patrick.net

"As Patrick points out in his front-page "Why it's a Terrible Time To Buy a House" article, the oldest baby boomers are now 66 years old and plenty of them will sell their SF houses and move to AZ or FL or such. They paid $60K for their houses and if they make $400K instead of $800K, they've still made a big gain and can head for sunnier warmer cheaper regions. Cheaper being a big factor. Things will come full circle everywhere, even in San Francisco, and at some point the focus will be away from housing housing housing. As Edvard pointed out, a lot of this is about fear. We live in uncertain times."

But here's the thing..How can everyone do that at the same time?

There was a housing study performed that examined retirement ages and makes predictions. it's three and a half years old but it does say that there will be years where the majority of boomers retiring start to move out

www.informaworld.com/smpp/title~content=t782043358

see i don't buy the baby-boomer move out = cheaper houses argument.

You have to realize that 1) the homes are already paid off and 2) because they've had decades with minimal house payments, much less than what you or i pay in rent and a fraction of what you and i would pay in mortgage, a good number of them probably have huge nest eggs/pensions and the actual benefit of social security.

So sure, they would make a killing at 400 or 800k, but the fact is most of them probably don't NEED the money, and if they don't NEED to sell right now, why would they throw away 400k just because you and I hope they would?

I obsess over real estate (overpriced or not) because in our area, large houses are cheap, jobs are scarce, and where I want to move I could barely afford a doghouse. It is hard to think of trading what we now enjoy (lots of space, abundant parking, no HOA or paint color rules or grass length citations) for a doghouse, but this means we spend a lot of time on the road and on the phone tracking family down south.

In regard to the boomers downsizing, I think that those who have kids or younger relatives will pass their Prop 13 properties on through a trust or other arrangement. In my parents' 1950's SoCal neighborhood, lots of old folks have died or gone into nursing homes, but their houses are quickly taken over by grandkids, nieces and nephews. So those properties are unavailable.

If the relatives decide to sell, it will be for as much as the market will bear, of course. Unless they get a scummy realtor (no R) like the one retained by the inlaws of my aunt's deceased friend, a realtor who convinced them to put the house on the market at a very high price with a "Pending" status, and come to find out he bought it from them at $150k less than listing and has now divided it in half and rents it out. It still seems wrong to advertise a house when it was never really for sale in the first place. So if there are any deals to be had from dead or demented boomers, I suspect the realtors (small r) will snap them up before normal people get a chance.

I think the psychology is simple: Not being able to get something that we want and have also earned in terms of past common sense about the housing market. The rules have suddenly changed and they don't make sense, and so we are frozen in the dilemma of overpay versus sit and wait.

We grew up middle class, knowing that we wanted to own a home when the time came, and knowing that houses were just naturally affordable to those who worked hard and had good jobs. We obsessives were moving responsibly toward our goals like pack mules, since we have hard working sensible personalities rather than get-rich-quick impulsive streaks that dominate the recent casino-like reality. Suddenly we watched as housing became a hot investment commodity, the tide of prices rose higher than we were able to pay at our point of entry, and the real-world basis for such bubble prices lost all sense. This leaves us in a dilemma of either taking out a super chunk of debt for something that should not logically be so expensive, or continuing to rent and feel disappointed. Perhaps it feels like we f'ed up somehow, but looking back it's impossible to see where we made a mistake because we used good judgment all along.

There has been a huge transfer of wealth to financiers in the past two decades. Many people lost a lot of money so that corporate coffers could be so stuffed. We Ben Franklin types (a penny saved...) managed to hold on to our money but have now lost out on our standard of living in the service of the big greed game.

Postscript: I also find it obsessively fascinating to look at the sale histories of properties. When I see prices sailing ever upwards during the boom, and then becoming REOs at half the price, I obsess over where all that money WENT. Somebody made a killing. I obsess over all that granite that was quarried for countertops in abandoned houses, because buying a headstone for my husband's grave was a shock immersion in stone technology and prices.

I obsess over all the sacrifices we are making as a low-income family as opposed to those you read about and become acquainted with who are not paying their mortgages but are able to buy expensive toys for the kids and $250 shoes for the moms while they live free in their nice new houses.

There is just so much injustice in the topic of real estate it is hard not to be obsessive about it. I think before I have an apopletic fit I'd better get off the computer and go enjoy the sunshine and the kids.

