patrick.net

Goran_K says

Insanity.

Insanity, yes.

But this scenario is correct and the systemic way of lending has not gone back to the old lender/borrower business model. Thus, mortgages are still being sliced and diced and sold off to investors.

So, I'm not quite confident prices will drop to 1999 levels, in my neck of the woods anyway.

Eff it. I used to feel that way. But walking home instead of fighting traffic is great. Being able to stop off at whatever bar has the best happy hour and cutest worm also has its charm.

If houses drop enough where I'm ok buying, so be it. If not, I'll retire in 17 years, pay cash for a home, and still be happy

Oh, of course you feel cheated. The system is punishing those economically responsible and rewarding irrational exuberance. And yes, we should feel greatful for what we have, but it used to be much better. The problem is the direction we are taking, and one can turn a blind eye to it at it's own risk.

I feel cheated because CD's used to pay 6% back in 06 now they pay 1%.

Of course the whole fraudponzconomy is managed soviet era CCCP style and 'they' want people with bags of cash to plunk it into RE or Stocks right now. Its all fake zeros and ones to them in a game.

rowemoore says

here they come:

http://www.mortgagenewsdaily.com/04262012_home_prices.asp

There is good news near the end of the article.

Reading these articles is maddening. I cannot stand how housing price recovery = a return to housing prices which can only be supported by toxic debt. To me, a housing price recovery is a return to pre-1998 prices. In some places that is happening, but not in the right places.

Why not rent in Oakland? There are many fantastic neighborhoods and it offers an easier commute to downtown SF than many of the neighborhoods in SF. But you haven't experienced it yet, so why lock in when you can test it out with renting? Let housing be consumption, not an investment. Then, buy after you are certain that you like the area and want to stick around.

Yeah, I refuse to buy just because of property taxes, being single I don't need much space and again for a single person, the money pit aspect of it is quite a drag. So, I'm putting retirement before real estate these days. I may consider buying a really cheap and small 771 sq. ft. condo for 45k very near to where I work, depending on the HOA dues it might come in cheaper than renting, and the taxes are only $1700.

That feeling of being cheated is exactly what drove me to create this site and what keeps me working on it.

Yippee Kiyah ! All Hail to the chief. Thank You, again Patrick for providing this vocal community.
In the early eighties, I thought I.T. might provide some kind of unity for individuals who had been damaged in some way. But I was thinking along the lines of people who were unhappy with their auto repair, maybe an auto purchase. Maybe appliances. I had no Idea back then that the appointed leader to the financial crisis would advise the president "We can save the banks, or we can save the people, we can't save both". Who doesn't feel cheated ? Have ya ever left a waitress a nickel tip ? There is some malice involved. Hasn't every society eventually become an US vs THEM kinda gubmint ?
An Author on NPR this morning. "Leo Litwak: wrote 'Home for Sale". Mentions we grow up in this country starting off in a little cracker box condo or something, just expecting it to grow into a palatial estate. Growth is a system that CAN NOT be sustained forever. Nor can the opposition, stagnation. "INTELLIGENT GROWTH" is maybe what we should all seek in the future. But in the meantime, we should be focusing on repairing our failing political system. And not just bitchin about it. Lest we all remain in the cracker box.

Maybe the cheating has been going on all along.
Are we as a group of Patrick readers participants in a cohort effect: becoming increasingly self-aware of our environment?
Sometimes, I think I am trying to gain knowledge to make informed decisions, but it seems the cheaters are always a few steps ahead.
I can't do anything about the cheating, and I haven't found a way to move on -- that's why we are all here.
This is a very important topic that makes me think of the red/blue pill moment in "The Matrix."
http://www.youtube.com/embed/te6qG4yn-Ps

citizen jpp says

Maybe the cheating has been going on all along.

Now that we know we're been cheated all along, what can we do? Demand more transparent info on real estate transactions? Are there any websites that talk about building costs?

I think bitching about it in public is actually productive. It helps other people wake up to the Matrix-like reality of mass enslavement through debt.

Most people think massive lifelong mortgage debt is normal at this point, and it definitely is not normal and doesn't need to be that way.

We need a much more transparent housing market, with openly published and verified bids, but even more than that, we need the government to stop sponsoring mortgage debt. Mortgage debt is just not at all productive. All it does is suck money out of working people and hand it to bankers.

