WatchIt's pretty clear most of us believe there is a bubble. It's also pretty clear that many believe the peak is behind us and we're now in the midst of what may be a very large, very drawn out decline.
So now what? Is there anything left to debate? Or are we all coming here out of habit?
And why are there still people out there who claim there is no bubble or decline? What's that all about?
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And the jokes on them! There was no wealth redistribution back home, just uneven wealth accumulation! Those high taxes went for what, again?
–DV
And yet somehow CA has the highest inflation adjusted GSP growth in the US. How could that be? They must be counterfeiting money or something.
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DEAD PERSON:
I'm not dead!
CART MASTER:
'Ere. He says he's not dead!
CUSTOMER:
Yes, he is.
DEAD PERSON:
I'm not!
CART MASTER:
He isn't?
CUSTOMER:
Well, he will be soon. He's been quite ill lately.
DEAD PERSON:
I'm getting better!
CUSTOMER:
No, you're not. You'll be stone dead in a moment.
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Sorry, Max and Kurt S.
What I meant to say was I agree with Kurt S.
the next real “event” will be Spring inventory levels.
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Caligirl,
if you are waiting for a bottom, look at Japan and you will find an answer. This won't be a simple reset of RE, but trade imbalance, medicare, pension/SS obligation train wrecks all rolled into one. If you are waiting for the absolute bottom, start looking 7 years later. Silicon Valley didn't hit the bottom until 94 in teh 89 bust, so adding another 2-5 years sounds reasonable for this bottom.
Now, life is of course too short to wait that long. You need to balance out $$$ vs. enjoyment, recently Americans have been trading the former for the latter too much of course, so we shouldn't go to the other extreme either. However, for a meaingful drop from the current level, you should hold out till at least 2009 when the biggest wave of ARM/I/O/ Neg Am reset (about 4-5 trillion worth of mortgage) are behind us. The biggest refinance wave of mortgage will hit throughout 2008, so you definitely want to see how much housing price will be drowned out by that avalanche.
So in a nutshell, the earliest you can buy is late 2009.
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bb, thanks for the misinformation. Debt = wealth, there is no housing bubble.
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The point of public relations slogans like "Support Our Troops" is that they don't mean anything... That's the whole point of good propaganda. You want to create a slogan that nobody's going to be against, and everybody's going to be for. Nobody knows what it means, because it doesn't mean anything. Its crucial value is that it diverts your attention from a question that does mean something: Do you support our policy? That's the one you're not allowed to talk about." - Noam Chomsky
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To paraphrase the great Joaquin Andujar of the St. Louis Cardinals:
"You can sum up real estate in one word: You never know.''
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No tax cuts until we cut spending.
If we do not cut tax first, the government can always find ways to spend. We should cut tax first, then we can starve unnecessary programs.
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It’s clear that rent-to-price ratios south of SF aren’t nearly as good as in SF, but it’s hard for me to get a very clear picture. I think a good-size house (4 bed, 2-3 bath, >2000sqf) on a quiet street in a good school district (such as Cupertino) would rent for $3000, but I’m not sure. Such a house would probably sell for $1.2 million, so the ratio is clearly much worse than in SF where $620K condos rent for $2300.
Yes, if I must buy now I will probably do so in San Francisco. Also, houses above 1.5M-1.75M may be overpriced but I DO NOT see a bubble.
Luckily, a 2/2 is all I need. I do not have to look for a house in a good school district.
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I’m trying to figure out how much nice houses in good school districts rent for on the peninsula.
I am in the market for a rental because my lease will be up and I am escaping from San Jose. All I need is a 2/2 apartment/condo in a nice neighborhood. I like to live among older people (45+ years old) because young people scare me. Any suggestion?
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You can sum up real estate in one word: You never know.
So they knew when prices were going up. But we never know if prices will come down?
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I have a friend who is a director at Google, if there is a position paying 250K per engineer, I can tell you there won't be more than 5 people in the entirely valley fit for what that position calls for, and most probably they are happily employed elsewhere.
If your company is paying 140K for a QA, no matter how senior that QA is, your company will fold in the next 24 months. We pay our H1Bs no more than 100K, even for those perpetual H1Bs who have been in the trade for 5+ years.
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Unfortunately that isn’t working. Instead they just keep raising the debt ceiling and let the next generation deal with it. There seems to be no consequence for the current congress to have such a high deficit.
True enough. But privatising much of the government should help.
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I like to live among older people (45+ years old) because young people scare me.
Funniest thing I've seen all week. :roll:
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Peter, I didn’t say there is no bubble. The point I am making is that the current average household income in the silicon valley can hold the bubble for much longer than what is being preached on this board.
It is not about how long the bubble can be sustained. The stock market could have been sustained indefinitely because there was NEVER any affordability issue (you can buy 1000 shares, 100 shares or 1 share), but it did not. It is a game of psychology.
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If the employment market is that good rent would be through the roof by now. It is still WAY (40%) below 2000 level.
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The salaries you’re quoting sound about 15%-20% too high (unless things really changed significantly over the last year or two).
Or perhaps you have to start paying your minions more. Just kidding. :)
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Anecdotal: Took my tax binder to the CPA today. He said there's no question the RE market is headed into a steep decline.
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Just go to zillow.com and you will discover something interesting in Palo Alto:
Houses above 1.5M sustained a relatively stable trend all the way from 1999.
Houses below 1M went relatively no where before 2004. Then they shot up sharply.
