patrick.net

There was a RE section on the Bay Area Chinese radio program 2 days ago, and I think it is going to have some impact on the ethnic market psychology.

They had a seasoned agent covering west valley communities come up to talk about the market. She confessed that the market has been EXTREMELY slow since March, and even good school districts like Palo Alto and Cupertino are not spared. She was talking about some "case studies" of some Palo Alto homes sitting on the market for more than 6 months without an offer.

When asked about advice to both the seller and buyers, she stressed over and over again, SELLERS beware, the market has turned, "you have to drop your price, NOW". She went further in saying sellers not only needed to drop price to cater to today's market, but they also needed to drop even more because the market would get there in a couple of months and as a smart seller, you'd want to get there first before your neighbors. Pricing yourself for the market 2 months later is her advice (meaning, price below the current comps). If you don't price below the comps, she warned, you will become above-comp in a couple of months and your listing will just go stale.

However, she also commented that in the better neighborhoods, there are lots of sellers who are just tesing the market. They bought a long time ago, don't need to sell, just want to cash out at the top, and if the price target is not reached, then they may not sell since their carrying cost is very low. She sounded a bit frustrated when she was talking about these test-water types, because obviously she thought they were wasting her time, so she almost said it flat out that test-water sellers should not bother.

She also commented that the East Bay and inland properties are already starting a landslide situation, they are already 20-25% off from the top.

At the end of the program, she did the usual sales pitch saying that if you are trading up, this is the best time yada yada...Sounds desperate for the deal flow.

The funniest term this agent used was "pre-emptive price cut".

"You need to get there before your neighbors figure it out, it is a zero-sum game, if they cut first, they win and you lose. Don't worry about the 10s of thousands of dollars because you have already locked in a huge gain in the last few years, what you are doing now is the protect the majority of your gain, not to get that further 10s of thousands of dollars. So price below your neighbor pre-emptively and protect your overall gain."

Oh, and she impressed me by saying, "A RE gain in value like what we saw in the last 3 years was once-in-a-lifetime opportunity, so if you are a seller, grab this opportunity to unload because such a gain won't be seen by you again in your lifetime."

RE: Wood construction, all I can comment about that is it's certainly not an earthquake issue. Having travelled throughout earthquake territory in Asia, most newer construction is reinforced concrete, which according to locals I asked, was considered the most "earthquake safe". Who knows.

But, speaking of wood, and going COMPLETELY OT, here's a good laugh:

http://tinyurl.com/kd6hp

Actually, not really much of a laugh; more of an "ouch."

ride SLEDS ACROSS THE LONG ISLAND SOUND!

Interesting, but of course, Long Island is just a moraine from the last ice age (end of line for the glaciers).

The hockey stick is real, but the earth has had plenty of climate change without the aid of man. I'm more concerned about the forests we're cutting down and the resultant mass extinctions than CO2. Of course, that's easy to say when living in the 1st world. We've already cut down our ancient forests.

Sir Rick of Shmend Says:

Oh as far as climate change goes, did you know that in the early 20th century people used to ride SLEDS ACROSS THE LONG ISLAND SOUND!. Nah were not having any serious effect on the environment.

There may or may not be humanity-induced global warming (I'm agnostic on this point), but I do have to disagree with this example. Check out the paintings of Brueghel - many of them depict Belgium in winter covered with snow and ice, now a rare phenomenon. Does that mean global warming has occured since the 16th century? Who knows. But if you go by your argument to the extreme, was global warming responsible for ending the ice age?

Most of the scientists in the climate field probably make reasonable observations, but they superimpose their belief systems on those observations, skewing their conclusions. Happens all the time in Science. That's why Science is not as pure as you might think.

To BA,

I highly suspect that cost is the reason and earthquake-proof is just a marketing cool aid that the developers want to shovel down your throat.

Steel frame is obviously MORE earthquake-proof and that's why you can get a discount on home insurance if your house is built with steel frames. I can't understand why other parts of the house cannot be built with lighter-weight composite metals that is obviously much more durable. A wooden house has an average lifetime of no longer than 150 years, at least that I what I heard.

A wooden structure may make sense because nobody is expected to live in just one house throughout his life. So we might as well crank out the cheapest houses possible so that more people can have their slice of the American dream.

OO,

Thanks for the post. That was an amazing talk by the agent. I hope to see more and more such advice even in MSM in near future.

When I see sales still happening at these levels, I sometimes wonder, am I underestimating the stupidity of general public ? Let's hope such talks, articles cure some of that idiotic thinking of desperate buyers.