It was basically an arms race, where the everyone thought they could bid more than their neighbor/competitor for a house by borrowing more. But they forgot their neighbor could and would do the same thing. And the banks and the NAR encouraged the government to guarantee ever-bigger loans.

Reducing the amount of mortgage lending would be hard to pull off though, since that means all house prices would fall a lot, and there are huge political and powerful consituencies that DO NOT want falling prices:

* everyone who indebted himself at current prices
* old people who want to sell and downsize
* banks, because high prices are the main assets on their balance sheets

While it seems like massive inflation would make sense, given the QE measures we have seen, people have been saying it would happen for years now. Surely the government would like to allow it to deal with their debt issues, but they also have to know how wildly unpopular that would be. I'd agree that it is a "when" issue more than an "if" issue, but all indicators point until at least the end of 2014 before any big inflation can occur given the Fed's declared strategy.

Will this massive inflation be the panacea all mortgage holders have been dreaming of? I don't know, but chances are that the cost of goods & services will greatly outrun wages, and people won't exactly be throwing piles of disposable income at their mortgages. Folks might be spending so much more on the basics that even less is left for the mortgage. Then again, maybe not. We'll find out at some point.

Are rising house prices coming? Yes and no. It depends on location. Where you are in AZ, I would believe it. Prices really got smacked down there, and the frenzy of investor activity there did an excellent job of soaking up distressed properties. If there people are battling over decent properties now, then that must mean that the only houses left are a few good ones and a bunch that are in too bad of shape to fix and make a profit. So, it is conceivable that prices will go up a bit now that the market isn't flooded with low-hanging investor fruit. I am still a little fuzzy on HOW people are going to make rental income there since it sounds like overbuilding was an issue, and there are more houses than renters, but I may be mistaken since I don't live there.

There is a lot of anecdotal evidence that a similar situation in the BA is playing out. Certainly, anything in an OK area with a fair-looking asking price gets sold FAST, and at or above the asking price. I think that sellers are purposely listing low to attract attention since a listing price is not any sort of binding contract. Being that there aren't that many nice properties available at the moment, I don't blame them for using that tactic. It works well when competition between sellers is so low. Will prices rise all over the BA? I sort of doubt it since this place had an incredible amount of meddling during the crash. SF & the SV hit a plateau on the way down and didn't follow the same trend as most of the rest of CA. Banks have been systematically foreclosing on houses, starting with the lowest priced ones and working up as they go. The BA happens to have some of the most expensive RE in the BA, and there is a very large number of delinquencies and properties in foreclosure here, that aren't listed. If there is going to be a lot of foreclosure activity here, it will be one of the last places to show it. I believe that 1 in 4 people here are underwater to some degree or another, and it is unknown how many would just walk away if their property value took another hit.

We all know that we are going to see a push for loan mods & principal reductions this year as the presidential would-be's try to buy votes. What happens to RE around here will be largely dependent on what promises are kept from the campaign season. Inventories will likely grow a bit after the election once people know what will or will not happen. Our unusually warm winter (or lack thereof) also pushed a lot of sales activity earlier into the season, so it may end up being a weak summer for RE here.

And of course, RE in the BA could defy reason yet again and rise further. I am already making some preliminary plans to move to Seattle with my fiancee since I can't really justify current prices, and certainly not higher ones. I fly between here & there weekly for work, and I have encountered a number of young professionals on the airplanes that are in the process of leaving the BA, mostly due to housing prices (some really don't like the rat-race/money-money-money atmosphere, and some can't deal with the far-left politics of the peninsula). The next few decades will be very interesting for the SFBA. Almost all of the people leaving are white, so the BA may undergo a very large cultural transformation if this keeps up. The peninsula will probably also grow even further to the extreme left, politically, as more politically moderate people leave.

Homes selling depend on incomes being able to support current price points. Unemployment is too high, and under employment is just as high. Wages are stagnant right now.

I just don't see RE taking off until jobs and employment start to rise.

Homes are only in bidding wars now because of super low inventory, and I don't think it's because we've suddenly run out of houses, especially when I can walk down the street and see 3 homes that are vacant with "Chase Banks owns these properties" signs on the garages, but are not listed on the MLS.

Sorry Robert, maybe things are rosier in Arizona, but California has a lot of correction left to go. But I wish you well in retirement!