It is not hard to see that one is caused by wealth and one is caused by debt.
Since debt = wealth, perhaps I have been talking nonsense. :)
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If the salary quoted by bb is true, I think most of the companies in the SV will have relocated to Austin, TX, and their employees will happily obliged too.
Give me a freaking break, 140K for a QA, lowest on the food chain. If your QA costs 140K, how much should you be paying your code-spewing engineers? 180K? Then how much should you be paying your group product managers, program managers, biz dev directors? Everyone will be making 250K plus and yeah, the next thing we know, we are all paid in US peso.
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Now I am not saying that the "wealth" behind these higher-priced homes cannot go away, but it is more real than Greenspired liquidity.
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Good luck. If I were you, I would be looking into relocation or even outsourcing. How can you compete?
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...they just keep raising the debt ceiling and let the next generation deal with it. There seems to be no consequence for the current congress to have such a high deficit
Congress is just the entertainment ministry of the shadow government. They don't care if the U.S. spirals into a black hole of debt. Congress has its marching orders and the ultimate goal is to level the world economy so that a new order, one world government, can be established.
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Unalloyed, have some faith in your government. Bubbles have been rather common throughout history. It is not the end of human civialization.
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BTW, a 300K combined household income can barely support a 1M mortgage.
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I can give you some examples of houses above 2M coming down since 2001.
I have been tracking acreage properties in Los Gatos, Saratoga, Cupertino and Los Altos Hills, I can find quite a few examples that their current asking price is LOWER than the price purchased back in 2001. Here is one example:
15289 TOP OF THE HILL RD, Los Gatos, purchased in 2005 for 2,650,000, currently available for sale at 2,195,000
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I can give you some examples of houses above 2M coming down since 2001.
Yes. However, it is probably safer to hold one 2M house than 4 500K condos. :) (NOT INVESTMENT ADVICE)
These higher-priced houses are much less detached from the reality than liquidity-driven shitboxes.
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I am not saying people are not making that kind of salary, I have plenty of friends with 250K+ household income, but they are all people armed with ivy league degrees, JD/MBA, 5-8 years of working experience.
QA on average make south of 80K, maybe if you are the best QA in the whole wide world you make 120K. You make it sound like every QA is making that kind of money is such ridiculous. It is not like we don't know anyone in these companies and don't get headhunting calls. Quoting a few examples out of hundreds of thousands is called a bias. The valley always has a place for the elites, but not for there are just not that many elites that support so many multi-million dollar homes.
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I guess all these folks are buying, not renting…
Really? What a convinient explanation!
Then how come apartment equivalent housing (aka "cheap" condos) have seen the most appreciation? I know, these highly-paid professionals like to experience lower-middle-class lives in transitional neighborhoods.
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Also, I thought whenever an employment boom occurs, demand for temporary housing will tend to increase...
Rent is the missing link, I guess.
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Peter P,
For me the RE bubble and the coming economic maelstrom are symptoms of a nation that has abandoned civilization. Banking deregulation and throwing out usury laws, negative amortization loans, 350 lb women in spandex are all signs of a society that has shown its heels to civilization.
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Headhunters are like realtors. They make commissions based on the salary. Hire this guy or forever be priced out.
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For me the RE bubble and the coming economic maelstrom are symptoms of a nation that has abandoned civilization. Banking deregulation and throwing out usury laws, negative amortization loans, 350 lb women in spandex are all signs of a society that has shown its heels to civilization.
Well, I guess civilization is not a natural thing. :) Honestly, I do not have much faith in humanity.
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15289 TOP OF THE HILL RD, Los Gatos, purchased in 2005 for 2,650,000, currently available for sale at 2,195,000
Perhaps they did some reverse renovations, like taking away appliances and the all-important granite countertop. :)
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All I ever wanted was tea and crumpets in the afternoon, and dogs with happy faces. But I'll settle for 60% off 2005 prices at the bottom of the curve.
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Why? It’s about $16K/mo after tax. A $1M mortgage would be less than $6K/mo. You can sustain even a $1.75M mortgage with that income - it would still leave a few thousand dollars a month for other expenses.
What? No one should spend more than 25% - 30% gross on housing. It is a guideline for the mass and higher-income people should be even more conservative than that.
How do you get PITI below 6K for a 1M mortgage?
Interest at 6% is already 5K a month. Property tax is another 1K. Insurance and upkeep is at least 250 a month.
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They don’t like it, but that’s all they can afford, and they’d rather buy than rent.
Ah, dignity. We can get two gentlemen to engage in a duel just to buy a house.
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I never understood why it applied to higher-income people. You only need very few thousand dollars a month to live on. Why is it so bad to spend the rest on a mortgage? Why is it ok for most people to have, say, $3K left after mortgage payments, buy it’s not ok for high-income people?
Perhaps Bill Gates should live in a private Mars conlony with oxygen dome and artifical gravity. He just needs a few thousands to live on anyway. Why not spend the rest on a space mortgage?
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Why would anyone want to pay 6K PITI and have 200K stuck in downpayment when I can rent for 3000K?
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Why is it so bad to spend the rest on a mortgage? Why is it ok for most people to have, say, $3K left after mortgage payments, buy it’s not ok for high-income people?
Because banks would never lend like this in a normal market. Doesn't that scare you a little bit?
I do not want to be stretching by any definition. We are spending less than 1/5 NET on housing right now, going to 1/2 seems far-fetched.