patrick.net

Peter P,

Good point and absolutely true! However only about 200 companies in this country have access to money at this level so they are basically "debentures" and short term notes as well as "repo's" or repuchase agreements along with a smattering of Letters of Credit. Most of 90 days or less in duration. The brokerages pay for the "insurance" to create good faith in the market place and frankly to compete with the assurances of FDIC.

The Palo Alto Eichlers were never a “Lower Class” neighborhood…

Really? My friend told me that Eichlers were designer for poor people. But he lies from time to time.

-designer
+designed

FAB,

Today $300K of “household” income will put you well in to the top 1% of all US families and $500K will put you in the top 1/10th of 1%. The top 1% is not in the “middle”…

I think there's been more bimodal accumulation recently. I'll try to find the reference but I think that $250K household income puts you into a group smaller than 1%.

Keep in mind, however, that there is nominal distortion to these figures.

Peter P,

I believe there are other components that go into creating money markets but those I believe are the biggies. I have a buddy at Nuveen in Chicago and he could probably define it much better. Ahem, I may have a "SIPC" placard prominently displayed on my desk but hell, you're the guy that just took the CFA Exam!

you’re the guy that just took the CFA Exam!

I probably did not pass anyway. Should have taken a realtor exam instead.

Because of where I'm from, Eichlers look too much like mobile homes to me.

Because of where I’m from, Eichlers look too much like mobile homes to me.

The exposed beams are really bad. One must cover them up in the bedrooms.

Peter P,

Now, now! Let's not get frustrated here! Besides what percentage of people pass on their first go round? I understand it's less than 1/5?

CAR REALTOR EXAM:

1. What color is an "orange"?

2. What color is "The White House"?

(Bonus points for getting your name and social sec. number correct!)

People on this forum mentioning that they think 300k is middle income level salaries are perfect examples of just how out of whack fundemental concepts in value in California has gone. If you make 300k- you're loaded. Plain and simple. No buts, or IFs about it. Trust me. As someone that made 25k for 3 years after college, I can tell you that there are millions and millions of CA residents that don't even make that much. I save roughly 50% of my 50k salary, yet if I were to buy, forget saving anything, let alone avoiding going into serious debt. The people making 300k and STILL think they're middle class obviously have no concept of common sense, and if they have problems saving money, then it is their faults entirely.

People on this forum mentioning that they think 300k is middle income level salaries are perfect examples of just how out of whack fundemental concepts in value in California has gone.

Who says that the middle class makes middle level income?

"Middle" just means that it is between "upper" and "lower".

It is about class (cast).

No, there’s a better option: let the workers “buy” (or think they’re buying) the property with huge mortgages.

That sounds vaguely similar to the risks of home purchasing since 2003. But, there was a perceived upside due to appreciation providing "safe" exit strategies. Take away that upside, and I don't see the same run on the housing market, which may explain growing inventory. How could the market be fixed to eliminate options such as renting? Even with the NAR "cartel", they only have so much control on pricing. Like Peter said, if globalization favors growth in emerging economies, I don't see how that supports inflated pricing here. Judging by recent job migration, that suggests growth is linked to less worker overhead/higher opportunity. Little that I know, but I don't see a New Economyâ„¢ repeat of c. 1999.

"...I think that people who live in the Bay get used to looking at things through a fish-eye lens"

I agree. Here we have a sliding scale of values/expectations, where we eventually forget any semblance of normality. If a $300K median home is now $800K 4 short years later, then there *must* be a way to buy. After all, most of us consider ourselves "successful", therefore we should ride this wave like everyone else. Jump on, or be a loser. Never mind the skyrocketing costs in the bay area, because success and unending appreciation will cover everything. Work yourself to death for homedebtorship now, because it will pay off someday.

There is a huge disconnect in the perception of what $300k per annum buys because for anyone who bought a house before 2001, $300k is chump change. For the rest of us, it's still a lot of money. I think the reality is that $300k is the new $30k.

We've just witnessed the greatest wealth explosion in history, and money no longer has any agreed-upon value. For instance, the house I rent was worth $193k in 2000 -- in 2005, that would have been an insufficient down payment for the same house unless your income was in excess of $170k.

Peter P's definition:

The Upper Class: Bill and Warren
The Middle Class: The Rest of Us except:
The Lower Class: 49 States: People who live in Mississippi
Mississippi: Frank from down the street.

Back to the number's I quoted previously:
20th percentile $18K
The Middle Class: $18-$83K
80th+ percentile >$83K

By this definition, many of us here in the BA are not in the middle class, but we sure feel poor.

If you buy a reasonable house in the BA and make less than $150K/year, you'll be living paycheck to paycheck. I can think of no situation that would make me feel more Lower Class than joining the FBs.

Save money, earn dividends. Save flexibility, earn sanity. Rent and be happy.

