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Ahh the same ole tired crap.
The entire BA bubble Vs non-bubble debate can easily be summed up in as little as 4 statements.
1) No bubble, there isn’t enough housing, supply Vs. demand.
2) The Google effect, companies in the Bay Area lead the world in everything and attract top notch talent for which they pay handsomely. Never mind that the brunt of companies in the Bay Area do not produce physical items, ahh the “new economy”. Interesting that the code monkeys in China/Vietnam/India etc are rapidly getting as good if not better than the code monkeys in the BA. Companies are in business to make money, period. It is only a matter of time before the equation swings forever in the favor of off shore code monkeys.
3) Houses are worth so much in several areas because of the outstanding schools.
4) The perfect nature of all things BA justify the a$$pounding RE costs.
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surfer-x's website
http://tinyurl.com/3goal
http://tinyurl.com/m3qld
http://tinyurl.com/39p8n
http://tinyurl.com/da7f
http://tinyurl.com/qlbde
The last one is pure fucking genius, how to not get offshored, "be number one", "have amazing skills". Wow, brilliant
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Different Sean's website
don't forget that the boom is playing out in a number of areas and a number of countries, not just BA. it's in DC, NYC, london, ireland, netherlands, spain, australia, etc... there's a net loss of people from sydney to the tune of 15,000 per year, so can't see how that will keep prices firm...
'nother link on CBS5.com:
cbs5.com - Don't Drive--Sunday Is Another Spare The Air Day
on that, haven't heard much from Robert Cote lately... seems to have retired to lick his wounds after repeated tag team smack downs in one thread, heh...
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Huh?
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A young family moved into the house across the street. We had lots of friendly contact for the first few days (kids are about the same age etc.). They've found out that we rent, and now they don't even say "Hi" anymore.
Nice.
Fresh Choice in Capitola today. On all three neighboring tables, the subject of conversation is those folks' recent real estate transactions - first/second homes, investment properties, etc.
Seems like it's the main economic activity for everyone around here.
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A young family moved into the house across the street. We had lots of friendly contact for the first few days (kids are about the same age etc.). They’ve found out that we rent, and now they don’t even say “Hi” anymore.
Nice.
Middle-class snobbery.
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Well, I told you all I would let you know when I first started to feel a chill in the air of San Francisco real estate and it is finally starting to happen.
I get Chris Panou's Income Property Review. I never asked for it, but I guess he sends it out to all owners of multi-unit property. He usually talks about how crazy the San Francisco market is and how homes are getting bid up, but this month his cover letter is about how you are only going losing money in San Francisco if you bought in the last six months and how the main problem these days are sellers that are living in fantasyland and refuse to price their properites appropriately.
Even more telling is the dollar/square foot Q2 05 to Q2 06 change, which is -4%. This is the first time the year over year change has been negative. Can single family homes be far behind? I know it is not the -25% that so many had hoped for, but it is the beginning of something. We will have to wait and see what exactly that something is.
On a side note: Cote cannot be defeated with logic DS, but I think you figured that out. I imagine you might have just worn him out though.
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On a side note: Cote cannot be defeated with logic DS, but I think you figured that out. I imagine you might have just worn him out though.
Logic can be twisted for any argument. The only thing that really matters in this world is how hard you can swing that club on your enemy's skull.
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To avoid hearing those conversations, you should try eating in Downtown Palo Alto on University.
You cannot avoid them.
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surfer-x's website
HaHa, all I can say after reading that article is ahahahahahahahhahahahahh
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Girgl's website
Fresh Choice in Capitola today. On all three neighboring tables, the subject of conversation is those folks’ recent real estate transactions - first/second homes, investment properties, etc.
Seems like it’s the main economic activity for everyone around here.
burbed says:
To avoid hearing those conversations, you should try eating in Downtown Palo Alto on University.
Huh? Wouldn't it be even worse there?
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surfer-x says:
The last one is pure fucking genius, how to not get offshored, “be number one”, “have amazing skills”. Wow, brilliant
"Be number one" is just silly.
However, there are quite a few people in the industry who aren't motivated to use downtime to learn something new, who prefer to stay on the "old project" that they know well, do just enough to get by, etc.
That makes it quite tough to prove to whoever has the money and calls the shots that they're worth the big bucks and should not be replaced by someone who is equally unmotivated, but cheaper.
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It’s all talk about Web 2.0, mashups, adsense, podcasting, job opps for devs, etc etc etc.
Which restaurants? Are those nerd hangouts?
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Honestly I rather hear real estate talk than nerd talk.
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Girgl Says:
> A young family moved into the house across the street.
