WatchThis is really an extention of IWOG's thread of why 2013 is set up to be a huge up year, expecially in the SFBA. The main theme is the drastic lack of inventory.
Consider this.
"As of January 07 2013 there were about 5,074 single family and condo homes listed for sale in San Francisco Bay Area." In Jan 2012, 2011, it was 13,041 and 18,212 respectively. http://www.deptofnumbers.com/asking-prices/california/san-francisco/
Which brings up a question, why is that?
Shadow inventory from underwater owner? I don't really buy this one. In my neighborhood, essentially no one is underwater yet literally nothing is for sale.
Bulk Buyers? Bulk buyers have been especially active in NorCal, Sacramento, Phoenix and a few specific area. If I was a big real estate LLC, I would focus on a market as well to at least capture some scaling. Likely the bulk buyers are taking inventory out of the market. You hear about the blackstones, but I'm sure there are smaller, aggregated efforts as well.
Refinance? A low interest rate envionment in the last 3 years mean today's current owner are better off renting than selling. It's a huge difference to pay a mortgagge of 6% vs. 3.5%. With the latter, an owner does not need to sell thus resrict inventory.
Price expectations - Current owners probably think the worst is behind us. When employment rates get to perhaps 6.5% and retail buyer comes on board in force, perhaps that is when owner's decide to sell. That time is not now thus no one is willing to sell.
As an aside, when I was interviewing tenants for a rental of one of my property in Hercules, A 1700 sq ft SFH, a common theme was they were looking to rent for one-two years. At that point, they want to buy. The retail buyer's (for that demographics) will be coming on board in 2 years, at that point, it will make sense to sell in 2017. My thinking is, the people who lost their homes in 2009-2011 will eventually be retail buyers again in 2014-2018. my opinion only.
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robertoaribas says
For me it's a something called a "winning attitude." You don't have it. You may have in the past. You may change for the future but if you stay in the place you're in today you will fail or at least not enjoy your successes. Of course if this is just your Internet persona and you're really not really like this. If you have good reason for it then who knows. But I've never met a successful person disrespect people the way you do. Success is a journey and you're on a twisted one on this forum. For some, forums are like a drug. It brings out the worst in them. Were's the profit in insulting people?
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ELC says
yeah, I see. That clears it up! So if someone has that "winning attitude" but bought in 2006... I presume that attitude will have carried them right on through to success?
You'd think on a housing blog, maybe a demonstrated ability to analyze housing trends would count for something, but I guess not.
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David Losh says
So I just showed you how wrong you are on the spending cuts you thought the government has made in the latest bill (you were only off by about $1375 billion LOL) and you want me to prove that you are wrong in your other assumption that the government has unlimited options for spending cuts. Wow!
I mean, here the government was talking at the end of December about the end of the world as we know it (fiscal cliff drama) and that massive changes needed to be made to put us back on the road. And after all that urgency and melodrama, they decided to cut $25 billion in spending. Were the $25 billion cuts to be made in 1 year? Oh No! Not 1 year, not even 2 years but a full 10 years. That is a measly $2.5 billion a year that they could cut even with all the dire statements they made beforehand. And to congratulate themselves on these fabulous cuts, they increased spending by about $41 for each dollar of the new tax increase (LOL)
And here you are now claiming that the government has unlimited options to cut spending (they will do it out of the goodness of their hearts) and you want me to prove you are wrong! Oh boy! I just don't know what to say.
(Here I edited my comment to remove caustic statement. I don't want to be rude. We can continue to discuss in a courteous manner)
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chi_renter says
Yep, the government didn't cut spending much, that certainly proves that gold is on its way to a zillion dollars an ounce, any second now!
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robertoaribas says
Perhaps you could quote where I said this. All I am saying is that with the system in such a disarray and with absolutely no efforts being made to limit any of this debauchery, you should not be surprised that responsible people will try to protect their hard-earned money by moving into safer and more sound assets such as gold. That process could result in the price of gold going up as a natural supply/demand variable and not because of irrational exuberance. You don't agree with this assessment?
