patrick.net

Yep y2k. Thing is land is free. Food is good, grow it. Houses are good build it. Thing is people are confused by carpentry. How to start. Stone works really well until you can add to it or build something else. Coal for fire. Works really well its everywhere. Game mostly free. All over California. If you get tried of being conned and stolen from. Could be a place to start. You stick around your going right back into the same old mess. Or go back to credit. Sit in traffic in terror of your boss who dosen't want you to be late. Go to the grocery store buy HIS goods. After all your to stupid to throw some seed into the ground. Or shoot a turkey. Buy his furniture on credit. Live in his house ON Credit. Go to his schools on credit. Pay the thieving govt. The taxes they imply that really don't belong to them. While they dance and sing for you 24 hrs a day on a 24hr a day news channel and tell you what they are doing for you. Which I don't even find hysterical anymore. Really it's insulting to my intelligence. They know, don't ever think for a minute they don't know they are hustling you.

StoutFiles says

Prices would need to drop another 50% for that to be possible. Not for me personally, but the majority of people. I don't think the country could take a blow that big.

Yes, this country will be destroyed if it dropped 50%. The problem is this country's monetary & economic system is based upon self-destructive fundamentals to begin with it.

All types of chaos will ensue for sure. (Social, political, economical & cultural)

But for everything to go back to normal, there first needs to be chaos to run it's full course.

This chaos will simply be the consequences of a faulty system that has been allowed to exist for such a long time. Every action has a reaction, I'm afraid.

APOCALYPSEFUCK is Tony Manero says

It's never been a better time to squat in an abandoned McMansion and prepare for the impending cannibal anarchy.

If you want to squat a place; why not squat a mansion that's already occupied?

Some rich people own homes so big, they won't even know a stranger is in there squatting.

50 cent once had someone squat his 25 bedroom mansion for 3 fucking days.

I'm too worried about job security at the moment. I haven't even considered if things are affordable or not.

I don't think I'm alone.

tts says

Ideally I'd agree with you though.

I agree. It is unfortunate that this financially sound and economical concept seems unlikely to ever occur soon.

tts says

CA does tend to be pricier than elsewhere though, so maybe 2.5x or so to fit his area of choice?

I guess. I mean sometimes, what can you do? Life is short & sometimes you got to play along to get along in life.

Today's comments reveal that everyone knows the housing game is rigged for banks and the government. They obviously benefit from high house prices. If government wanted low house prices they could immediately create thousands of low cost building lots, or they could limit real estate speculation in high cost areas. Never going to happen.
Consider birds. No one charges them for food or housing, taxes them, or leaches off their work. Try charging them rent. Only humans can be enslaved and exploited to the maximum (and we think we're the smartest). Have you ever lived even one single day where you didn't have to pay somebody (rent, etc) for just being there? For just being born on this Earth. What an insidious system they've created. Please read Henry Thoreau's Walden, especially part 1, Economy. It it as close to the absolute truth as is humanly possible.

MCMSinger says

tts says

Home prices should be around 3-4x income
More like .5X to 2x absolute maximum. I don't even think 2x annual income is very financially conservative. Even 1X annual income is beginning to push it.
.5X annual income is more financially conservative and better for the economy. People have other expenses and they need to save money.

I agree with the above qouted lower multiplier for the price of a house. I always figured 1X yearly income was about right.

tatupu70 says

MCMSinger says

tts says

Home prices should be around 3-4x income

More like .5X to 2x absolute maximum. I don't even think 2x annual income is very financially conservative. Even 1X annual income is beginning to push it.

.5X annual income is more financially conservative and better for the economy. People have other expenses and they need to save money.

So rents would fall by 1/2 to 3/4 too then, right?

I'd like for it to rain gum drops and for money to come out of my kitchen sink.

Don't upset taputu, he goes ape sh** every time someone tells him the house he bought isn't worth what he paid for it.

Apartments are definitely becoming less affordable. My wife and I lived in a "luxury apartment" in Fremont and the unit that was going for $1575 in june of 2010 is going for a little over $2000 a month now. That's about a 28% increase roughly. We saw it coming and in part due to this bought earlier this year. What apartment complexes are doing is unconscionable - taking advantage of people who got foreclosed on and jacking up rents due to "supply and demand." 28% jack move is way bigger than "inflation."

So I see too there are some people that like to give away their labor for credit. Hey thats ok. Either that or your stupid. Paper was nothing but credit. Thats all it ever was. Just credit for the labor or work you did. It can be adjusted up and down at their whim just like the bullshit interest rate game. Hey no inflation here folks. Oil at 4 bucks a gallon and no inflation. Your pliability and gullibility never cease to amaze me.