Goran_K says

Unemployment is too high

I'm not sure what kind of house you are looking for, but unemployment for the well-educated in the BA (ie the ones who would be buying houses) is actually around 4%. The landscapers and construction workers who are driving up the overall unemployment rate aren't the ones who would be buying nowadays.

This idea to 'end mortage and all other debt' is an impossible dream.

Its like the Ron Paul dream - he got 3% of the vote and I'm pretty sure if Patrick was organized enought to get a 'mortgage debt is illegall' initiatitive on a ballot box it would get about 3% support.

Remember this is a democracy you just gotta add up the numbers - the debt slaves and debt slave masters far outnumber the 'debt is wrong' crowd.

FHA loan cieling was 220k in 2001 in high cost areas - now its 729k and the NAR wants it to be 1m or unlimited (currently they are lobbying for this.....no one is lobbying to outlaw debt so which one is more likely?)

Very soon the 729k limit will be raised just as soon as Obama or Romney get in the chair again and there is a slight slow down in sales. Prepare accordingly.

tiny tina says

Goran_K says

Unemployment is too high

I'm not sure what kind of house you are looking for, but unemployment for the well-educated in the BA (ie the ones who would be buying houses) is actually around 4%. The landscapers and construction workers who are driving up the overall unemployment rate aren't the ones who would be buying nowadays.

Do you have any sources for that, or is it anecdotal?

How desirable is homeownership, given the mobility of the typical worker?

Does it really make sense to buy, knowing you will likely move a few years later?

You have been screwed. Everyone else has too.
The tens of thousands of illegals and HB1 visas create more housing demand while driving wages down. Who benefits? Surely not you.
Who loved the housing bubble? Among them, those guys who build/fix up and flip houses, who interestingly employ illegal aliens.
Semi-educated people selling houses/mortgages also liked the situation.
The trend is not going to end while the liberal simps encourage everyone to take what others have.
Would you believe that Pebble Beach Corporation is now going to build "affordable housing" down there in order get a permit to build a couple mansions?
I don't know the answer besides not voting for the traitors and of course, buy AAPL because money gives you the flexibility that complaining doesn't.

tiny tina says

Goran_K says

Unemployment is too high

I'm not sure what kind of house you are looking for, but unemployment for the well-educated in the BA (ie the ones who would be buying houses) is actually around 4%. The landscapers and construction workers who are driving up the overall unemployment rate aren't the ones who would be buying nowadays.

I'm guessing that the unemployment rate of "the ones who would be buying houses" is probably 0% + the small fraction of trust fund babies.

But your 4% number is correct and yet I'm betting if you looked closer you'd find of the well-educated pool there are home owners and renters. The unemployment rate of home owners is going to be less than the renters (or those who have moved back in with the folks).

Continuing to look at demographics we would find that the relative number of buyers who can afford nicer bay area homes is down as a percentage of the overall home buying population -- as compared to 5 or even 10 years ago. This is due not only to the recession and tighter restraints on borrowing, (both very significant obviously) but also the fact that we are in a population lull. In the nicer bay area markets I've been told the average buyer is mid-thirties. The demographic relative to the rest of the population is low.

The next "boom" of buyers is in college or just out: 18 - 23. Forget the fact that the unemployment rate for this demographic is much higher than 4% - the reality is even in a rosy future scenario they are at least a decade from buying a home.

In the end, it really does come down to supply and demand. Currently, in some bay area neighborhoods the demand is greater. This will change, but I don't think the best of those neighborhoods will ever suffer lower home prices. This is good for those who own or buy there. The sad thing is those homes will go up further once they become "gated communities", which they inevitably will.

PockyClipsNow says

Remember this is a democracy you just gotta add up the numbers - the debt slaves and debt slave masters far outnumber the 'debt is wrong' crowd.

Because the debt is wrong crowd is completely wrong. Debt is a tool that, when used correctly, is extremely beneficial to society.

To think otherwise is just silly.

Goran_K says

tiny tina says

Goran_K says

Unemployment is too high

I'm not sure what kind of house you are looking for, but unemployment for the well-educated in the BA (ie the ones who would be buying houses) is actually around 4%. The landscapers and construction workers who are driving up the overall unemployment rate aren't the ones who would be buying nowadays.

Do you have any sources for that, or is it anecdotal?

She may have low-balled. The bay area numbers are better than the national. Here are the national.

http://www.deptofnumbers.com/unemployment/demographics/

Goran_K says

Do you have any sources for that, or is it anecdotal?