There are many possible definitions:

Upper: people who find flying commerical too cheap
Middle: people who fly commerical
Lower: people who cannot afford to fly commercial

Upper: people with all the material goodies without having to work
Middle: people with some material goodies when they work
Lower: people with no material goodies no matter how hard they work

Upper: people who are served by others
Middle: people who serve others and are served by others
Lower: people who serve others

As you can see, the survival of commerical airlines depends on the existence of the middle class. ;)

In W(h)inespeak ...

In Dallas:
Upper: Phelps Insignia
Middle: Hess Select Cabernet
Lower: Charles Shaw Cabernet

In the Bay Area:
Upper: Harlan Cabernet
Middle: Chateau Mouton-Rothschild
Lower: Phelps Insignia

NEWSFLASH:
I just read on the CNN ticker that "doingwellthankyou" is actually HaHa's evil twin. I actually suspected this initially, but didn't want to say anything lest I be labeled a conspiracy theorist.

Sorry, I know nothing about wine. It is a shame considering how much I love food. But if I also liked wine I would be insolvent by now. ;)

I actually suspected this initially, but didn’t want to say anything lest I be labeled a conspiracy theorist.

Huh?

Dallas:
Lower: Charles Shaw Cabernet

God damn it, RW. Now I feel like lower lower class here in the BA.

$2 Chuck - cheaper than beer with red wine health benefits.

Make sure to sneer at me when I pick up my next case of Shiraz.

"I can think of no situation that would make me feel more Lower Class than joing the FBs". LOL!

Right on! We need to say that more often. Case in point. The poor guy that bought my old house. I'm not saying I walked away with a ton of money by any stretch but this poor couple will owe on it more than I EVER did and to boot the neighbors have decided they have better things to do than lawn work. I'm already starting to see places all over Oregon where people have hastily wrapped up projects (ready or not) and pulled the plug on numerous others. When the free money dries up evidently so does the enthusiasm. FRIFY, we walked away. Most people didn't. They don't have the luxury of all these idle pursuits nor any options. We've established that "just rent the f@cker out" won't work. Neither will selling it. Oh you can try and throw your hat in the ring but most will give up. So what does that leave? Ahem, tuffing it out. Thanks, I've done my share and then some.

There is a ton of nominal distortion to the income figures. This goes back to the regional inflation differentials.

Making $83,000.01 in the Bay Area is "middle class" in the Bay Area, but much richer if you were to make that elsewhere, like Mississippi. It's all about purchasing power parity.

The only reason to compare yourself to national figures is if you are planning/considering relocating. If you want to go to Mississippi but live in San Francisco now, then you are best to rent as cheaply as possible and save as many CADs (California Dollars) as possible. Then take those to Mississippi where they'll give you 1MSD for every 1CAD, since they peg the exchange rate thanks to your Federal Reserve system.

If you think this is fanciful consider what is going on in the Eurozone today, where effectively you have very different costs of living but a pegged standard currency.

If you're not planning on leaving the Calizone, then all you care about is your relative position in the income distribution of CADs. In fact, to the chagrin of saner regions, you are better off earning tons of CADs even if you have to spend lots of CADs to live here than you would be earning MSDs. This is because national products are priced nationally, on the margin. Since the exchange rate is fixed, folks with a pocket full of MSDs find they can't buy as much car or Hawaiian vacation as folks with a pocket full of the CADs.

Randy,

Puzzle this one then:

http://www.census.gov/hhes/income/4person.html

In terms of Median income, California is below CO and CT where you can still buy houses for $350K. CA has a much more bimodal distribution of income than these states, thus Median doesn't capture the fat upper tail of CA's distribution.

It's indeed your relative standing in that fat upper tail that matters the most because they're the one's throwing their $$$ and futures on a real estate bet.

The real victims in this group are middle income folks like WW2 on $50K. WW2, stop talking about it and get thee to a $45K Denver/Austin job.

Who says that the middle class makes middle level income?
“Middle” just means that it is between “upper” and “lower”.
It is about class (cast).

The term "Middle Class" is highly fungible, subjective and hardly precise. Even so, I can still remember a time when your average skilled wage earners were generally considered to be "middle class" (I am not that old --late 30s). This included teachers, nurses, cops, electricians, plumbers, carpenters, etc. --you know the people who actually DO REAL WORK for a living. Until fairly recently historically speaking, such people could buy a house in a decent CA neighborhood w/out a stated-income 107% LTV NAAVLP --just like it's STILL possible to do in most other states.

I'm with SQT, FAB, KurtS, etc. How out of whack is our perception here that $300-500K/yr can be considered anything BUT upper or (very) upper-middle class? Please. If these people are merely "working class", then I suppose that makes the vast majority of CA wage earners Untouchables!

Clean Air Day again...

http://sfgate.com/cgi-bin/article.cgi?f=/c/a/2006/06/26/BABADIGEST2.DTL

I think it is wrong to have free public transportation whenever the air is bad. What a waste of taxpayer money!

Instead, gas prices should be doubled in the entire week to discourage driving.

CA has a much more bimodal distribution of income than these states, thus Median doesn’t capture the fat upper tail of CA’s distribution.