So take your little labor paper to Wal-mart and buy your masters goods. That were grown in Masters fields by masters little labor paper loving, field hands. Shipped by masters packing houses. By masters paper loving truck drivers and trucking companies. To the masters Wal-mart built by masters credit paper loving construction workers. Go in and be greeted by masters paper wanting greeter (oh he's just so low on the food chain Doris. I can't bear it.) Get it. Load up your auto that was obtained with masters credit. Paid for monthly with masters (your so happy with it.) labor paper that you and the other slaves so happily suck in. Because well you can't figure any way out of masters system. Hey like any field hand you were born into it.

0.5x of yearly income for a home is just plain crazy. That would correspond to a monthly rent of 4% of your pre-tax monthly income, or 8% or less of your take-home income. That sounds like trailer park or a dorm room to me. Or maybe Detroit?

Anyway, until we reach 0.5x prices I will look for the 2-3x homes and rent them out to fools like you at a nice profit...

Let's get real here. I have no problem paying 3x for a decent home, since I'd still pay about the same as my current rent (including taxes and maintenance!) but after 20 years (not 30!) I'd own my home free and clear.

At 0.5x I'd add a new house to my portfolio every 5 years. Now wouldn't that be nice? Well, maybe not since the rental market would probably also collapse at those home prices :-)

dublin hillz says

Apartments are definitely becoming less affordable. My wife and I lived in a "luxury apartment" in Fremont and the unit that was going for $1575 in june of 2010 is going for a little over $2000 a month now. That's about a 28% increase roughly. We saw it coming and in part due to this bought earlier this year. What apartment complexes are doing is unconscionable - taking advantage of people who got foreclosed on and jacking up rents due to "supply and demand." 28% jack move is way bigger than "inflation."

Are you sure that food inflation hasn't been higher???

DaveM_Renter says

0.5x of yearly income for a home is just plain crazy. That would correspond to a monthly rent of 4% of your pre-tax monthly income, or 8% or less of your take-home income. That sounds like trailer park or a dorm room to me. Or maybe Detroit?

No. That's what you should be paying for a house if you want enough money left over to save for retirement. It's not like I'm going to be getting a pension.

SFace:

Sure, quote the NAHB for affordability. Does that take into account that
a) a much larger percentage of households is now a 2-earner household?
b) a lot more of one's take-home pay is now needed to cover other basic costs, like food and health care so effectively one has less money left over for housing?
c) due to low interest rates you need a lot higher savings rate to be a ble to retire at a reasonable age?
d) the impact of property tax on affordability?
e) the fact that you have to pay 20% down (a lot more money now than in 1990) or PMI?

I'd love to see a true unbiased study on home affordability throughout recent history.

FortWayne says

tatupu70 says

MCMSinger says

tts says

Home prices should be around 3-4x income

More like .5X to 2x absolute maximum. I don't even think 2x annual income is very financially conservative. Even 1X annual income is beginning to push it.

.5X annual income is more financially conservative and better for the economy. People have other expenses and they need to save money.

So rents would fall by 1/2 to 3/4 too then, right?

I'd like for it to rain gum drops and for money to come out of my kitchen sink.

Don't upset taputu, he goes ape sh** every time someone tells him the house he bought isn't worth what he paid for it.

Quality Auto Repair Since 1979

lol--can you please show me where that has EVER happened?

I'm quite comfortable with my purchase, but that has nothing whatsoever to do with the affordability of houses in CA.

I just find it hilarious that you guys continue to wait for prices to be 1X incomes. Good luck with that.

corntrollio says

So even if you compare the absolute bottom of 90s prices to today, for Marin County, today's price is still over 20% higher adjusted for inflation.

Yes I agree...

Hysteresis says

you need to factor in the mortgage rates if we're both talking affordability

Yeah, it's hard to get into affordability though because prices and interest rates interact in a complex way. The low rate matters for monthly payment, but the high principal amount of the loan means you are f&&ked for actually trying to pay down the mortgage. On the balance, I'd much rather have higher interest rates and lower prices.

For comparison, $625K at 4% is like $407K at 8% in payment, but it's a lot harder to pay off the extra $200K+. At 12% (not unheard of when some of today's boomer's bought -- that'd be $290K. And it's a lot harder to pay off the extra $300K+. It's hard to say the homeowners are benefiting from such low rates -- it seems like banksters and realtors and other rent-seekers are benefiting instead.

tatupu70 says

That's not really a good comparison though--you're taking a price point below historical average and inflation adjusting to now. Unless we are below historical averages now, then the current price will always be higher.

Sure, I'm taking the bust from the 90s and comparing it to the bust from today and saying we're still 20% higher. Maybe we're not done busting, maybe we are. Most busts overshoot on the downside. Lots of government stimulus has kept our bust from dropping too far.

tatupu70 says

I just find it hilarious that you guys continue to wait for prices to be 1X incomes. Good luck with that.

