WatchThis might have been posted before but what the heck. Its worth revisiting. How many of you think the bubble will return? Of those of you out there looking- and not just those looking in the fortress areas- what are you seeing? Much of the same or have things changed?
Secondly, if another bubble rears its ugly head, what would you do?
A: panic and buy a house ( or get priced out foreva'!)
B: Say: "Screw it, I'm moving
C: Stay and continue to rent
D: ( for those that already own) brag about how much your house is worth.
E: None of the above.
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Nomograph says
No, but buying a crappy old house in a place like Palo Alto, is like buying a Honda Civic for the price of Maserati, just because it has Michelin Tires.
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tiny tina says
A $400,000 mortgage at 4.25% ( which is incredibly low and I would assume I'd get because I have a credit score of over 800) would be $ 1,967.76 . Thus if the argument is over 30-40 bucks, then I "guess" you can claim you won the argument. But that's pretty close to being $2,000 so what's the difference? Additionally, that 400k price didn't include the $100,000 down payment. Divided over 30 years that works out to be an additional $277 per month. Thus if we're gonna' get literal and specific, that means the monthly cost if all dollars were accounted for would be $2,244.00, if the down payment were also included into the mix.
Also- a good foundation and a bad foundation are night and day in terms of how well a house will not only hold up in an earthquake, but hold up in general. I know this because at one time in my life I sold earthquake retrofit hardware and let's just say that if your house is not properly secured then the chances of the house literally falling down in an earthquake are drastically higher. A lot of the houses in the BA are built in the 20's-40's and A LOT of them have crumbling, older, and inadequate foundations. But even for something as routine as needing new new shingles for the roof, you're easily looking at anywhere from $20,000-$40,000. Most asphalt based shingles are good for maybe 15-20 years. They DO wear out and they must be replaced unless you want the roof to rot away. So for the typical owner they can expect to spend money on at least 2 sets of shingles over a lifetime, thus figure a total of $40,000-$80,000 over the life of the house... for a set of shingles. Also- ever bought exterior paint? The decent stuff is around $30-$50 per gallon these days.
The decision to purchase for us isn't that big a deal. Like I said, we've saved for well over 10 years and if we really wanted to we could simply semi-retire to another state and say the heck with it. I came from another part of the country where 400k is the absolute nicest house on the block. A house with ACRES of land. For 200k I could own a pretty nice house on a decent amount of land and have a ton leftover. So perhaps my idea of "value" is different from others who might have only skipped from one major metropolitan area to another as most in the BA have done. Its just that for me, when I look at our situation, which is about the best scenario you could get- perfect credit, good jobs, lots of savings, retirement, and so on, at the end of the day $400,000-$500,000 for a mediocre house is still pretty ridiculous.
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rootvg says
Are you saying that wealthy people like to overpay? How did they become wealthy, then?
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bmwman91's website
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It seems like it may already be back (perhaps for a short time). What am I doing?
Well...my old BMW's motor finally took a dump (I could fix it, but the same damn thing has broken 3 times in 2 years now and it is a 12 hour repair I am tired of doing on a 22 year old engine with 220,000 hard miles). There is a fully built version of this motor that I have wanted, for years. It costs less than a new car (well, most of them), and since I was saving for a house, I think I'll blow 20% of that savings on something that I will enjoy on a regular basis. If anything, this is one reason that I am glad that the BA housing market is frothed to hell. It keeps me from wanting to participate, which frees up a little money for a project I have wanted to do for YEARS. Screw the house, I just wanted it for a garage for this anyway! My dad is cool with me leaving the chassis in their driveway & doing the motor swap there in the next couple of months (they live about 20 miles from me).
Here's where I sort of lose some people; what do I get for this price? This bored & stroked-to-2.1L motor, which I am embarrassed to say how much it costs, will net me a whopping 205HP at the crank. Anyone that knows much about cars will usually scrunch up their eyes & say, "huh?" However, you can run it off of its 7700RPM red line all day long because it is way over-built, the crank & valvetrain assemblies have about 4.5kg of moving mass knocked off of them (versus the stock setup), and the car only weighs 2550lbs, with the entire engine's center of mass behind the front wheels. I rebuilt the whole suspension a few years ago and the chassis is rust-free & stiff. The feedback from the road in this car is unreal, Almost any new car can probably take a corner as fast or faster, but I have yet to sit in one that gives this level of feedback (hence my hesitance to part with it, despite its dubious reliability).