OO and TBAoNTBA,

The excellent RE agent example OO points out just goes along with my theory - these agents are now getting desperate. No transactions = no money. They sense the sellers' stubbornness and realize with this stalemate, momentum is on the side of the buyer, and so the first one to likely capitulate will be the sellers. I wouldn't be surprised if the NAR has sent out directives to this end to all its minions far and wide.

This whole housing obsession is basically what happens when people become truly truly materialistic. They've let stuff and accumulation of stuff control their lives. So houses become status, it becomes a future, it becomes a means of living and the point of living. It's the peacock's tail of modern American life - esp. McMansions outside of the highest priced metropolitan areas - people buying 5 bedroom homes but live in the basement. People who buy exurban homes that they never see in daylight.

I had a lengthy conversation with the information lady at Cedar Breaks National Monument. She mentioned that the entirety of Utah is full of earthquake faults, and the houses there are not built up to earthquake specifications. If the big one hits, I see a hell of a lot of big houses coming down from their expensive ridgeway lots.

1) when is The Big One due anyway?

Please let me know too. I will mark it in my calendar. ;-)

The references to oil shale and tar sands weren't meant to imply these reserves were a solution to consumer energy needs. They will, however, serve as a solution to military needs should the necessary crisis present itself. Environmental damage is not a concern during times of survival. I point out that the two big winners of the last big conflict prevailed with resource-driven attrition by one and slash & burn by the other. Maybe the worst ways to win any war, but far preferable to the alternative.

The Big One of SoCal could happen any time now.

The Big One of NorCal is still years away, we are on a different schedule :-)

In case our schedule merges with that of SoCal, I will let you know.

I asked the same question, but the lady started a rant about GSEscalante NM as a massive Clintonite land grab, blah blah blah.

For you guys sick of the heat, this is probably a perfect weekend to hit Yosemite and the Eastern Sierras. We drove back via Tioga Pass and the whole Tuolumne Meadow had huge torrents of water everywhere. With the hot weather this week, I bet the Yosemite waterfalls are just massive. Camp at Upper Lee Vining campground and go frolick in the snow.

A wooden structure may make sense

Jeebus died on a wooden structure. think about that next time you SF bay fudge packers go on an all night coke/boneragra binge.

Sinners repeat. Jeebus will return !

Hmmm, that girl must be an exhibitionist. There are few things more public than a public restroom in a popular national park.

I find food and conversation to be much more important when one is on the road. Sleeping in the car is actually pretty cool. We saw the most amazing night skies on near Boulder, UT and in Great Basin NP.

"...she looked kind of like sandra bernhardt."

you are lucky there was a shower partition.

she looked kind of like sandra bernhardt

There's a carpet munching section of the campground?

SP,

True. German tourists are very good at following orders (eek, did I just totally offend the Germanic portion of this blog?) and were all model tourists. They stayed on the trail, they didn't smoke while hiking, they didn't pose for pictures on sheer cliffs.

The government jobs aspect is a little weird. Southern Utah is a mixture of New Age restaurants (very good and reasonably priced ones) and irrigated hayfields. I actually found the little old information ladies to be the most anti-federal government. I had one lady who thought the whole GSEscalante NM was created as a big Clintonian kickback.

Working for the park service does seem like a nice retirement gig. Exercise, sunshinek, clean air, human interaction. Beats Wal-mart greeting any day.

How to spot a German tourist, if you see someone who looks gay and is dressed a bit odd, kind of like Mike Myers as "Dieter" but has a girl with him, he's likely German. The give away is very odd sneakers.

Hmmm,

My boyfriend speaks German, so I just ask him. The German nose is also pretty distinctive.

I also encountered a lot of big (Mormon) families of eerily blonde people, including a family of at least eight kids, all with the same top and similar looking bottoms. That was just a bit creepy.

if you see someone who looks gay and is dressed a bit odd

LOL...sounds like a Berliner Grufti, but most Germans dress pretty normal.
Where's Ptiemann to do his "Dieter Dance"?
Sorry Pete!

did you know that mormons have to wear special underwear?

I bet Mormon goths were special black numbers.

Bhitis Says:
Don’t miss this on why the US will still be the only superpower in the world by 2030.

Nutters. The futurists in control would really create universal dystopia -- within a week...

Steel frame is obviously MORE earthquake-proof and that’s why you can get a discount on home insurance if your house is built with steel frames.

The only problem with steel frame is being careful with wiring -- you have to drill holes thru the frame to get wiring thru, and it's imperative you grommet them, otherwise the steel edge will eventually cut thru the wire insulation and make the whole frame live. the question is, how long does a grommet take to degrade?