I paid $32K for my house in Baltimore City. That was in 2003. That's less than 1X annual salary. House behind me just sold for 60K.

zzyzzx says

tatupu70 says

I paid $32K for my house in Baltimore City. That was in 2003. That's less than 1X annual salary. House behind me just sold for 60K.

I'm glad you're pulling in more than $32k

zzyzzx says

dublin hillz says

Apartments are definitely becoming less affordable. My wife and I lived in a "luxury apartment" in Fremont and the unit that was going for $1575 in june of 2010 is going for a little over $2000 a month now. That's about a 28% increase roughly. We saw it coming and in part due to this bought earlier this year. What apartment complexes are doing is unconscionable - taking advantage of people who got foreclosed on and jacking up rents due to "supply and demand." 28% jack move is way bigger than "inflation."

Are you sure that food inflation hasn't been higher???

It seems that food inflation is around 15% based on my experience. Rents at many properties have exceeded that.

DaveM_Renter says

I paid $32K for my house in Baltimore City. That was in 2003. That's less than 1X annual salary. House behind me just sold for 60K.
I'm glad you're pulling in more than $32k

I thought we were talking median salary to median house....

=DaveM_Renter says

I paid $32K for my house in Baltimore City. That was in 2003. That's less than 1X annual salary. House behind me just sold for 60K.

I'm glad you're pulling in more than $32k

Housing prices are at 2x-4x for the social class that normally occupies them...at least in Ohio anyway. I could buy a 32k house, but around here that'd give me the ultimate fixer-upper and/or a neighborhood I'll probably get stabbed in.

Maybe that didn't apply for you. If so, you're one of the lucky ones.

Without arguing specifics and ranges, what will be the result of this?

1) Current homeowners will be obligated to pay the banks for homes that no longer have the marginal value for the loan. Who wins? Banks have larger loans than what would otherwise be possible.
2) New sales at lower prices. Banks still have same 2% or better margin in lending from the cost of the money to them, but don't loan as easily and have to write more loans for the same $. This also promotes higher density in the cities and later in life housing purchases and favors apartment / condo owners keeping rents higher. Alternative is to pay for more gasoline to get back and forth to property.
3) If the current late in life homeowners manage to pay off their home, then they should be able to afford a higher taxation rate. This should further discourage home sales to new owners and allow for banks to posthumously accumulate more homes as the current residents pass.

And as we have seen before .. rates fell in early 1990 so did home prices.. even today rates have fallen and so have prices.

Yep, homes are now more affordable then ever that is why homeownership rate is on the brink of collapse.

http://finance.yahoo.com/news/Home-ownership-sees-biggest-cnnm-3881936188.html?x=0&sec=topStories&pos=7&asset=&ccode=

The percentage of Americans who owned their homes has seen its biggest decline since the Great Depression, according to the U.S. Census Bureau.

In general, home prices probably are as affordable in large California cities than they were in the 1990s. The exception is the higher priced markets (upper quartile) in big cities in LA, which still have plenty of room to fall.

Why?

Banks have offloaded most of their shadow inventory of homes below $300k, but the more expensive homes of $300k have yet to be released onto the market. This has kept prices artificially high, while banks try to slow down writing off the huge loses of expensive homes. Similarly, people with greater means use various legal methods to forestall foreclosure and stay in homes for years before they are kicked out.

This is starting to change though as million dollar homes have seen the greatest increase in foreclosure filings. It makes sense that the top of the market is the last to fall. As well, FHA loans are now maxed out at $625k versus $729k just a few weeks ago, so homes priced between $625k-$900k will experience a significant price adjustment.

If you live in an area of $300,000 median priced homes, have good credit and can put 20% down, you can get a mortgage for under $1200 per month. The problem today is that nobody saves money anymore and very few are likely to have the 20% to put down. If you do and you live in an area of median priced homes, you can get a sweet deal right now.

billibong says

The exception is the higher priced markets (upper quartile) in big cities in LA, which still have plenty of room to fall.
Why?
Banks have offloaded most of their shadow inventory of homes below $300k, but the more expensive homes of $300k have yet to be released onto the market.

300K in LA is not expensive. Even some of the worst zip codes in Los Angeles like Watts 90044 and South Los Angeles, formerly known as South Central Los Angeles 90047, have average and low end homes that sell for more than that.

lurking says

300K in LA is not expensive. Even some of the worst zip codes in Los Angeles like Watts 90044 and South Los Angeles, formerly known as South Central Los Angeles 90047, have average and low end homes that sell for more than that.

That may have been true before during the boom, but look at Redfin for 90044 now and see how many houses sell for $300K and above now:

http://www.redfin.com/homes-for-sale#!market=socal&region_id=37491&region_type=2&sf=1,2&uipt=1&v=6

Then look at 90047:

http://www.redfin.com/homes-for-sale#!market=socal&region_id=37494&region_type=2&sf=1,2&uipt=1&v=6

It's less than 10 for 90044, and most of them are in the under $200K range (mean is under $200K). For 90047, there are more houses in the $300K and up range, the average is only a little more than $200K.