> We had lots of friendly contact for the first few days
> (kids are about the same age etc.). They’ve found out
> that we rent, and now they don’t even say “Hi” anymore.
I have this happen all the time…
Girl: I hear you went to grad school with Tim… (a VC worth millions)
Me: Did Tim tell you that I had to tutor him since his undergrad degree in “Romance Languages” from Harvard didn’t really get him ready for grad school level statistics?
Girl: Where do you live?
Me: In the city…
Girl: Where in the city?
Me: Presidio Heights…
Girl: (with big smile touching my arm giving me that I want to come back to your place look) When did you buy your place?
Me: I just rent a crappy little apartment…
Girl: Look there is Sheila, I need to talk to her…
Six Months Later:
Girl: Why didn’t you tell me that you own a bunch of investment property?
Me: You didn’t ask (holding back the urge to say “Because I want nothing to do with gold diggers like you and will enjoy watching you rot on the vine as your good looks fade away and you continue to lower your standards)…
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FRIFY,
Thanks for the link. This is one possibility often mentioned, that would prolong the inevitable. This may result in some stickiness. But it may also make the unavoidable recession much worse and last for a longer time. No one knows how many can keep their payments low by being a serial refinancer.
This is SO not going to be pretty.
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SP,
On Ben's blog there was a big discussion about LAY's change of tune. It may be an attempt to increase transactions. But it can backfire, and make people wait for the hard landing, and making matters worse for the realtors.
BTW, that realtor baiting was just mean and unethical ;-) Keep it up though :-)).
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surfer-x's website
With his new loan, his third adjustable-rate mortgage, Mr. Perry, a former technology project manager, cashed about $200,000 out of his home’s equity and is investing it into his four-year-old financial planning business. “I could have sold my house and made my family move,” said Mr. Perry, 42, who lives with his wife and a 3-year-old son in Danville, about 20 miles east of Oakland. “But I didn’t do that. I said, ‘Look, I want to start a new business,’ and this product allowed me to do that.”
Renter: someone who sends a check every month to someone
Homeowner: someone who sends a check every month to a bank
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surfer-x's website
I could have sold my house and made my family move
Could someone explain to me when debt became money?
My house? No fucker, it's the banks house.
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What makes the article even more insane is that this guy is a FINANCIAL PLANNER! Dude is robbing Peter to pay Paul (for a while anyway) and his entire theory leans rather flimsily on the notion that the bubble won't burst. That is, assuming he's heard of the bubble (let alone that it's about to crash). Btw, these guys are the lowest man on the totem pole of "fin. planners" b/c they don't even come from within the industry. There's no sense of apprenticeship but; they worked with a lot of people over the years that are now nearing retirement age so they leverage those relationships to the hilt and milk it out for all it's worth. They figure, hey, I'm a smart guy, I'll get them to transfer the money over and I can figure this stock market thing out later! Besides I know ALL ABOUT technology. Anytime you ask these guys about sectors other than tech they give you the "this guy just doesn't get it" look or they steer the conversation back to technology. Please stay away from this individual.
*This is financial planning advice.
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SP,
I commented a few threads back about realt-whores using "two scripts". I certainly had my suspicions but your little experiment proved it. It's so funny to go on say C/L and see half of the posts tout how "hot" the market is and the other half have gone the "Make $$$ from distressed Properties" route! I appreciate the "field work".
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SP Says:
> Friday morning, I called the Realtwhore who was ‘our agent’
> when we bought our current house. Told her I am thinking of
> selling the place The message was: market is going to crash,
> so don’t expect to get top dollar and don’t blame me if your
> house sits on the market.
> Friday afternoon, I had my co-worker call the same realtwhore,
> He told her he had just moved in from the east coast and his
> family was coming here in a few weeks. Her message to him
> was that bay area prices have shot up 15 to 20% a year for the
> past three year, and this year have only gone up 5% - so it is “
> only a matter of time before they make up for this poor growth
> and shoot up”
> Same realtwhore, same day, same market. Looks like the RE
> market suddenly got hot in span of 4 hours.
This is one of the reasons I left brokerage. To this day (after meeting with hundreds of brokers) I can only name one successful broker that is even close to honest (and he works hard in a strange niche market without a lot of competition)…
About 10 years ago I met with a top LA broker to sell a portfolio of REO property and while I was waiting in his office I heard him going back and forth between two lines talking about a horrible scary place in a “gang neighborhood” and a great investment in an “up and coming neighborhood”. It turns out he was trying to get the seller to lower the price and the buyer to raise the price on the same property so he could make a fee. Most brokers will say ANYTHING to make a sale because they don’t get paid for being honest, they get paid for selling real estate…
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Girgl,
What I've done to "de-fuse" those situations is to simply explain to people that you are on a "lease w/option to buy" or that you have "first right of refusal". To less sophisticated homedebtors (which certainly seems to be true in the example you gave) this sounds incredibly savvy!
