just the "Bay Area", then it shrunk down to "Desirable places in the Bay Area, now people are arguing over which Neighborhood in select towns are "Fortress". Seems like there's no such things as fortress when it keeps collapsing on itself.

A fortress dessribes something that is barrier by forces where people are protected. In the context of war, it may be a moat, with high walls. In the context of housing, high prices keep people out.

Where are the places where prices are so high that your average citizen are excluded. In the North, Tiburon, Salsuilito. In San Francisco, they would be districts such as Marina, Pac Heights, Presedio, and areas around the hill manor. In the peninsula, I consider Hillbobough, Atherton, Los Altos (hills), Palo Alto, Menlo Park, and most parts of Burlingame with lots of semi fortress like Cupertino. In the eastbay, I consider Berkeley Hills, Lamorinda, areas of Pleasanton, Danville as fortress.

The fact of the matter is households living in single family home in these areas are extremely small. They may represent about 100K household. the bay area has 2.5M+ household which makes the fortress just 4% of the entire stock. There may another 250K properties that may be considered semi-fortress making the stock 10-15%.

Over time, bad place gets worst and good place gets better. this is especially apparent in a wide diverse of people who are on welfare, works at Low paying job yet there is a substantial pop who are rich and makes more than 250k. The gap between prime and non-prime locations always follow.

The rich has not gotten poorer, poor and portions of middle class people has gotten poor. The unemployment rate for 100K employees are around 2%-3%, the unemployment rate for the non-degrees are close to 20%. Wealthy foreigners are more wealthy comparable to a few years ago because real estate and stocks are outpacing those in the US and as their currency is strenhthening vs. the US dollar. There are more millionaires now than ever.

Some 10-15% of the transaction are foreignors, CA is the #2 state as far as foreign transaction and asians make up 45% of CA transactions. There is a fair amount of transaction from foreignors buying prime properties. That doesn't mean they are overwelming the transaction front, it means they own more than ever, slowly

That doesn't mean prime properties are not declining, just stating some observations.

Define foreign transactions and site the sources of your statistics sf ace

SF Ace,

thank you for helping me out there. I am lousy at making a cogent delivery of the notion, but you did an excellent job of it.

Are you looking for more clients in your business?

My friend whose networth might be close to $3-$4 million USD back home in india has not been paying his mortage from last 16 months and trying to get a loan modification by doing so. And how much is planning to save , prolly close to $100 or $150K. My point is no matter how rich some one is , no one throws away the money. So the whole idea of rich foreigners always available in continuous supply to buy shacks in Fortess area is simply laughable.

Cloud,

I see you emphasize my point. Yet another wealthy immigrant Fortress homeowner. Who can blame him? The modification he is trying for is setting the floor for Fortress prices, that's what makes it a "Fortress".

"Dude(fist pound)"

Please don't mistake truth as a prophesy of doom. Although I'm sure many of our current economic pains will ease as we get closer to the corrective surgery in November, our housing woes are just getting started. Until Barney Frank, his lover (Fannie Mae exec at the time), Chris Dodd and anyone else who helped manipulate the housing market by annihilating equilibrium through manufacturing "virtual" buyers, are brought to the gallows...I'll sound the warning. What's worse is Barney Frank and many others sat back in glee as an equitable number of homes were built to match this otherwise severely ineligible buyer pool and as the horrendous 100% LTV loan programs were quickly designed in order to match the two up. Although we now have healing conservatism reigning in the buyer issue, the massive surplus of home inventories remain throughout the country. Please don't shoot the messenger.

By correcting a false 4+4=12 to 4+4=8, don't expect it to equal 12 again. A correction is a correction. Keep your eye on inventory; who has it, how much is there, and what are their plans. The smartest of money will most likely not buy until these questions are answered and successfully verified.

I think Mr cloud's point is that even millionaires want a loan mod because values have fallen below his loan amount so even if they have money they are considering walking away.
Hardly supporting the theory that they are propping up prices.

I happen to be looking at recent Cupertino transactions. The foreigner theory seems to be working.
I suppose it just takes a few AAPL or NFLX employees to keep the comps in the area.;)

