WatchYou guys look a lot at the median income, or median rent, of a locality as the basis for your evaluation, but that won't account for external demand.
Take SF for example. Prices are 11x income, which is stupid. BUT it COULD be justified if there is demand from outside of the valley.
Let's say every rich person in NY, Shanghai, Hong Kong, London, Geneva, and every other crazy rich person in the world wants a home in SF. Then prices might be right as the global demand is much higher than the limited supply of SF housing.
Note this theory only works in Global cities (NY, SF, Miami, LA) and not land locked places with less global appeal (San Antonio or Phoenix).
Thoughts?
Follow
Befriend (7)
37 threads
1,538 comments
Mountain View, CA
bmwman91's website
Premium
Yup, our government is even encouraging foreigners to price-out natives. Spend $500k on real estate, get a resident visa. Americans are trapped-out financially and we'll sell our nation well before we address any of the reasons why our economy is broken. Capitalism!
Follow
Befriend
22 threads
409 comments
bmwman91 says
Did this thing really passed in Congress? I remember hearing that some clown (Chuck Schumer?) proposed such legislation but I'm not sure it really became the law.
Follow
Befriend (23)
55 threads
3,795 comments
Scottsdale, AZ
robertoaribas's website
ChrisKolmar says
(I-T)^-1*D=X where X= Production, T = Technology Matrix, and D = external Demand.
There. I took account of external demand! I just knew my reading up on nobel economist Dr. Leontiff's work would pay off someday!
Follow
Befriend (7)
37 threads
1,538 comments
Mountain View, CA
bmwman91's website
Premium
IDDQD says
I believe so.
And your user name is pure win.
Follow
Befriend (31)
34 threads
2,545 comments
San Jose, CA
Premium
Chris,
What's the percentage of foreigners buying real estate in San Francisco do you know?
Follow
Befriend (7)
37 threads
1,538 comments
Mountain View, CA
bmwman91's website
Premium
Over the last few months, I have been seeing a surge in the number of people speaking Mandarin in public, and they dress the part of monied foreigners. They seem to range in age from early 30's to mid-40's. So, they aren't folks that moved here decades ago. China has a lot of money from the west, and the people holding it want to put it somewhere. If they have been convinced that the SFBA is one more item on the list of "things to do for social status" then it is game over for people living here. The cultural mentality over there has basically bred the perfect consumer-Borg that believes that respect is bought through brand-name conformity. If the SFBA is one of those brand names, well, folks here will find out just how much money has made its way over there (and back!).
It's not a knock against the Chinese, it's just a statement of fact. Europeans came to America and used the idea of property ownership as an excuse to commit genocide. There are countless other examples throughout history where peoples have been pushed out of their homeland by foreigners. This might just be the next chapter in that book. We may well have sown our own undoing by pushing "American culture" all over the world. We got a hive-mind culture to buy into our ideas of insatiable consumerism, handed them trillions of dollars, and now they are setting out to take their piece of the bullshit-pie that we convinced them to seek. Ironic, no?
Follow
Befriend (31)
34 threads
2,545 comments
San Jose, CA
Premium
BMW,
It's ironic that we have enjoyed a very high standard of living for a long time, and some of us don't know it or don't appreciate it. The foreigners come here & see everything is cheap compared to where they came from.
In the late 90's foreigners bought into the fortress and drove up home prices. They bought shacks on an oversize lot in Atherton and Menlo Park for over $1M. They tore those shacks down & put a McMansion on it. To them, $1M-$1.8M was a bargain while Americans complained it was too expensive and over-priced. LOL!
Now I see Chinese going into Cupertino & paying $800k -$1.2M for a shack, and they think it's a bargain.
I bust my behind to make sure that my kids will have a decent place to live in the Bay Area instead of being renters for life. We typically don't value what we have until we lose it.
Follow
Befriend (7)
37 threads
1,538 comments
Mountain View, CA
bmwman91's website
Premium
E-man says
Yup.