Cautious1 says

I think one cure would be to get off the computer and go enjoy the sunshine and the kids.

Agreed, 100%. Getting out and LIVING is sort of the point of life. Realistically, a living space is only going to bring a finite amount of happiness. Sunshine & fresh air are generally available everywhere & are free. Kids...I can't say that I enjoy them at all, but that is probably more a product of me being a 27 year old male. Maybe in a few years...

bmwman91 says

Well, I stand corrected regarding the East Bay. I am mostly thinking of places convenient to where I work in Mountain View (not Google), and I guess those areas are sort of dumpy.

Well, I thought the reaction you got was a little heavy in context. There are certainly decent areas of the East Bay. However, you specifically mentioned short commute, so that could mean Hayward, Castro Valley, San Leandro, Union City, maybe if you're up in the hills, but that takes longer. Dublin, Pleasanton, Livermore, that might not suit your commute desire. Fremont ain't bad though.

edvard2 says

The average person in the Bay Area can tell you absolutely anything you'd probably want to know about Liechtenstein but couldn't tell you a thing about 20 miles down the freeway.

Sad but true.

Zakrajshek says

Simply, leave the smog, crime, gangs, ripoffs, frustration, and misery all behind you.

Have you ever even been here? Doesn't sound like it. You're trying to make a point, but why exaggerate and be bombastic about it? No doubt, some people are choosing not to be in the Bay Area because of cost of living, but where are you actually suggesting? It seems like you wanted to criticize, more than you wanted to contribute.

cab says

the oldest baby boomers are now 66 years old and plenty of them will sell their SF houses and move to AZ or FL or such. They paid $60K for their houses and if they make $400K instead of $800K, they've still made a big gain and can head for sunnier warmer cheaper regions. Cheaper being a big factor.

But cheaper can mean many things. SF is cheap if you have a low tax valuation because of Prop 13. If you move somewhere else, you will have to pay more in property taxes, although perhaps you can get a cheaper condo and pay lower state taxes and sales taxes elsewhere. You'd have to do the math. There are also other factors, such as old people don't always have to drive everywhere in SF (doesn't have to be the bus -- could be a taxi).

Prop 13 causes more inertia than there otherwise would be. For example, your kid and grandkid can inherit your tax base in some cases. It's also trivial for grandma to move out into a home/condo and for someone else in the family to take over the house.

SingleSpaced says

Think about moving to places where income is $80k and houses are $120K.

Where?

corntrollio says

But cheaper can mean many things. SF is cheap if you have a low tax valuation because of Prop 13. If you move somewhere else, you will have to pay more in property taxes, although perhaps you can get a cheaper condo and pay lower state taxes and sales taxes elsewhere. You'd have to do the math. There are also other factors, such as old people don't always have to drive everywhere in SF (doesn't have to be the bus -- could be a taxi).

Prop 13 causes more inertia than there otherwise would be. For example, your kid and grandkid can inherit your tax base in some cases. It's also trivial for grandma to move out into a home/condo and for someone else in the family to take over the house.

A few Bay Area counties allow you to transfer your low prop 13 taxes to a smaller/cheaper home once after the age of 59 I believe. My FIL was able to sell his home in Orinda he bought in the 70s and buy a condo in Danville and keep his property tax basis - and pocket a few hundred thousand. He is also now walking distance to everything he needs/wants.

http://markusandheidi.com/default.asp.pg-Propositions6090

repo4sale says

GOAL IS 3000-6000% GROSS PROFITS PER PROPERTY WHEN THE OBAMA ADMINISTRATION IS OUT AND THE MARKET TAKES OFF!

keep dreaming there.

tts says

Young and young-ish people don't really think about inflation, its the older folks who are retired or near retirement who start to think about it since that can kill their savings.

What young/young-ish people think about is interest rates which are effected by inflation but they won't care about the inflation itself. They'll just complain about the interest rate being too high or whine about how they didn't lock in that tenth of a point less rate or whatever.

Thats a good sentiment. I remember a while ago in Bloomberg Businessweek magazine there was an article on investing with a cartoon related to that.

That cartoon drew a scenario where a young person is given a chance to invest $600 into stocks long term to make a large sum of money, and instead choose to blow it all on an iphone.