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underwaterman says
underwaterman says
Fair enough, but since 12 of the experts on your list made predictions that didn't come to pass (and therefore can't be correct), how about rephrasing your question to reflect this. I would suggest:
"Can you guess what happens if any of the 71 experts are correct?"
For the record I have read you posts with an open mind and I don't find your arguments very convincing. Your "gold to the moon" story may come true, but that doesn't mean your reasons, logic, or analysis is worth a damn.
Frankly you just haven't done a good job convincing me that I should put more stock in your analysis than my own. Also, what are you trying to accomplish with your posts? Educate the masses? Gain followers? Win arguments? Entertain yourself? You have made your points, most people don't buy them, you have clarified and buttressed your arguments, but you still don't have any takers. The name calling and ad Hominem attacks don't help you cause, either.
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chi_renter says
various academics in my field (mathematics applied to economics) have looked at the hedging value of gold versus inflation, versus economic risk, versus disaster, and have found it extremely lacking. In fact, the bet that can be said is that it trades on its own momentum.
Secondly, there are very real ways for the US to solve its long term debt problem, and in fact a very likely strong economic recovery that we will see more evidence of as the next few years unfold will solve a big portion of it all alone.
We bombed Japan into the stoneage at the end of world war 2. We nuked two of their cities, and the loss of human capital made that epoch of their history only about 1000 times worse than our current crisis. look at their economy 5, 10 and 15 years later. ditto Germany.
Never underestimate the ability of the US to grow.
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chi_renter says
Wuhh? For how long? I think this assertion is not consistent with what most Americans are experiencing. In fact it seems so far out of whack that you need to justify it with some examples if you want people to take you seriously.
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chi_renter says
You quoted a fiscal cliff article that didn't happen because there are no spending cuts yet, we only got the revenue increase, but that is irrelevant to the fact the United States government has Trillions in pork spending.
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swebb says
Here is a link to ShadowStats inflation graph which shows real inflation when using the original methodology (from before 1980) used to calculate inflation (before the food/energy variables were removed to make inflation seem smaller than it is to fool the public). Clearly you can see it is close to 10% (definitely a 5-6% gap between official and real)
http://www.shadowstats.com/alternate_data/inflation-charts
And here is a very indepth article on why reported inflation feels so much different than what us regular Americans feel everyday in the marketplace. Do you disagree with the statements in this article?
http://www.zerohedge.com/news/2012-12-20/guest-post-why-reported-inflation-seems-different-reality
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Shadowstats, BLS, Google Price Index, and MIT's Billion Prices Project ...
Guess which one doesn't belong and is inconsistent with the other 3?
10% inflation?!? What would 10%/year inflation look like over 13 years? Does that accurately reflect what you see?
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robertoaribas says
I am certainly glad you're a math major, otherwise I would think you were clueless...
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Call it Crazy says
deficits go up, when you stifle a great depression and fight 2 unfunded wars. Your point? are we going to be n 2 unfunded wars forever? Is the economy going to remain in a depression forever?
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robertoaribas says
Roberto, I think that you might be overlooking the reason why Japan and Germany grew as they did. They were bombed into the stoneage. People lost everything and had clear reasons to work hard and be productive, because if they didn't they would have to live in the stone age.
Take America today. People are born with EVERYTHING, in comparison to post-WWII Japan and Germany. If you don't feel like working, you just go get free money from the government which will buy you food, imported baubles and all the entertainment you need to kill time until death. The slow rotting of our infrastructure and social attitudes toward progress aren't the winning mixture for real economic growth.
America COULD see large growth again, but there would need to be major social shifts in all socioeconomic classes. It generally takes a shock to the system, of some sort, to get that to happen. The only likely event like that would be the US Dollar losing its international reserve status and us being forced to produce our own goods again. If we keep with our slow decline, people will probably just rationalize it away and accept it. When you have the dollar menu and reality TV to placate the masses, well, most people know what happened after the free bread and circuses in Rome.
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underwaterman says
nominated.