In our case my wife and I truly are shopping for a new lifestyle and hopefully one that doesn't include lawn work. But we're not sure just yet. There are many instances where we have the entire condo complex to ourselves and could probably "crank" the old stereo (and there are occasions that still call for that) but sometimes it feels as much like having roommates more so than neighbors.
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FAB,
That's one thing I could never understand about realtors. Why all the fibbing? I've never been RE licensed and doubt I ever will but back in the 90's I pitched the Trump Atlantic Bonds (which btw WERE paying 11 1/4%) but you have to be honest with people about "The Donald's" track record and reputation. Any time you have debt paper paying substantially higher than market rates there has to be a reason! As long as you're honest with folks about that (and they fully understand the downsides) it's O.K to make the sale. Some people ARE junk buyers. So it's possible to be completely honest and still make the sale. Why more realtors don't give it a try I have no idea.
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FormerAptBroker Says:
"...Most brokers will say ANYTHING to make a sale because they don’t get paid for being honest, they get paid for selling real estate…"
_____
Let's substitute a few words and see if the logic still holds true:
"...Most (crack whores) will say ANYTHING to make a sale because they don’t get paid for being honest, they get paid for selling (their bodies)…
"...Most (drug dealers) will say ANYTHING to make a sale because they don’t get paid for being honest, they get paid for selling (dope)…"
"Most (fertilizer salesmen) will say ANYTHING to make a sale because they don’t get paid for being honest, they get paid for selling (shit)…"
Here, you fill in the blanks on this one:
"...Most ( ) will say ANYTHING to make a sale because they don’t get paid for being honest, they get paid for selling ( )…"
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hellboy,
I believe it was SQT's husband that was getting investment advice from a hair dresser not long ago in SAC and they are now frantically trying to sell. General rule of thumb? Don't take inv. advice from hair dressers. Just a thought.
You're right to a certain degree, and now we're hearing there's a recent rash of folks that are rolling their loans over to get a "new" int. only loan. This strategy is shaky at best and down right foolish if your property value doesn't increase. I suppose you're right though, these people will do anything to call themselves "owners" to avoid throwing their money away on rent but the truth is these people are very much "renters" with the primary difference being that they can not just walk away from it like we can! This is basically the last act of a desperate man. It won't work for long. B/c these people have treated their home like a car payment they'll be in the same situation when they go to "trade up" or (bail out). With a ton negative equity. Had they banked the difference between an amoritizing loan and an IO no bigee. We'll soon so how few FB's did that.
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SQT,
Good article. Some of the examples were a disparity of only about 10K so while not accurate, no where near as damaging as appraisals out west where they overstated by a few hundred K! They did a good job though showing how in a rising market they felt comfortable "padding" the appraisal b/c the crazy insane appreciation could fill the hole behind them. Now? I think George was right, there will be a pretty mean fall-out from all of this!
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HARM's website
And oh, by the way, “Bendover Bernanke” ™
SP
This will be added to the Housing Bubble Glossary.
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Others are doubling down.
Escalation of Commitment. Another reason not to seek FBs for lowball offers. The typical FBer will just keep doubling down until they're forced from the table (and thus inject more lumpy stickiness).
Mental Accounting.
Once perception turns and prices are expected to decline (even slightly), those with the most to lose in terms of gains will be inclined to sell if they were planning on a sale sometime soon anyway. Long-time occupiers with big gains. They'd have liked the 800K in gains, but taking 685K in gains still ain't bad. And every day they wait, they see those gains shrink.
On the other hand is the FB. They're at $0, then they're at -$50K, then at -$150K, then -$250K. Each time they have less incentive to anything other than try to win back their losses. These are the guys who won't drop their price, hoping instead for that magical greater fool to be delivered by their RE agent.
Everyone who goes down with the ship thinks they're going to be the last one to get on the lifeboat before it's too late.
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Michael Anderson,
I wasn't able to open the link but I do get a kick out of the forsakencraft guy! The sign spinner intervies were just too much! My old buddy lived right in that area and sold his place FEB of this year! Seriously, while I think he waited a little too long he really didn't have a moment to spare. It really flirted with "getting cute" on the timing. Now he can sit back and watch it unravel from a safe distance.
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Yeah…I own no euros, yen. or gold…..lotsa dolla….