22262 Bitter Oak Street, $595,000, 07-23-10, 959 SF, 2 BR, Y. Nagano to A. Ghayoumi; 2006:$580,000
10578 East Estates Drive, $1,100,500, 07-21-10, 1,738 SF, 3 BR, R. Duvvuri to S. & P. Gupta; 1997:$442,500
10655 Flora Vista Avenue, $1,850,000, 07-27-10, 3,749 SF, 4 BR, T. Phan to Y. Chen; 2006:$1,035,000
22891 Longdown Road, $796,000, 07-23-10, 1,727 SF, 3 BR, Arora Trust to S. Krishnamoorthy; 2003:$565,000
7818 Lunar Court, $1,150,000, 07-21-10, 1,421 SF, 3 BR, P. Chung to T. Wang
22025 McClellan Road, $775,000, 07-22-10, 1,404 SF, 2 BR, Constant Trust to R. Tsai; 1990:$312,000
10465 Moretti Drive, $693,000, 07-27-10, 1,078 SF, 3 BR, D. Morgan to Chang Trust; 2000:$439,000
10418 South Tantau Avenue, $725,000, 07-22-10, 1,284 SF, 3 BR, George Trust to L. & S. Mukkavilli
20655 Sunrise Drive, $1,427,000, 07-27-10, 2,899 SF, 3 BR, M. Pellow to Z. Yang; 1976:$54,000
20320 Town Center Lane #833, $980,000, 07-27-10, 2,002 SF, 4 BR, S. Cheung to H. Yang
10872 Via Sorrento, $1,130,000, 07-21-10, 2,356 SF, 5 BR, H. & C. Masumoto to J. Tang; 1996:$497,000

all that is is a few transactions with names. its not data.

how is that supporting that foreign money will prop up the bay area?

Yes there are a ton of immigrants in Cupertino, we all know that by driving down Wolfe Rd... hence the foreign names,...yes prices are still higher then it was in the late 90s and early 2000s, prices are still too high like we all know....

where is the data showing money coming in from China and India? Where is the data showing the percentage of homes bought with cash (or high down payment, or lack of Alt-A arms)? where's the data showing buyer income that is on par with house prices?

Serpentor,

Chill out. No matter how affluent someone may be, there's always gonna someone with more. No matter how hard we may work or sacrifice to achieve a modest middle class situation or whatever, there's always gonna someone who was lucky and got more.

That is the great thing about the American Dream. Successfully achieving The American Dream can be something as simple as being accepted for coming out of the closet, or being a fundamentalist religion person, or sharing a camping trip to Lassen with kids, or having a fulfilling life in the service of others.

It does not have to be calling a MacMansion in the high API score enrollment Fortress areas home. If some folks like jobcat listed can just "buy" their material American Dream, we don't need to be so resentful that we may not get some schadenfreude over it.

I'm not resentful, I just don't like it when people make things out of thin air to support their own theories. I'm sick of people who don't understand others culture making up things just to delude themselves about their own poor investments.

Give me data. I would love to be convinced as long as the data is there. show me the numbers from reliable sources.

I'm all about the achieving the American dream.. Hell, the life story of my family is all about the American Dream. What's happened in the last 10 years is not the American Dream. When you buy something you can't afford with other people's money, when you commit financial suicide to keep up with the Changs and Wangs is not the American Dream. When you mortgage your future and live paycheck to paycheck is not the American Dream.

SF ace says

In the peninsula, I consider Hillbobough, Atherton, Los Altos (hills), Palo Alto, Menlo Park, and most parts of Burlingame with lots of semi fortress like Cupertino.

1415 SAN RAYMUNDO Rd: 2007 purchase price $3.2M, listed now $2.75M (6 months in market)

420 W Poplar Ave: 2006 purchase price $2.6M, listed now $2.3M (6 months in market)

510 W Poplar Ave: 2007 purchase price $2.2M, listed now $1.7M (100+ days in market)

413 HILLSBOROUGH Blvd: 2008 purchase price $2.5M, listed now $2.3M (75+ days in market)

I guess those foreigners missed these above addresses while searching MLS. Can someone find a Chinese or Indian who drives fancy car, sends kids to private piano lesson, visits native country every year? Just give him above addresses. He will snap up those properties with his "wealth". ;)

sybrib says

I see you emphasize my point. Yet another wealthy immigrant Fortress homeowner. Who can blame him? The modification he is trying for is setting the floor for Fortress prices, that’s what makes it a “Fortress”.

LOL! Excellent reasoning! Now I know whom to ignore. :/

P2D2 says

SF ace says

In the peninsula, I consider Hillbobough, Atherton, Los Altos (hills), Palo Alto, Menlo Park, and most parts of Burlingame with lots of semi fortress like Cupertino.

1415 SAN RAYMUNDO Rd: 2007 purchase price $3.2M, listed now $2.75M (6 months in market)
420 W Poplar Ave: 2006 purchase price $2.6M, listed now $2.3M (6 months in market)
510 W Poplar Ave: 2007 purchase price $2.2M, listed now $1.7M (100+ days in market)
413 HILLSBOROUGH Blvd: 2008 purchase price $2.5M, listed now $2.3M (75+ days in market)
I guess those foreigners missed these above addresses while searching MLS. Can someone find a Chinese or Indian who drives fancy car, sends kids to private piano lesson, visits native country every year? Just give him above addresses. He will snap up those properties with his “wealth”.

yep. fortress. Someone call call Shanghai, there are some great deals! LOL