I'd take renting in the SFBA over living in China any day though (been there enough times to say that for certain). Lots of people there feel the same way, and have the cash to do something about it. Trips to industrial China really do a lot to show how good things are here. Buuuuut, it's more fun to complain!
But seriously, when the time comes for kids of my own, I'll be getting the hell out of the SFBA.
Follow
Befriend (4)
331 threads
919 comments
Native Americans wish we would all leave. We overdeveloped some nice property.
Follow
Befriend
1 threads
79 comments
New Lenox, IL
HEY YOU says
F'd a lot of it up...and the Native Americans want to just live off the land and only take what they need.
We are some bunch of EMEA's
Follow
Befriend (31)
34 threads
2,545 comments
San Jose, CA
Premium
bmwman91 says
People move here for jobs. Real estate has always been expensive where the jobs are. In general, it's easier to move out, but harder to move back. The inflation might be 2% in other local area while it's closer to 5% in the Bay Area.
It's unfortunate for some people that moved here in the late 90's and early 2000's. They worked hard, saved money, bought at the peak, and lost everything. You have had your chance to buy real estate at a discount in the last several years. I guess the discount wasn't close enough for you to jump in. Just remember that if you missed a RE cycle, you'd have to wait 7-10 years. Maybe you'd be ready by the next cycle. :)
Follow
Befriend
17 threads
54 comments
San Francisco, CA
E-man says
Just pitchin a theory. Here's some data to back it up:
http://www.bizjournals.com/sanfrancisco/morning_call/2012/09/foreign-buyers-shopping-for-bay-area.html
Follow
Befriend (31)
34 threads
2,545 comments
San Jose, CA
Premium
ChrisKolmar says
Chris,
Foreigners spent $82.5B in the last 12 months. That's an increase from $66.4B. I guess by knowing the total real estate sale dollar amount in the last 12 months, we can figure out the percentage of the foreigner's purchase.
Follow
Befriend (4)
25 threads
1,520 comments
Laguna Beach, CA
Premium
Foreign or not, they are simply speculators.
Follow
Befriend (7)
37 threads
1,538 comments
Mountain View, CA
bmwman91's website
Premium
E-man says
Haha, well actually my window was 2002-2007. I was a broke college student and probably could have lied my way into a jumbo loan and then squatted. At that time though, my priorities were mixed between chasing ass and studying for engineering finals! After graduation, I was mostly concerned with paying off student loans.
As for buying RE, well, I am not sure that I can convince my wife to wait 7-10 years. We do have a 20% down payment for a house in an area that we like, but the apartment we rent is still about 50% of the PITI costs (and the ITI are more than rent) and my commute is a 5 minute bike ride (hers is 15 minute drive against traffic). So, we wait, hopeful that things will settle down a little after the election and that the government insanity that props up the market will stop being as effective (nobody is holding their breath for it to stop). I have a friend in the mortgage industry that told me at my wedding last week, "don't do ANYTHING until February, you'll see why." I am pretty skeptical that anything will happen, but I don't see any reason not to wait until then anyway.
You mentioned coming from Eastern Europe where you saw hyperinflation, right? I have a coworker that came here from Romania and admonished me that I needed to buy a house ASAP back in 2010. Being young and naive, I thought that he was nuts and the idea that RE would stop reverting to the mean-line in the SFBA was up there with saying that the sky was purple. Well, like you said, many Americans have a small view of the world and don't understand that the quality of life that we have is an anomaly, while many others have seen the true nature of things and jump at a chance for "cheap" real estate in a place like this. Looks like I missed this boat by not understanding how things can work to my disadvantage, so I can either give up my current lifestyle to bust my back and buy in the near future, or wait for the boat to circle back in the next down cycle.
Follow
Befriend (2)
61 threads
1,305 comments
Premium
BMW, your situation reminds me of another poster Edvard2. As an engineer, your chinese SO and family, you will not be moving, even when the time comes for kids. Heading in the prime of your careers, you're better off in the Valley, ask Ed how transposable somewhere else. Chances are, you will be buying within the next couple of years and competing amount thousands like yourself for the same places.