Holy crap, if I can get myself to pull the trigger on this motor (and a fully rebuilt transmission & 5-clutch differential), it will be INSANE. This gets me so much more excited than some stupid wooden box that would suck up all of my disposable income, it is insane. I will have to take out an insurance policy on the motor & drivetrain alone (which are about 4x the fair-market value of the car itself)! God I love hobbies! Shit, even my fiancee is at least somewhat supportive since she knows this would make me giddy like a kid in a candy store. She isn't fully aware of the price tag yet, but I'll work something out lol.
OK, coming back from grease-monkey land, that's what I am doing while this housing market circle-jerks itself to hell. In the end it is all about living your life in a fashion that suits you! (with some degree of responsibility & forward-looking, of course)
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I will:
F: start shorting the banks that hold the mortgages
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IBM has job openings in San Jose and San Francisco on a regular basis that can't be filled. Most of their people can't afford to live in the area.
Things aren't gonna change. There's no reason. The trust fund babies are still here. The wealthy Baby Boomers are still here. The Berkeley profs who live in Orinda and Lafayette are still here.
If anything, the property situation and income disparity are likely to get worse.
There's too much money here...but that's how it is. Been that way for years.
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wouldn't do anything different.
1. keep renting
2. keep investing the extra money i save by renting, in stocks and bonds
i make good money. rent is cheap. no reason to change my strategy.
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you guys are funny - one day its the apocalypse, next day its the bubble may return....
those that can afford to buy - buy. Those that can't - don't. It's been that way forever.
Someone once told me - the trick with real estate is...you never sell. If you time it right, Iwog style, then by the time you retire you have a bunch of places that you are renting out which is your retirement. Papervalue of the house is not that important. Rent value = important.
At this point there are killer deals out there, I wish I had more money because I see the 1% buying everything up. I think instead of y'all's fantasy of prices going down to 1975 in a few years, its gonna be the 1% owning most of it and renting to you at horrendous prices. A 30 year fixed mortgage as laughable as it may seem to you now, is going to be as cheap as it gets.
:)
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BoomAndBustCycle says
NOTHING here is cheap...food, rent, or anything else. Flight instruction is needlessly expensive. Renting the aircraft itself is ridiculous. Getting a car worked on is higher than it should be.
There's too much money here!
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Rule of bubbles:
1. Bubbles can't be reflated.
2. You don't see another bubble in same asset class during the same generation.
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Austinhousingbubble says
Finally, someone talking sense. I couldn't agree more. No where else in any asset class can you get someone to take 97% of the heavy lifting. This is a housing welfare country, always has been always will be. We are just now starting to see the damage that can do to everyone. I don't mind helping kids get educated, I don't mind helping people ride bullet trains between SF and LA. I'll even go so far as to say I don't mind supporting the national sporting teams. I'll be dammed if I am happy with my money bailing out the greedy and the idiotic. They shouldn't receive one cent of my tax money. I work hard to not be them, not to help them push their immoral virtues down my throat.
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SubOink says
The logic is pure and simple. A house which I own with a $3000/month (PITI) in my neighborhood, isn't the same house I rent for $3000/month.
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SubOink says
Buying based on what you can afford vs buying based on what something is actually worth is not the most savvy approach to any purchase/investment.
Something else: variables like rents and affordability and credit and interest rates are all dynamic and cyclical phenomena. In the instance of rents, they are up right now given increased speculation by "investors" taking advantage of the unique current environment (people with damaged credit flooding into rentals from foreclosures), so using rental parity - at least as a single or dominant metric - is probably not the best way to establish affordability in the long term. While rents may be high now, there's no hard fast rule they will still this high - especially with seemingly every boy wonder trying to realize his lifelong dream of being a landlord.
In your defense - if you can afford to potentially overpay on something, (as a collector, I do it...we all do it), and you receive utility from your purchase that you were not able to get from a rental situation, then there is real value there, too, even if it's hard to quantify in terms of dollars.
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"Buying" a house with a mortgage is still renting. You're just renting the money rather than the house.
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rootvg says
There is absolutely no verification that the information you are providing is correct either. They want to give you the money, charge your the loan fees, etc. Remember, they just package it and push it back on the taxpayers anyway. Why would they care if the loan applicant is lying? They don't. I and we do.
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edvard2 says
Again and again, you're making my point. A lot of people who live in the Bay Area simply don't belong here income wise. That's a snotty thing to say but the longer I live here, the more confident I am with that opinion.
I don't know how we fix this. Maybe we don't.
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bmwman91, we salute you!
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xenogear3 says
True. However, you may be able to quit working & spend the last third of your life spending your time on whatever you choose if you live cheap & keep things simple.
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wthrfrk80 says
Same here, of course I don't live in the BA. But the way this state is ran I wouldn't be surprised if many will want to abandon it simply.