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chi_renter says
I don't have great data, but after some basic google searches I came up with this:
1982, loaf of bread $0.50
2012, loaf of bread $1.50
By my calculations that's about 3.7% inflation on average. Are my numbers wrong?
chi_renter says
Admittedly, I'm probably a little out of touch when it comes to food prices. I'd notice the sticker prices increasing because I pay attention, but it's not really on my radar from a bottom line standpoint. Still, 10% inflation is just so far out of bounds that I have a hard time believing it.
Prices would double every 7 years at that rate!
I bought a new car about 7 years ago -- a mid line Subaru Outback. $22k A comparable model today (Actually, it's probably meaningfully nicer) -- about $24k.
I bought a pair of Montrail hiking boots about 7 years ago. I don't remember the exact price, but it was about $140 for the pair. Several months back I bought a similar pair (same brand, same basic boot) and I paid about $130.
A six pack of top shelf beer 10 years ago? I remember paying about $6. Today? $8.50 will get me a six pack of almost any beer I want.
I bought an basic / low end mig welder in 1994 -- it was about $400. Today comparable models are about the same price.
I remember a McDonalds cheeseburger priced at $0.65 in the mid 90s. Today it's a buck.
10% inflation doesn't pass the sniff test for me.
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underwaterman says
In business, we call this unemployed. Who in their right minds based their investment based on an economic theory that the system has to collapse in order to succeed?
Gold may very well go up signicantly, only if A, B, C, D and E happens. Good luck putting everything in gold bars. That's an insane bet worth seeing the mental physcologist. Your 85 experts are cut from the same cloth and the end result is wrong. They're just gold bugs and the talking points are all the same.
At least with housing, if prices go up you win with equity, if prices stay flat or down, you win with cash flow. The only way Roberto does not come out ahead is if rents collapse by 50% which is not going to happen. Rents will be up 50% a decade like it has for the last 100 years.
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SFace says
With caveats.
a) If you are a landlord
b) If you are a homeowner and are OK with selling/moving to a smaller house in a presumably less expensive area when you retire.
c) You gonn' ride the HELOC TrAiN, baby!!1
As someone that wants to buy a house, live in it and customize it into a life-long HOME, I don't really see much merit to the "equity" argument for home ownership. It is totally illiquid, subject to prevailing market trends and realizing its value requires you to extract it via debt or uproot your life. At best, I see it as a sort of funky "emergency savings account" that eventually grows faster than you could grow a real savings account if you rented long-term (since rents do tend to go up over time). Tapping it isn't terribly straightforward.
Houses are now commodities, and it is disgusting to me. Rent seeking is completely unproductive and crushes the greater economy by sucking up disposable income that would otherwise be spent on real goods, and by juicing various financial instruments that don't actually produce anything outside of the FIRE sector. Buuut, bitching about it won't change the fact that it's the hottest game in town right now.
This might be bordering on starting another economic discussion tangent. "Money has no value unless it can easily be exchanged for real goods and services." Equity makes people FEEL good though, that's for sure.
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swebb says
Of course. Shadowstats is a site for the tinfoil crowd to congregate at.
There is nothing untoward about the government changing the "basket of goods" over time to reflect peoples' changing habits. When two or more substitute goods are available, people will generally act rationally and buy the cheaper one.
And, for the record, food, energy, and housing costs ARE included in the CPI measurement. There is separate core CPI that does not include volatile food and energy. Both numbers are calculated and reported.
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robertoaribas says
Simple answer, YES!! Or, worse!!
As long as your government continues to spend MORE than they take in, nothing will change and we will continue to go down the rat hole until we can't anymore.... take a look again at this chart...
....And prove it otherwise ....
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underwaterman says
Yeah, I hope it won't take another 10 years for sure. I am getting tired of just waiting for some sanity to prevail. In the meantime, no worries. I am happily saving my money renting and putting it wherever I have the most safety.
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Call it Crazy says
gotcha. Except, the scenario you are waiting for, people will be killing you and eating you in that home you just bought for 3 silver coins...
I'm not going to base my personal financial decisions on waiting for cannibal anarchy, but by all means you can feel free to do so!