Follow
Befriend
2 threads
2,497 comments
E-man says
The market is still over a trillion, so 7-8%. It would be nice if the article defined "foreign" purchase. A lot could be visa holders that will leave and sell in a couple years. A lot could be "foreign" corporations that are actually overseas invest shells owned by wealthy US investors. Raw numbers are worthless.
Follow
Befriend (31)
34 threads
2,545 comments
San Jose, CA
Premium
BMW,
Since investors have been buying almost everything at the steps, and the number of foreclosures have been insignificant, there will be no inventory coming on the market in the next 4 to 6 months. I'm studying and overlaying some data. If history is any indication, there is a good chance that the market will get soft in 2014 and 2015, and that's your last chance before we go into the next bull run.
You might have to sacrifice and consider Sunnyvale or Santa Clara. Think about the sprawl factor in the next 10-15 years. Don't short change your family and your kids. :)
I came from Vietnam where we experienced hyperinflation in the 70's and early 80's. I was too young to fully understand it, but I equated everything to candies at that time.
Say it cost you $1 for a candy before hyperinflation. When we went into hyperinflation, it cost 3 candies for $10; then 2 for $10, then 1 for $10 in a very short period amount of time. Then the government would create a new currency and converted $10 = $1. Basically, $1 of the new money = $10 of the old money.
They did this new money conversion for 2 or 3 times. Imagine your $1M mortgage will become $100,000 mortgage after the 1st currency conversion, then a $10,000 after the 2nd currency conversion. For this reason, the people didn't trust in the currency and hoarded gold every chance they get. No one bought silver though.
Follow
Befriend
15 threads
2,839 comments
ChrisKolmar says
ChrisKolmar says
We had global millionaires and billionaires for decades in and out of the Bay Area long before anyone here even took their first dump in their pampers.. still prices never skyrocketed to such heights in prior decades or seen so much needless hype..
Frankly, its only an hour flight but have you seen any Hollywood UBER rich wealthy , film stars, music rock stars, or Sports stars own mansions in SFBA.
Where is Mick Jaggers or Rod Stewards home in the Bay Area ?
Follow
Befriend
15 threads
2,839 comments
"Foreign buyers spent $82.5 billion on homes in the U.S. during the 12 months ending in March, an increase of $66.4 billion a year earlier, according to the National Association of Realtors."
One needs a greater breakdown on such purchases.. purchase what ? .. Apartments by some fund, i doubt it was entirely SFH by individuals and you need greater data to back up that claim.
Follow
Befriend (7)
37 threads
1,538 comments
Mountain View, CA
bmwman91's website
Premium
E-man says
I have no problem with either of those places. Actually, I like the Cambrian area of San Jose. Mountain View is only attractive because I can rent 5 minutes from my employer (not Google BTW). I would never want to spend $800k+ on a dumpy shack here. The city has no character and seems to be getting infected with the Palo Alto monied-liberal idiocy.
I'm not sure that moving elsewhere would be short-changing my kids or family. There are plenty of nice places in the US where one can raise well-balanced kids. Heck, looking around the SFBA, it seems like it is tricky to raise well-balanced ones...you really need to ignore everyone else to do a good job of it! I'll admit that I am just talking out of my ass though...talking about raising kids when you don't have them seems like one of those silly things that you look back on & chuckle about how naive you were.
Anyway, I just got married last weekend and am about to go to Maui for 2 weeks to chill out. The house can wait...at least for now, we can save money faster than prices are going up. I think that it will be worthwhile to see what happens after the election/inauguration as far as house owner subsidies, foreclosures and the fiscal cliff.
My friend in the mortgage industry says that banks have really dialed back the foreclosures this year because of the election. They want to lay low and not cause any problems so that (whoever) wins won't be pissed at them for causing unrest during their campaign. He claims that the foreclosure mill will begin operating again in mid-February. The Fed buying MBSs also frees them up to sell foreclosures since their loses were bought-off and they will get free Fed money PLUS proceeds from a sale. I sort of doubt that it will happen, but who knows. Stranger things have happened.
