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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SubOink says
Because they don't think of it an an investment. They think of it as a luxury good. Like a Ferrari. Or a yacht. Or a glass of fine wine. Or a jet. They don't expect a return on those purchases. They buy them because they're nice to have and they can afford it. They're investments are in stocks and bonds. And maybe real estate if they're collecting rents.
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wthrfrk80 says
I'll use myself as a real-life example to further this notion. In my "other life" prior to getting my current career going I worked at retail stores making $8-$10 an hour. I did this from the time I was around 16, all the way through college, and the first 2-3 years after graduating college. I can recall taking out a loan for a computer. It took me over 2 years to pay it off. It cost $1,500 which at the time to me with my financial situation was a HUGE amount of money. In fact, most anything like a TV, CDs, cell phones, and a nice dinner all seemed impossibly expensive. I was just barely scraping by.
Fast-forward to now after 10+ years in my career and I make a lot more. I'm not rich, but I can go out and buy a computer, a flatscreen TV, or even a econo-car no problem. Not to say I do this all that often as I'm a cheap-ass who still drives the car I had in high school. But when I go out to a nice dinner I no longer worry about how much it is or what it'll do to my monthly expenditure or what sort of dent it will make in my savings account. Not that I take this for granted, but these are all things that at one time were very big deals to me since they were outside the realm of what I could really afford. Now I can and that notion has more or less evaporated.
What if I made millions and millions of dollars? A nice house would be the same thing. Not neccesarily an investment per-say, but given that its value in the end would probably be a non-issue since I wouldn't be counting on it for my finanancial well-being unlike most people who do simply because their purchasing power is limited and a house to them is this extremely expensive thing that could very easily ruin them financially if things don't go well.
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edvard2 says
I have a better question:
When you figure out that there are a lot of wealthy, successful people in the nice areas and you'll never be able to afford a house on the peninsula, what will you do?
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SubOink says
The government and the people with money in this country thank you. Actually, I thank you too, because your willingness to loan the government money all year takes a little sting out of how much I disagree with where my taxes get spent.
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SubOink says
Some do.
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SubOink says
Sociology.
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Nomograph says
There ARE a lot of wealthy, successful people in the nice areas and for that reason those areas will never be affordable. My understanding is Danville and Alamo were high in the early seventies and they're high now.
It's EXPENSIVE to live here. Some will not be able to afford it. Some who are here, should not be.
What else is there to know?
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San Jose, CA
F. Continue posting about how smart you are about not buying.
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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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rootvg says
There are a lot of wealthy successful people in Des Moines, Iowa, too. Mountain Brook, Alabama is one of the ten wealthiest communities in the entire country. Bloomfield Hills, Michigan has the second highest median income in the country, just ahead of Beautiful Belle Meade, Tennessee, and just behind Palm Beach, Floriders. It would be interesting to do a comparison of the cost of living in these places and a place like Danville.
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Austinhousingbubble says
Fair enough, but there isn't the demand for those places that we have here. There also isn't so much old money and then you have the California emotional, follow-the-leader high school culture thing to worry about.
When we say the Bay Area is a bubble, we mean it. This is Disneyland. When we try to explain this place to my parents, they look at us like we're nuts.
There's too much money here, too many over credentialed arrogant assholes who can't think straight and too many interlopers from all over the world looking to seek their fortunes at someone else's expense by redefining reality. If you come here not knowing that, you will eventually get hurt. The laws of physics, economics and common sense have not been repealed. Two and two will NEVER equal five no matter how many people say so and no matter how many times they say it.
Bloomfield Hills is a nice place. It snows there, but it's nice. Moreland Hills, Ohio is also nice with similar demographics. Around Columbus, Upper Arlington is nice. I think Jack Nicklaus still lives there. In the Cincinnati area, I like Blue Ash. I'd live there in a second.
Down your way, I like Round Rock. Georgetown is also a good bet although it's further away. Go south and there's San Marcos. I got my hair cut there once, during a day trip to the outlet mall.