Los Angeles is certainly an expensive city, but what you're saying is a bit of hyperbole. As I mentioned, it may have been true during the boom, but prices came back to earth in the last few years. The prices are probably also artificially inflated still by the ridiculously low mortgage interest rates and massive government subsidies.

300k for a mediocre home is not affordable jesus christ. Given wages and debt load home should be going for close to 100k for a mediocre home.

tts says

300k for a mediocre home is not affordable jesus christ.

Amen. Even someone making 300K a year shouldn't have to pay nor should they consider to pay 300K for a home.

They are other expenses and money should always be saved in case of emergencies but also for retirement.

tts says

Given wages and debt load home should be going for close to 100k for a mediocre home.

Sounds more reasonable, I guess.

tts says

300k for a mediocre home is not affordable jesus christ. Given wages and debt load home should be going for close to 100k for a mediocre home.

In Mass that wouldn't be that bad. Hardly anything can be found for I'd say less than 190k. Technically yes there are some urban areas that would but it would be beyond mediocre to the point of a waste.

In northern NJ there are hardly any decent houses in the $300k range. And when I do see a listing for a $300k house, there are never any interior photos, which means the house is a dump. There will be 8 or 10 photos, all of the outside.

HEre's a $300k house in my area. Sure looks inviting, right?

"NEEDS A LOT OF COSMETIC UPDATING AS REFLECTED IN PRICE."

http://www.njmls.com/listings/index.cfm?action=dsp.info&mlsnum=1117848&dayssince=&countysearch=false

HousingWatcher says

In northern NJ there are hardly any decent houses in the $300k range

Depends on who is defining "northern nj". If you only mean hudson county, the smallest, most developed, and closest to NYC of the 6 or 7 counties (depends on how you count middlesex) in "norther nj", then that's probably true.

I was referring to Bergen County.

HousingWatcher says

In northern NJ there are hardly any decent houses in the $300k range. And when I do see a listing for a $300k house, there are never any interior photos, which means the house is a dump. There will be 8 or 10 photos, all of the outside.

HEre's a $300k house in my area. Sure looks inviting, right?

"NEEDS A LOT OF COSMETIC UPDATING AS REFLECTED IN PRICE."

http://www.njmls.com/listings/index.cfm?action=dsp.info&mlsnum=1117848&dayssince=&countysearch=false

" .HOUSE IS IN MOVE IN CONDITION .NEEDS A LOT OF COSMETIC UPDATING "

Anyone else find that a bit contradicting?? Photo Gallery only has one picture.

tts says

00k for a mediocre home is not affordable jesus christ. Given wages and debt load home should be going for close to 100k for a mediocre home.

I agree.

HousingWatcher says

I was referring to Bergen County.

You need to look beyond Cliffside Park. I just looked up Closter and there were 11 houses less than 300k, most of them looked pretty nice. I choose Closter because I lived there in 92, know the area, and have kept up with some people there. As far as I know that these houses are in nice area's, with very good schools, unless my friends have failed to tell me about a catastrophic decline in Closter.

Can someone please correct me if I'm wrong?

If interests rates start going UP soon, home values/prices start coming DOWN soon as well, right?

If so, who cares about our "historically-low" interests rates?

Interests rates can only go up while taking our "historically-high" home prices and little equity gains in the tank with them.

Waiting for the drop says

If interests rates start going UP soon, home values/prices start coming DOWN soon as well, right?

This is a matter of debate, to some extent.

It is true that many people use monthly payment to determine whether they can "afford" a house.

It is true that monthly payments go down when interest rates go down, so that people can afford a larger loan.

However, sometimes interest rates and home prices rise together, and sometimes they move in opposite directions, depending on how the economy is doing, because housing prices also depend on income and certain other factors like unemployment and loan availability.

I do agree that our historically low interest rates have created a lot of support for high house prices, have served as stimulus essentially for houses, and have kept prices from falling too far from the peaks too quickly (and probably have kept them from overshooting on the down side).

When wages go up accordingly rates and prices can go up at the same time. This is what happened in the 70's-80's.

If wages remain stagnant when rates rise then home prices will fall since affordability will drop. This is what will likely happen this time around.

Rates rising are a given, the timing is the problem. Officially the government believes it can keep rates suppressed until 2013 or so. No one really knows if they can however and once that time frame comes a long no one really knows how high rates will get exactly either.

Historical average is around 5%.

In the 80's however rates got to around 18% by an inflation fighting Fed.

18% is extreme and we likely won't see that, that rate is untenable given our national debt load. What I do expect is a still very high 8-10% sustained for many years.