Follow
Befriend (31)
34 threads
2,545 comments
San Jose, CA
Premium
BMWman,
Congrats on your wedding. Maui was also our honeymoon destination. I got marry when I was 28. Pretty close to your age. :)
If what your friend said is true, we should see more short sales on the market in March & April. REOs won't hit the market till 3rd & 4th quarters of next year. I hope it will happen next year to get this housing correction behind us. Hey, maybe my prediction for price softness in 2014 to 2015 will come true.
There are some really nice pockets in San Jose if you know where to look.
Again congrats.
Follow
Befriend (5)
55 threads
1,314 comments
Premium
This has nothing to do with external demand. Sure, the dollar has depreciated and if it continues to debase it might become somewhat "cheaper" for foreigners given that their currency is not in shambles as well, but for now this had been solely fueled by ZIRP. Having manipulated ultra-low (zero!) interest rates for an extended time has never turned out well, so this is a dead-end ultimately. Look for the lost decade(s).
Follow
Befriend (7)
37 threads
1,538 comments
Mountain View, CA
bmwman91's website
Premium
E-man says
Thanks! It's easy to get super negative when looking at RE in the SFBA, but life's damn good overall.
I'm 28 right now too actually (the "91" references the car's age). A good age to get married!
Follow
Befriend (2)
61 threads
1,305 comments
Premium
Damn, that makes three of us. Got married at 28, I think. Congrats to you.
Enjoy Maui, where are u staying? Four Seasons?, Lahaina area? November 2012 in Maui is absolutely quiet (quiet enough for xxx on the beach, not the cocktail)with mid 80's weather but two weeks in Maui can be quite boring (lots of old geezers) especially if she doesn't golf, any thoughts of going to Oahu and party in Waikiki instead?
Follow
Befriend (7)
37 threads
1,538 comments
Mountain View, CA
bmwman91's website
Premium
So a friend of mine works for Apple and gets ~80 nights per year in the Hyatt hotel system. He hooked us up with a free upgrade to a king suite at the Hyatt Regency in Lahaina. Then for the second week we are staying in a vacation condo...I think I'll need a break from restaurants lol.
Quiet & boring...sort of what we need. I fully intend to do a lot of hiking, boogie boarding, parasailing, helicopter volcano tours, snorkeling & cliff diving. Bringing some rock climbing gear too. My wife & I are not big on crowded vacation venues, so having it be the "quiet" season is a big plus. Past vacations have been to Hong Kong & other busy places, plus a trip to watch the STS-133 launch (scrapped). This will be a nice change of pace.
Follow
Befriend (31)
34 threads
2,545 comments
San Jose, CA
Premium
SFace says
Wife & I went to Maui 3 years in a row after we got married. We went to Waikiki the 4th year. I hated it. Too crowded, and it felt like I was in the city. We haven't been back there since. Our 11 year anniversary is in about 2 weeks. 2 days before PK's birthday. We're going to Tahoe. Not sure when we'll go to Australia, but it's in the works. Man, I'm getting old. :)
BMW, you're pretty hardcore for doing all of that stuff. I only love snorkeling and eating. Wife can swim like a fish. It's breath taking watching her swimming.
Follow
Befriend (31)
34 threads
2,545 comments
San Jose, CA
Premium
I think 28 is a good age to get married. If I could do it all over again, I would have married my wife at 24. Too bad I don't get a second chance at it. :)
Follow
Befriend
15 threads
2,839 comments
bmwman91 says
enjoy your time in Maui...
Follow
Befriend (28)
171 threads
4,206 comments
Premium
When I am Prime Minister fucking on the beach will be mandatory.
Follow
Befriend (5)
24 threads
1,304 comments
Premium
APOCALYPSEFUCK is Shostakovich says
AP for PM!!