Peter P Says:
Data can be twisted very easily. Research any side of the issue and you will be convinced. Research both sides of the issue and you will be skeptical of “Science” itself.

jeez, that sounds like the arguments of postmodernism! what next in here, communism!!??

I'm open to a discussion about dashi stock preparation...

surfer-x Says:
Sinners repeat.

freudian slip?

Did someone say postmodernism? ... I didn't think so.

Move along; go about your business.

did you know that mormons have to wear special underwear?

So do the Sikh's

Peter P queried: Let me ask you. What is the Theory of Global Warming?

The Theory of Global Warming is the thesis that if Al Gore sits on a talk show telling you that any scientist who disagrees with him doesn't know science (and that we are in for many more Katrinas) that you will not notice he arrived in a huge SUV @ 11 mpg and spends 2K a month on heating/cooling just one of his cribs.

I am going to predict in about 3 months, SFH rent will go down in the Bay Area.

I was just randomly going through some craigslist SFH rental listings, it seems to me that here are the established trends

1) More "just remodeled" properties available at a tad bit more expensive rent than usual (2200-3000 compared to 2000). My guess is that these properties belong to the flippers who got stuck in their flip-of-the-century.

2) More SFHs available for rent.

A few houses I recall having been there for more than a couple of months just dropped their asking rent. Naturally the FBs will want to increase their asking rent to make up for the *very* negative cashflow. But asking is all that they can do. The market will tell them what the market can bear, and the market won't bear much as long as there are apartments out there as another alternative. Lots of condo conversions are put on hold, and repartments are happening.

The rental market is much more efficient and responsive than the housing market. Rent will head down.

Returning:

Just wanted to weigh in on the CEO comp issue -- a bit late perhaps, but this is an area near and dear to my heart. Started my career in the compensation field and wrote my masters thesis (15 years ago) on exec. pay, pay structure, and firm performance in the packaged goods industry (guess what -- there wasn't any correlation).

My two cents -- many problems in this area.
1) Agency problem -- in that CEO's are the agents of the owners and the trick is to get the CEO interest aligned with the owners -- one of the initial reasons for options (e.g., the CEO is incented to improve the value of the company). But the agency issue has broken down -- CEO's just take care of themselves. The latest problem is issuing options after a market closes on a day when major positive news comes out.
2) All are paid as if they are "superstars". Some CEOs really do make a difference (cf. Eisner at Disney in his first five years) but most are really caretakers. But all want to be paid like they are the Ali of the world, but are really only Leon Spinks.
3) The Lake Wobegone problem -- "Our CEO should be paid at X% above average", which results in a never-ending upward spiral of compensation.
4) Because they can -- unless the CEO is well known and ends up with an egregious package (cf. Jack Welsh and the $400mm retirement package to the CEO of Exxon), CEOs can get away with almost anything.

My answer to "are they really worth it?" -- in short, no. What it takes is connections, education (the right schools, not just well educated), intelligence (OK, these guys aren't stupid by any stretch), and LUCK (right place at the right time and someone helping them early in their career). To cite an old example -- Lee Iaccoca was smart and successful, but did you know that he was 4-F and didn't serve during WW2? So when most people were in the military, he was at BS engineering degree and then did post grad work at Princeton. Not a bad head start to have finished a great education when your peers are just starting and trying to get a seat in any college.

I recommend "Fooled by Randomness" by N. Taleb -- should be available at your library and look at his thought on the impact of randomness on outcomes.

All the best

What's next folks ?

The trend is firmly established. Housing market is going down. Except a few buyers who are still willing to be mortgage slaves, everyone in the know is kind of accepting the fact.

Can anything change this trend ? What will it be is there is any ? Fed stopping the hikes. Will that change anything ? Can it prolong the agony ?

What else should we be watching out for ?

Sir Rick of Shmend Says:
Postmodern Essay Generator

cool -- i've been looking for one of those...

Robert Coté Says:
Do you understand the meaning of enumerable criteria?

apparently not. if it's not where i listed 4 things straight off, including the mathematical obviousness of greater cost in longer runs of materials used in providing public utilities? how is that an 'is, is not' argument? The State Premier articulated just such a concern with sprawling suburbia here some years ago, since he is the one responsible for providing those utilities. But all your arguments were completely mathematically flawed. How can housing people in higher densities contribute to MORE land use? That's patent insanity. i wouldn't have used so many words if all i had to say is 'is not'. you used trillions of words to make a lot of weak points previously , so it takes half a trillion to try to rebut them. oh, sorry, i'm not allowed to reply in kind.