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underwaterman says
underwearbrain, you haven't been part of any intelligent discussion, because you lack the prerequisite. You quote gold bugs who have already missed their predictions by 5000%. "somebody says you can buy a home someday for a few silver coins... he said it would be 2011... but that small error doesn't count..." your credibility = 0 at this point.
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robertoaribas says
Talk about extreme statements.....
I never said that, in fact, I hope the economy improves. But, remember this statement:
robertoaribas says
If, after looking at the situation of the country's debt, you really believe your statement above, then you wasted a lot of money on your math degrees.
I'm not a math major, but I can see that the direction of the economy isn't going to end well. If you choose to be an ostrich and stick your head in the desert in Phoenix, and believe what you wrote above, that's your choice.
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Call it Crazy says
1. end of the wasteful wars.
2. natural end of the recession. yes they always end, and while in them, pessimists assume they will last forever. I've studyed the economy of the great depression, and the investments that won long term, I don't believe you have.
3. energy. We are seeing a resurgance of domestic energy production, coupled with more efficient cars (thank goodness obama beat romney, or these standards would certainly have been rolled back to the detriment of our future) the US is on a course to quit importing energy in the near future. Don't discredit the effect that will have on our economy, and even a small surcharge tax on energy usage could both cut deficits and encourage consrevation.
4. automation. We are very likely to see the reshoring of serious amounts of manufacturing, since hours of labor aren't going to be nearly as important in a robot manufacturing world. Won't help the unskilled get jobs, but it certainly will help the balance of trade, the dollar, and the economy.
5. ending of long term unemployment, and other extreme aids from the federal government.
6. Return to trend GDP growth rate. After the great depression, the US didn't start a new trend of growth from that point, but rather returned to the old growth trend from prior to the depression. From today, that would mean a 20+ increase just to make up for the underutilization of the last six years, and we would grow at 2.5% from that point... Serious increase in government revenue, even if nothing changed at all.
But hey, it doesn't jive with cannibal anarchy, nothing could ever get better theories...
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underwaterman says
Good, that was the goal.
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Call it Crazy says
You did great by including the charts, and graphs. Those are the same I use to show how we can get out of the mess we are in. Here's one you forgot to include. I have more.
Consumer debt is what is the real problem. The government, in response to the attack of 9/11 2001, spent money on all sorts of things that were for "National Security." It created jobs, and an incentive to spur economic growth in things like creating housing units. The consumer racked up massive debt, and continues to do so.
Well, here in 2013 the piper needs to be paid. The United States government has options the consumer does not.
Your second chart shows that in 2007 the consumer began using bankruptcy, and foreclosure to lower debt from it's peak. Moving forward the only option the consumer has is to increase income, or spend less.
This chart shows wages are flat, so that only leaves consumers spending less, or using more credit.
The consumer will spend less, look for better bargains, do more substitution, and in general the providers of goods, or services will have to play along with that.
Prices will fall to be more in line with what the consumer can afford.
The government can, and will, cut spending. They have unlimited programs to unwind. Obama has been kind of brilliant in transferring more jobs to the private sector.
We can talk about banking another time, because it is the basis of our problems. Banking, insurance, and the financial markets are the corner stone of where we can get more tax revenue, and cut government spending.
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Is it safe to continue now?
We are at the end of January,and it looks like low inventory will be with us for a while.
What many people have pointed out is that sales volume is continueing pretty well. Good houses come on the market, get multiple offers, then they are gone.
I don't understand why so many buyers are so desperate, other than getting into a good school district. Another thing that doesn't make sense is the number of sellers who should look at today's market as a gift.
I'd think a lot of people would want to sell, or maybe even should sell, even short sale, just so they can retire that debt.
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David Losh says
I don't quite understand the multiple bids at many price points... maybe it will be another bubble, who knows? I thought I was buying homes to keep forever, but if this year is similar to last year, I may sell one in late summer to take some chips back off the table :-)
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There are always people that want to buy homes. People get desperate. They either retreat or charge forward paying what ever the price required.