It was from an article I read a few months ago. In a brief search, I found a national number which is 4.2%. I would think BA would be similar if not lower than the national average.

http://www.bls.gov/news.release/empsit.t04.htm

Every time I pay taxes to support the welfare socialist state for the public sector unions which constantly vote themselves more benefits from my paycheck.

bmwman91 says

And of course, RE in the BA could defy reason yet again and rise further.

Why do you keep on harping on this? Have you traveled much? Do you know how much real estate costs in NYC, Tokyo, London, HK, Buenos Aires, Syndney, Melbourne, Paris, Vancouver, Taipei, Singapore? Do you realize that no US city ranks in the top 10 of most expensive cities in the world?

http://www.huffingtonpost.com/2012/02/16/most-expensive-city_n_1281845.html#s701687&title=Tied_for_3rd

Do you think SF compares more to a Frankfurt or to Oklahoma City? "Reason" would dictate that a more attractive city is more expensive than an unattractive city. Just because you don't find the Bay Area worth the cost doesn't mean the rest of us moving here don't. Perhaps you're the kind of person that's more comforable in Raleigh, NC than San Francisco. Good for you. Just stop with the bitching about other equally smart people wanting to pay a premium for the leaning left politics (try moving your fiancee out to NC and see how some of the locals treat her), the great weather/outdoors, and the high tech opportunities here.

Goran_K says

If you don't want to live in an apartment for 20 years, you're forced to participate in a ponzi scheme and overpay for a home.

Then don't live in an apartment. Search hard and find a home of some good landlord that isn't trying to squeak out every last cent from his rental to pay down his massive mortgage. Many people have no mortgage on their homes and for various reasons have to rent them. They want, more than anything, someone that can take care of the place. If people are really serious about comparing renting to buying then you would put the same energy into finding such a rental as you do to buy. Spending a single Sunday out looking at apartments is not the same time commitment most people put into buying so it is not a fair comparison. Rent a home just as good as you could buy for less and enjoy. I don't feel cheated at all, in fact I feel like I am cheating the system.

I actually am renting a "home" of the SFR variety. I was just trying to make my post more dire. :)

FortWayne says

Every time I pay taxes to support the welfare socialist state for the public sector unions which constantly vote themselves more benefits from my paycheck.

Thank you from this school-teacher family that has so much cash that we don't know what to do with it. We have classrooms filled with upwards of 35 kids and usually not enough paper or pencils, but we really like selling baked goods to pay for classroom necessities.

tiny tina says

Goran_K says

Do you have any sources for that, or is it anecdotal?

It was from an article I read a few months ago. In a brief search, I found a national number which is 4.2%. I would think BA would be similar if not lower than the national average.

http://www.bls.gov/news.release/empsit.t04.htm

That's a good link, but it doesn't track underemployment. So if someone is only working half-time, or working at a job under their normally expected level or salary, it still counts them as employed.

According to this article,
http://www.remappingdebate.org/article/hidden-toll-underemployment

There are over 9,000,000 who are underemployed, and it cuts across all educational levels.

Here's a graph that illustrates it:
http://www.remappingdebate.org/mediapopup?content=node/948

So I'm not sure your claim of anyone who is educated in the Bay Area and wants a house has income and can buy is valid.

Most government employees are basically ALL multi millionaires now.

Its the pensions. In order to throw off 80k a year 'until you die' you need to have about 10m in the bank at 1% interest rates and after tax you get 80k (a typical gov pension if they retire in 2020 or after). Of course cops/firemen/paper pushers get more.

They will say 'they pay into this fund' but its a lie - they are paying into it with salary from taxes not earned income from a non taxpayer funded job. Its like a kid getting an allowance - the parents earned that money really....

At any rate we are all free to become gov workers - so thats fair.

Its the 'French Dream' in thier country to do this. I think we are headed somewhere between France and Cuba politically..... especially once Obama gets in again. House payments will be based on your declared income - sales price doesnt matter the loan terms will be 31% of your combined w2. (the feds already have this structure setup - its called a loan mod via HARP or HAMP I cant remember, at some point it will apply to NEW PURCHASES just watch!)

FortWayne says

Every time I pay taxes to support the welfare socialist state for the public sector unions which constantly vote themselves more benefits from my paycheck.

Incomplete sentence. Let me finish it for you.