This shows that socialism is counter-productive.

FRIFY --

Wine snobbishness aside, Chuckie Shaw is an incredible value. It's 60% as good as a $10 Cabernet, but at 20% of the price of a $10 Cabernet.
Sometimes, I will use a bottle of that to cook with so I don't have to cook with the expensive wine that will go with the meal. There is always a quite a bit left over, as you rarely need a whole bottle to cook with, which I drink later in the evening (once I'm too shitfaced to care about bouquet or mouthfeel).

Buying $100 Cabernet is probably stupid, but not as stupid as buying a $600k fixer-upper. That's what I tell myself, anyways. And I'd much rather sip my overpriced wine on Saturday night than install crown molding and granite new kitchen cabinets, or fix a broken hot water heater.

Who came up with that stupid term "fixer-upper"? Where I come from we have a term for things that need to be fixed: BROKEN. And the idea of buying anything BROKEN for two-thirds of a million dollars is retarded at best.

I suppose much of this hinges on if that income is W-2 or 1099. Self employed people can "fluff up" their Schedule C as well as their Schedule A yet a W-2 employee has very little if any wiggle room. During the 'go-go' 90's I was a W-2 wage earner and couldn't write off squat so my taxes felt out of kilter. You don't keep as much as you'd like to think. FRIFY, I'll take it the Census link you provided were all quoted in "pre-tax" dollars right? Still and all, 300K is decent money any way you slice it.

Who came up with that stupid term “fixer-upper”? Where I come from we have a term for things that need to be fixed: BROKEN.

It is called New English (similar to New Math):

newer home = older home
30 years young home = 30 years old home
new paint = old everything
updated = outdated
near transit = noisy transit
cute = tiny
bonus room = unpermitted room

"fixer upper"

No kidding! What kind of BS is that? How about "broken downer". My father used to drive past "fixer uppers" and say the only thing they need now is a match!

One of my favorites:
"handiman's special" = ready for wrecking ball

Though it might be a stupid marketing term, I for one, value some of the classic buildings as opposed to the kleenex and spit construcion of newer homes.

So the ideal house is a brand new classic building.

“handiman’s special” = ready for wrecking ball

Investor's special = ready for some NAAVLP

"The real victims in this group are middle income folks like WW2 on $50K. WW2, stop talking about it and get thee to a $45K Denver/Austin job."

-Frify,
I disagree. The real victim will be California. In essence, as mentioned countless times, the state will and is losing a TON of new talent and fresh minds. This was actually run as a major story in SF weekly not too long ago. I see a future of overly wealthy, gout-infused citizens, and a new generation of brain-dead kids sent through the useless public education machine.

FRIFY,

In terms of Median income, California is below CO and CT where you can still buy houses for $350K. CA has a much more bimodal distribution of income than these states, thus Median doesn’t capture the fat upper tail of CA’s distribution.

All that means is that CA has two very fat tails, upper and lower, and that CA's lower tail is fatter than CO's proportionally. I'm not convinced that either CO or CT are more or less bimodal than CA. The larger numbers and economic diversity in CA alone will make it less bimodal, not more, due to larger variation over a greater population. It could just be that CT and CO are slightly more skewed in a normal approximation of the upper tail distribution.

"Potential" bonus room = incompleted unpermitted bonus room

I will use a bottle of that to (Shaw) cook with so I don’t have to cook with the expensive wine that will go with the meal.

Agreed: that wine works very well for cooking, and it's mostly OK to drink. On the other end, spending $300+ for a bottle of wine is needless, unless drinking money is your game. I once shared a bottle of Marcassin Chardonnay that was very good, but $400 good? I doubt it. With so many good local wineries here in Napa-Sonoma, nobody ever needs to spend over $50 (if that).

The real victim will be California. In essence, as mentioned countless times, the state will and is losing a TON of new talent and fresh minds.

Americans are very mobile, and very flexible in where they are willing to live within the US. This is a great strength over what I was describing is occurring in the Eurozone. The whole "Polish Plumber" problem is precisely because people aren't willing to move from state-to-state within the EU, instead they force their governments to subsidize standards of living that aren't within the natural market equilibrium. Despite what some have claimed, almost no one is moving into East Europe to exploit lower cost of living. The opposite is happening, in fact. East Europeans are moving West to temporarily earn more EURs, which they send back East. They can do this because of the inflexibility of the Western countries economic systems -- they support many jobs at higher salaries than the market would bear.

I am optimistic about CA's long-term viability. The present churn is part of the natural, painful process of economic reorganization. NorCal has fundamentals not found but in a few places in the world, and these will attract new commerce and population as the old is replaced by the new. Industries which have become unproductive in NorCal can be productive in Atlanta, so they move there. That's a good thing. Industries which are too risky and untested for Atlanta can locate in the Bay Area. That's a good thing. Everything working together is good for all of us, even if many of us need to eventually pick up and follow our industry out of state.