Maybe young people are just too child like. Back in the days you were 18 you moved out. Today they live with their parents until mid 30's.

corntrollio: Where?

http://money.cnn.com/galleries/2011/moneymag/1108/gallery.best_places_affordable_homes.moneymag/

Again, was looking at the article posted on CNN, and linked on the main page Thursday. I'm sure they all have negatives to go with, but on face value looks reasonable. Some examples:

10. Deer Park, TX
Median home price: $131,250
Median family income: $80,721

14. Stockbridge, GA
Median home price: $124,000
Median family income: $74,418

Interesting stuff...Seems like the folks in the South have some common sense... which is lacking elsewhere in the nation.

FortWayne says

Maybe young people are just too child like. Back in the days you were 18 you moved out. Today they live with their parents until mid 30's.

Weeell you have to bear in mind too that this young generation doesn't have the same economic opportunities previous generations have. They're coming up during the worst recession since the Depression and its still ongoing. Meanwhile they're saddled with tens of thousands of undischargable debt to get a chance at a OK job fresh out of college, and that is if they're lucky. Many seem to end up with useless degrees working off the debt at your local Starbucks or McD's for minimum wage, likely until their mid or late 30's at that rate.

So yea many are forced to live at home for far longer than previous generations, but you can't say that a whole generation suddenly became lazy/stupid/whatever. Even if it did who's fault would that be? Barring some weird chemical contamination or shit it'd be the generation that raised them that would be at fault wouldn't it?

life was generally easier back when there was less people around.

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

tts says

So yea many are forced to live at home for far longer than previous generations, but you can't say that a whole generation suddenly became lazy/stupid/whatever. Even if it did who's fault would that be? Barring some weird chemical contamination or shit it'd be the generation that raised them that would be at fault wouldn't it?

The other thing to keep in mind is that some people have pretty much become sandwich generations. This term means not only do they have kids of their own to take care of but potentially one or both set of grandparents. It might not mean living with them but checking up with them on a frequent basis.
http://en.wikipedia.org/wiki/Sandwich_generation

In addition what one might have been considered "adulthood" these days might not be. Anyone can have a child as long as they are fertile and housing can be provided by the government (section 8). Of course it is not a mature thing to submit someone into levels of poverty to do it but some do.

This website dismisses the concept of house ownership largely because it is frankly too expensive (and in most cases it is). I also dismiss it because the social concept is passe. If companies can move but people cannot then who has the advantage? I'm not advocating constantly moving but the days of finding some rock hard stable job and staying put in a location 30+ years are long over.

If someone rents they don't have to put a house on the market and try to sell it and wait longer...and longer.

We are tired of the overpriced re market and are renting. We like the flexibility. After selling a house and all the stress involved, we are not sure we want to jump back into that mess.

Bellingham Bob says

life was generally easier back when there was less people around.

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

“Nessuna soluzione . . . nessun problema!„

more resources available, less competition for them. makes sense.

tts says

So yea many are forced to live at home for far longer than previous generations, but you can't say that a whole generation suddenly became lazy/stupid/whatever. Even if it did who's fault would that be? Barring some weird chemical contamination or shit it'd be the generation that raised them that would be at fault wouldn't it?

As we used to say back in the days: "It takes a village to raise a child." Who is the blame? Parents.

Of course lately politicians would blame this on the Tea Party grassroots movement somehow, it's the new cool in Washington.

Real estate is overpriced by there are no controls over appraisers and they work for commissioned salespeople. Biggest conflict of interest in history!

The states want it this way so property taxes will keep rising.

Read: "The Truth About Real Estate Appraisal" by Stephen G. Bishop

tts says

Weeell you have to bear in mind too that this young generation doesn't have the same economic opportunities previous generations have.

This is definitely true. The younger generations don't have cheap cost of living, cheap education, and cheap housing, among other things. They also don't have the guaranteed pensions of the older generations and have fewer job opportunities, partly because of demographic reasons. Most of these excesses of the boomer generation has been funded by these younger generations, so it's no surprise they have fewer economic opportunities.

I don't obsess over overpriced real estate. ;-)

Where I live, a small decent house in a decent neighborhood can be had for $100k.

The rents, on the other hand, have been driven up by an influx of natural gas fracking employees. Here the "price to rent" ratio is at the other extreme relative to the bubble in CA. I currently pay $750/month in rent for a 1br apartment, but I could get a decent house for less money per month.