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wthrfrk80 says
Ross Perot has invested primarily in Treasuries for years and years. He says it's not about return on his money but return OF his money.
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wthrfrk80 says
Even in general aviation, most of the big airplanes are owned by paper corporations for tax and liability reasons. I can name several flight schools right off the top of my head where the school doesn't own the planes. One of them is a fairly prestigious operation over at Livermore Muni.
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RentingForHalfTheCost says
Won't happen. It should but it won't.
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dunnross says
Who cares? It's not my business either way.
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dunnross says
Do wealthy people overpay for a Maserati when they could have purchased a Honda Civic?
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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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rootvg says
Then why do you judge your gay neighbors?
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Rich people don't buy a 500k house.
Somebody that makes 1Mill a year, buys a house with a mortgage of 20k/month.
The ratio is very similar then the guy that makes 150k having a mortgage of 3000/month.
Complete nonsense. You guys have no clue what rich people do and why they do it. They do things very similar than everybody else - just add a 0 or 00 or 000 to it.
You think the guy that makes 20 million a year buys a house for 3 million in cash? No, he buys a house for 45Million...and that's the second house or the third house. It still takes 4-5 years of his income to pay for those houses.
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Nomograph says
I know many wealthy people that do cause price inflation. They pay retail for vehicles, houses, etc. without even trying to haggle. It is not worth their time. I once went tire kicking with a manager, who, spent about 2 hours to decide to buy a BMW convertible. No where in the discussion was anything about price even discussed. I asked him as we were driving back to the office about this, and he said he was fine paying what they were asking for it. He would rather give them the sticker price and make everyone happy and get great service in the process.
Most of us don't work like that. We know that the above person overpaid because anyone that haggles will do better. I don't want just the middle of the price profile, I want to be the person who pays the least out of all the buyers. That will still stay with me, even if I was rich. I'm sure it has to do with living my first 25 years of life so broke it was even hard to "pay" attention. ;)
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SubOink says
I completely agree with your argument here. However, I read all the previous posts and I can't figure out what you are arguing about. I didn't see any comment saying anything opposite of what you are saying here. Rich people do buy houses, and they do buy at their comfort level. That level is way above what is comfortable to most of us overpaid pheasants.
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dunnross says
You don't have to buy in Palo Alto. You don't even have to live in Palo Alto.
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SubOink says
Actually no. Thomas Stanley's book titled "The Millionaire Next Door" interviewed about a thousand people with a net worth of over $1,000,000(U.S) on exactly what you're talking about:
Who are the rich in this country?
What do they do?
Where do they shop?
What do they drive?
How do they invest?
Many rich people tend to be fairly conservative and practical in their purchasing decisions. The most popular car for a millionaire? Toyota Camry. Less than 10% actually drove a "Luxury" brand car (Porsche, Ferrari, etc). One person he interviewed had a $10,000,000 net worth but lived in a sub-$800,000 home.
The book was published in 1996, before the dot.com bust, and Real estate bubble, so the millionaires Stanley interviewed were "real" wealthy people, not on-paper millionaires because they held inflated assets like unproven tech stock, or real estate.
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Maybe, if the commute time could be make less by more efficient public transportation, location could be less of an issue. For e.g, there's VTA right in front our place that would go to mountain view Caltrain except it takes twice as long as driving, almost twice as much as the monthly caltrain parking permit. Before the gas price skyrockets, think Caltrain pass costs would exceed fuel cost. As much as California is trying to be green, they haven't been that successful in public transportation. How about public transportation connecting east bay with the Caltrain crossing the bridge? Of course, I don't know the difficulty in construction, but there is eurostar crossing English channel, it shouldn't be mission impossible.
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rootvg says
That's probably the best description of the Bay Area I've ever seen. Well said.
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SparrowBell says
I can easily beat the lightrail from Milpitas to Mountain View by biking. Have been doing it for years. The caltrain catches back up to me around Redwood city area. So sad.
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RentingForHalfTheCost says
You mean like this guy? ;)
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Goran_K says
I work with many very wealthy people. They all have more cars than I can keep track of and there is no toyota camry in sight. Actually, the camry is what the cleaning lady drives.