Just remember "Fools rush in where angels fear to tread." - Edmund Burke
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If the appreciation in my area continues I will be selling this spring/summer and I will go rent for a while. I will stay mobile and take advantage of the large number of SFH that are going to be available for rent.
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yup1,
There seem to be many more rental opptunities in Fremont than last year.
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I believe that in most of the hard hit markets there will be ample opportunity to rent.
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robertoaribas says
The problem with empires is when they stop expanding they tend to go bankrupt. What sovereign nation can we possibly attack to pillage and pay for all the bad debt we have piled up.
That clever stunt by Nixon in 1971 bought a lot of time, but seriously, you believe this debt and deficit issue is going to go on forever?
Some mathematician you are ignoring like - all of history - when talking about economics. You just pick a timeline that suits your beliefs.
If you seriously think that you have ever tried to improve the lives of the middle class for even one day you have to be kidding yourself.
Greed machine, all about numbers and math. The problem is that this vicious pursuit of money has actually lead to a decrease in standard of living despite massive increases in technology and efficiency and productivity.
We are all become slaves which are perceived as costs in the system, and the goal of the current system is to drive out costs.
The logical end is all labor being done by robots and all humans eliminated from the picture. Some world you guys are working towards. Doesnt feel like Star Trek.
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robertoaribas says
I am glad to see that even the uber bulls are a little concerned by what they are seeing.
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SFace says
Car dealers get sticker or above for silly things like hard to find colors. Even the most commodotized commodities are worth a lot more if they are perceived to be rare.
It should make sense that just like the stock market and historic low volumes that the low volumes of the housing market can make for easy arbitrary pricing.
That and a fresh wave of ill-gotten China-Dollars.
And then the celebration of, despite being a consumer economy based on disposable income, the increase of cost of living/higher housing.
Im done carying about SFBA, it has a horrific standard of living. I grew up all over the US, and despite good job opportunities, I've never lived so "poorly".
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Call it Crazy says
People who benefit from the system, especially the rentier class who makes unearned income off the backs of others, tend to defend the status quo of the banking cabal with extreme fanaticism and zealotry.
Expect nothing but basically pure lies to defend their way of life.
Thell tell you things like inflation is 2-3% while changing the basket of things inflation is calculated on, or changing the year the dollars are based on, etc.
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There's a Real Estate agent in my neighborhood who has sold some of the properties that have languished on the market in the past.
A little brick number on a busy street was one that even the seller thought he could never get rid of sold, for a fair price, but not cheap.
The agent has another albatross up for sale that has been used as an example of what not to do in lot development by our city Department of Planning, and Development, for years.
I'm also going to say that a house up the street from me went into foreclosure because of a oil tank leak, that was mitigated, then resold to an investor who turned it into a rental.
People are crazy to pay these prices for poop, but when a decent house comes on the market, at a decent price, watch out.
I realize as much as I sound like a perma bear I always expect the Real Estate market to wake up, and get to be more reasonable.
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Updated inventory as of 2/4/2013. I guess now that the superbowl is done, the home buying season starts and inventory will come.
February 04, 2013 Month/Month Year/Year
Median Asking Price $570,000 +3.6% +42.9%
Home Listings/Inventory 5,300 +4.5% -58.9%
http://www.deptofnumbers.com/asking-prices/california/san-francisco/
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In my humble opinion, it seems very obvious as to why Inventory of homes for sale is low. When you purchased homes for the last 10-15 years, they were very overpriced. After the housing bubble broke, those homes were purchased way over the current value. Not many folks are going to sell their homes "under value". Thus the only Inventory that will remain are those that (1) have to move due to life changes (2) those that are 'underwater' in payments (3) and the banks that already foreclosed on the homes.
So by the natural progression, based on the above, we would begin to have less and less inventory.
That's just my thoughts as I am in the market to purchase our Retirement and that seems to be what we are seeing. We made a very reasonable offer on one home, the seller could not accept as it would leave them "less" than what they owe; even though, they are holding out for that "one buyer" that will pay for their home, even though it is not a reasonable asking price for their area/home.
Again, just my thoughts....