The action in ETFs supports your position. GLD, SLV, IAU, DBC or FXE haven't played out too well for doomsters. GLD is just a big value trap circus (in my opinion).
I studied Int'l Finance and Currencies under R. Schramm a couple years ago. The last section, after all this intense theory and insanely complex quant hedging stuff, can be summed up:
Hedging currencies is practically never worth the cost of the hedge and/or the hedged position is practically always riskier than the unhedged position.
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SQT,
True! Another thing that FB's have not taken the time or bother to consider is that at say age 40 if you have 40K in your 401K you are probably fine (old rule of thumb). Well if you now owe 40K more than your home could be sold for you just lowered your net worth to ZERO (in most cases).
Call me crazy but I thought the whole idea was to INCREASE your net worth? I hate to say it but I'm starting to fear that there may be a short term impact to equity markets as FB's claim "hardship" and deplete their 401K's in an effort to "save" their homes? It'll be interesting, that's for sure.
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Michael Anderson,
I really didn't have time to get into it but neighbor just sold his HUGE RV! He was sooooo tickled! He'd had it in the RV Trader and people came from as far away as Canada and finally a guy from 7 miles down the road bought it! He was so happy! He also sold his little jet boat too. When I get a chance I'll ask if it was a "lifestyle change" or a bearish statement. He's already retired so I thought he'd be sad to see his "toys" go down the road but man was this guy ever happy!
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Price is only half the story. Commodities carry nasty volatilities, and lower sharpes (or whatever your indicator of choice).
I have commoidites in my portfolio, but it represents a small amount admittedly sensitive to my factor inputs (black-litterman). I definitely don't advocate a buy & pray approach, not because commodities aren't a good asset class. Just because they are better when combined with other good asset classes.
Didn't Warren learn his value strategies after failing as a young trader from one of those maligned PhD worthless academics? Or have you changed your opinion of Warren?
Academia and Practice are partners, not opponents. Each will only get you half-way there.
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That worries me. The idiots will probably sell stocks and bonds before motorcycles and boats.
Why are you worried? A stock market crash will probably accelerate the housing bubble correction. Stocks are not "cheap" anyway.
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Didn’t Warren learn his value strategies after failing as a young trader from one of those maligned PhD worthless academics? Or have you changed your opinion of Warren?
Perhaps he just did not have the luck required to be a good trader. Each person is lucky in certain things. He definitely had much luck in value investing.
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nomadtoons's website
The only thing I can add to this conversation that I observed all weekend was that the amount of homes now for sale in my hood has escalated to almost laughable levels. way, way way more than was in the spring.You have to wonder what people are thinking when they put their home up with every other 5th resident who's also selling.
Then again, I saw the lookers going to open houses- those same people that always seem to drive Volvo SUVs and have that hungry desperate animal look in their eyes.
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Mountain View, CA
Coz a stock market crash would effect those of us that have money in stocks i.e. 401k or instead of a house.....
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Randy H Says:
Others are doubling down.
Escalation of Commitment. Another reason not to seek FBs for lowball offers. The typical FBer will just keep doubling down until they’re forced from the table (and thus inject more lumpy stickiness).
The analogy between FB's and gamblers is apt. There's the well-known phenomenon of gamblers, having gotten some winnings at the table earlier and now in the hole, will have a mentality of "just one more hand" to win it all back. This keeps them at the table, and this keeps them in the hole, because, after all, the house always has the advantage.
FB's will likely be thinking this way for years to come. It'll be interesting to see how that factors into the ongoing housing meltdown. Delayed reckoning will lead to even more catastrophic outcomes.
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‘So you could have an addition $214 a month to spend AS YOU WISH’.
SFWoman, that is an extra sushi dinner, go for it! :)
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I do not see banks doing any tightening of standards at all. Common, we blame the Realtors. How are banks different ? Realtors are trying to sell houses, banks are trying to sell mortgages. They all just want to sell. Morals, ethics and such arcane stuff just comes in way of making money.
What will make banks change is risk ownership. As has been pointed out numerous times, banks do not own most of the mortgages they sell. So the real question is, when will secondary MBS market start asking more risk premiums.
Not anytime soon. There seems to be way too much global liquidity. Investors are so yield starved, that they are willing to finance whoever is willing to borrow at whatever rate.
The whole thing seems to be so precariously balanced, that it it possible to envision a vicious circle forming out of this. If the tide turns, it can get ugly. A real drop in house prices due to bubble collapsing under its own weight will make investors stop buying MBS.
So I do not think banks will change anything to stop the party. Nothing is more important than the psychology of buyers. That is indeed proving out to be the trigger that shot the bubble.