What nonsense is that. Look around the rich neighborhoods. Here in LA, you can look at miles and miles of neighbordhoods where each house costs 1.5mill and up...who do you think buys those if not the rich??
Look at ferrari and luxury car sales...who do you think buys those?
And look at Richard Branson type characters. You think he drives a Toyota Camry? LOL.
RentingForHalfTheCost says
You are right. I can't figure it out either. :) ...ah, wait...I guess we got on a tangent about houses being a terrible investment and then blabla and then bla and then more blabla...and now we are talking abut ferrari's and organic beans. LOL.
Happy Easter!!
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Goran_K says
this is correct
the data is fairly recent - it's from 2009.
also, stanley has a phd, was a professor for 20 years and his current job is studying and researching wealthy people. he studies the wealthy for a living. he has multiple best selling and widely acclaimed books (with actual data) on his findings on who the wealthy are and profiles them accurate.
these credentials trump anyone's lame "observations" pulled from their ass.
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Many people on this board wants to buy/own a house in Palo Alto or the Peninsula, and they don't deny it. The only problem is that they want to pay Concord or the Central Valley home prices.
It all comes down to supply and demand. The NIMBY in the Peninsula are so anti-development, which limits the supply, while the immigration into the Bay Area keeps on going up. Why do you think rent dropped during the last couple of recessions, and it went up the moment the economy is just barely getting better?
How many people you know that used to do that commute from the Central Valley, Los Banos, Salinas, etc. to the Bay Area for work, are still doing it. The majority of them gave the house back to the bank and moved back to the Bay Area. This is another dynamic that drives rent to stupidly high prices today. Guess who suffer the most? Of course, it's the renters.
As a landlord, I haven't realized this rent increase. I feel for the renters and haven't increased the rent in the past 3 years. However, I'm so tempted to raise rent on all of my rentals because it seems like the renters on this board don't appreciate that their landlord is giving them a deal. :)
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Goran_K says
It looks like we read the same book. :)
In 1996, home prices were generally about 1/2 of what they are now and interest rate was around 7-8%. Gas prices were about 1/3 of what they are now. Food prices were about 1/2 of what they are now. Rents were about 60% of what they are now. Wouldn't you say a millionaire in 1996 is equivalent to a $2 millionaire now? :)
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Los Angeles, CA
Hysteresis says
I guess its really all the poor people living in the 30mill+ houses down at the beach...NOT
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Boulder Creek, CA
E-man says
This is one of the dumber things you've ever posted, which is saying a lot.
Not everybody wants to live in PA or MV, most people just want to live in the BA without spending 80% of their income to do so. I don't think anyone expects a PA home to 300K =/
Also, some of us get reasonable deals because we pay rent on time and take care of the properties we live in. Trust me, you aren't doing anyone any favors. My landlord raises my rent, and they'll be over here changing light bulbs. They know this and I treat their place well, so they don't raise my rent.
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SubOink says
this is retarded. no one said such a stupid thing. were did you learn to read?
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Hysteresis says
Oh, the irony.
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tiny tina says
likewise
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E-man says
Stick it to them. 25% increase retro back 3 months! Wait, are you my landlord? Crap, ignore what I just said. Nothing to see here, keep moving...
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SubOink says
I'm actually reading this book now and it is very enlightening. Sure, there are rich that show things off and use their wealth to buy what others can't. But we are talking averages here. There is a vast majority of millionaires that live in middle of the line homes. They live a life you wouldn't suspect considering they are worth 4-5million. It is a good read. "The Millionaire Next Door: The Surprising Secrets of America's Wealthy". The moral of the book. Don't believe everything you see.
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E-man says
But when you compare a $1M 1100 sq ft home in Palo Alto to a home 3x bigger and much modern located 15min drive in Silver Creek ... you ask what am i paying $1M in PA for ?
LOL! for many of use who have lived here all of lives.. it really doesnt make sense. So why get so little for so much ?
No PA prices dont make sense compared to the nearby areas.