More subjectively:

Apparently the number of Americans who have close friends has plummeted in the past few decades:

Confirming the central thrust of Robert Putnam's Bowling Alone, a study released in the American sociological review today shows that Americans have fewer close friends and confidants than they did 20 years ago. In 1985, the average American had three people in whom to confide matters that were important to them. In 2004, it dropped to two, and one in four had no close confidants at all.

Apparently this is due to a number of factors: car-centric post-war urban design and the disappearance of public space where people can meet and contribute.

Bay Area Newcomer Says:
Just wanted to weigh in on the CEO comp issue

absolutely. all robber barons. i don't know when the community is going to wake up and realise the joke's on them, and how much real value has been leached away by predators and parasites and a dysfunctional form of capitalism.

They'll be the first against the wall come the Glorious Revolution.

* Disclaimer: not revolutionary advice *

we've only got:

2) teenagers of all races
4) Asians who first learned to drive after the age of 35
10) Ooooooooollllllllllllllddddddddd people

which is bad enough. and maybe variations on:

5) full of machismo

squalor of the European cities

??? they're held to be charming now... and 450 million europeans live there...

Interestingly enough this can be the case. That’s why people never provide enumerable comparisons to support their assertions. Higher densities require additional amounts of public dedications in order to function. Wider streets, more freeways, power plants, remote waste treatment and landfills and the roads and wires and pipes to those locations. Intense urban enclaves induce far flung urban development to support those locations.

fascinating, i'm sure lots of things can be the case. however, I don't see why there should be far flung utilities with high density development any more than low density. If anything, high density gives you more land choices for situating utilities than suburban sprawl that covers all available land. Currently, sydney is having a lot of trouble finding a suitable site for a much needed second airport further out of the city, but sprawling subdivisions were allowed to be built too close to all the earmarked sites. now they have a political shitfight -- everywhere they try to locate the airport, they have a NIMBY backlash from carpetbaggers who shouldn't even be there.

I absolutely contest that you need wider streets and more freeways, etc. For the same number of people, it doesn't make any difference -- you won't need larger utilities or power plants, that's a mathematical and engineering nonsense. The savings are in shorter infrastructure runs, common walls, floors and ceilings reducing building materials and so on. There are loads of English towns that are built at quite high densities and don't have 'wider freeways' etc because everything is co-located. the longer you need to run power lines, for instance, the more power attentuation you will get. not including the higher cost of construction itself.

we haven't even factored in the ongoing extra costs of continually burning extra fossil fuels to cover the longer distances, longer commute times, road congestion throughout road-dependent conurbations, extra pollution, greenhouse gases, etc.

good quality arable farming land is increasingly being turned over to sprawling suburban subdivisions. local and state govt are increasingly unhappy to pay for infrastructure, because they argue infrastructure costs go up with the square of the distance. apparently you know a whole lot better than all of the people who actually have to pay for the infrastructure to be put in and have the maintenance and forward planning headaches. not to mention the outright cost of extra materials. apparently you've spreadsheeted it and come up with different answers, but the govts just aren't listening.

where are your magical 'enumerable facts' demonstrating that high density developments need MORE land than low density, given equal sized populations for fair comparison? and that long run infrastructure costs less?

it's like building 2 4/2/2 houses, but making one house 3 times larger than the other by designing long connecting corridors between the rooms, then insisting that there were no extra building materials required, that heating costs won't be higher, etc.

however, i think that sensible urban planning is required quite apart from questions of density -- industries have to be located reasonably near dormitory suburbs, i believe housing options should be more flexible, etc.

Yea but we’re talking about a time when environmental sensibility was considered trying not to hit anybody when you through the bucket of the families’ daily defacations out into the street.

that's why edinburgh was called 'auld reekie'. they don't do it now, tho

In the decade surrounding the year 1666, one third of the entire population of Europe died from Bubonic plague directly associated with the bloom of the rat population.

yes, and the destruction of wooden buildings in the great fire of london cleared up a lot of the problems with the plague and allowed parts of london to be rebuilt in a more planned fashion with more substantial buildings and wider streets, etc, under christopher wren. his original plans involved rebuilding the city in brick and stone to a grid plan with continental piazzas and avenues.

paris was substantially redesigned by baron haussmann in the 1860s.

Why have no threads been created related to Jared Diamond’s “Collapse”? That might raise up the level of discourse a scootch.

it's had a mention... questions of sustainability and long range planning are increasingly important with high consumption levels and large populations.