"Every time I pay taxes to support the welfare socialist state for the public sector unions which constantly vote themselves more benefits from my paycheck, I poop my pants and need a fresh pair of depends."

Goran_K says

So I'm not sure your claim of anyone who is educated in the Bay Area and wants a house has income and can buy is valid.

Where did I ever say that?

All I said was unemployment for the educated is 4%. The data supports that point. Saying that unemployment is too high is not a valid point when talking about better parts of the BA.

PockyClipsNow says

Its the pensions. In order to throw off 80k a year 'until you die' you need to have about 10m in the bank at 1% interest rates and after tax you get 80k

80K annual pension converts to about 1.2M @ 5% return or 1.8M with 1% return. Of course this depends on retirement age to be eligible for pension. but still, nowhere worth 10M.

PockyClipsNow says

They will say 'they pay into this fund' but its a lie - they are paying into it with salary from taxes not earned income from a non taxpayer funded job. Its like a kid getting an allowance - the parents earned that money really....

They forgot to consult you for your invaluable expertise, you must be so oppressed . . . .

tiny tina says

All I said was unemployment for the educated is 4%. The data supports that point. Saying that unemployment is too high is not a valid point when talking about better parts of the BA.

What? Even your own stats show that unemployment is high.

Also if you simply wanted to bring up educated BA resident unemployment was low (you didn't even post any stats for the BA), why did you bring up the point "ie the ones who would be buying houses" ? That statement would imply that you believe educated BA residents would create demand for housing, unless you just mentioned that without purpose or reason.

My point was that unemployment and under employment would slow down home buying.

Also not to be a stickler, but you never actually posted data for "better parts" of the BA, and no stats about under employment which was my entire point, so until you do, your counterpoint is anecdotal and not based on anything but opinion.

Goran_K says

Then why did you bring up point "ie the ones who would be buying houses" ?

Because the ones who are buying houses are not high school dropouts working construction jobs. It doesn't matter if 50% of those making minimum wage are unemployed. They aren't buying $800k houses (anymore).

I haven't been able to find the article that is specific to the BA. If you want to think the BA is above the national average that is your choice. I'm not sure why you want to believe something that you know or should know is not true.

1sfrenter says

Thank you from this school-teacher family that has so much cash that we don't know what to do with it. We have classrooms filled with upwards of 35 kids and usually not enough paper or pencils, but we really like selling baked goods to pay for classroom necessities.

You can thank the socialist state for that mess where all personal responsibility is replaced by socializing problems onto the society. You don't have to have 35 kids per classroom, but unions demand that we teach all the kids of illegal immigrants further using up the limited resources we have.

When municipalities are cash strapped and in dire need to cut budgets at least for the bell curve the unions are out banging drums, throwing temper tantrums like spoiled children. That's why we can never get any decent pension reform, or decent education reform.

And you really should not complain about your pay, you guys are well compensated. In a private sector folks are stretched out to pay for healthcare costs, while we have to cover 100% Cadillac healthcare benefits for the public sector even after their early retirement at 55.

I agree with Ft Wayne.

If you dont have a pension or a gigantic net worth you might be eating out of garbage cans when retired. Or if you are lucky you might be a butler for a governemnt retired pensioner with thier millionaire pensions. Hey now i sound like Mish complaining about unions! Anyway we can always self euthanize, no reason to live in the street poor and sick.

FortWayne says

In a private sector folks are stretched out to pay for healthcare costs

Uh, sorry, no.

I pay $700 month for health insurance, which increases yearly.

Another $600 month goes straight out of my paycheck into the State Teacher's Retirement System.

In CA, teachers do not pay into nor do we receive Social Security.

We spend more of our tax dollars PER PRISONER than we do PER STUDENT and the United States currently incarcerates a higher percentage of its population than any other civilization in history (including during Stalin's reign in the Soviet Union).

robertoaribas says

I have three more homes under contract now, which will bring m total to 12

12 !!!! Are you using property management companies or dealing with the pesky tenants yourself?

PockyClipsNow says

If you dont have a pension or a gigantic net worth you might be eating out of garbage cans when retired.

It's the unions who fought hard for pensions (and the weekend and minimum wage and the 8-hour work day and safe working conditions).

Getting rid of unions (now only 12% of the US workforce is unionized) will not insure anyone's quality of life. The idea that unions are the problem is a smokescreen and the powers that be are helping us all race to the bottom and won't be satisfied until we are all working in 3rd world conditions.