Get ready California, prices are going up in 2011! (then back down)
By iwog Follow Mon, 15 Nov 2010, 1:58pm 26,288 views 491 comments
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Fisk says
Believe it or not, California and the Bay Area have a lot of great government services for the amount of taxes paid. Workers make more money, have better benefits, and have better legal protections than in other parts of the US. This doesn't appeal to employers of low skill wage jobs, but this is a plus to the educated highly skilled workforce. If you look at things like in-state university tuition and Prop 13, you can't find another state that even competes with the value offered by California.
The final piece you did not address. California and the Bay Area in particular are very immigrant friendly. Worldwide skilled labor pool feels welcome to make a better life in these areas. If you're a black doctor born and educated in Ethiopia, and you decide to make a better life for yourself in a new country, are you going to choose China or California?
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Bellingham, WA
iwog says
Not if there's a buyer's strike on US debt.
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Troy says
Especially if there's a buyers strike on US debt.
The money has to go somewhere. It's not going under the floorboards or into the mattress. It's going into the stock market, gold, and real estate.
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Skokie, IL
iwog says
The FED is manipulating interest rates downward which is exagerating the demand for housing. The FED cannot do this forever.
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Scottsdale, AZ
robertoaribas's website
actually, a failed auction of government debt would lead to a currency crisis, not hyper inflation. The US government would have to begin shutting down, and/ or paying in IOU's.
I would expect, that the world bank would not let an economy the size of the US shut down, if they don't even let Greece and Ireland shutdown, and especially given the importance of the dollar in international trade.
HOWEVER: they would probably insist on sizeable cuts to government spending immediately as conditions of any loan package, so the effect would be severe. And yes, interest rates would rise along with unemployment, house prices would get slammed.
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San Jose, CA
Troy,
I highly doubt that there will be a buyers' strike, cause we are so conditioned to be a home owner. I sure would like to see that happening. But there is just too much money out there. And only the rich and investors are going to buy those properties to drive up the cost of housing once again. Fine, the price of housing may go up. But again, it won't involve people like me.
So Iwack maybe right in this instance. He is a real estate agent who has nothing to do all day but to visit this website to preach something that may or may not happen. This time, my vision is not so clear like it was 6 years ago, when I foretold the impending disaster to everyone. Of course nobody listened to nobody.
I saved and waited for a good opportunity for 6 years. If Iwack is right, I may have missed an opportunity, because I simply have gotten used to waiting. Now I have about more than a few hundred thousands to sit in the banks that give me only 2% annual return. Unless Republicans is at it again, our economy will most likely recover within the next few years. Since I don't have a crystal ball this time, I think I will just keep the money in the banks just for a disaster that may never happen.
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shrekgrinch says
OK--"planet reality" is where the people in the US trade in gold and silver? Really? You do realize that the economies of the rest of the world would then collapse as well, right?
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Nobody says
Actually he's not.
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San Jose, CA
OK, you are just delusional.
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robertoaribas says
There will be no failed auction. At the last resort, Fed will cover the shortage no matter the cost to dollar exchange rate and other effects. IMF and WB cannot and will not get involved with this and demand anything of the US govt., for one because US has an effective veto power over them and WB president is an American appointed by the US govt. As said many times, Ireland and Greece borrowed in the currency not under their control, hence the problem.
What might happen (improbable but might) is that Congress will refuse to lift the debt ceiling at some point. Then even Fed couldn't help: for them to "lend", the Treasury must be able to "borrow".
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world bank certainly has no assets to bail out US...nobody can US can bail out itself.
an auction can certainly fail, Feds would not be able to react in time to save it.
Chinese shifted their buying of US debt to shorter term (1-3 years), so they are posed to bail out.
investors can certainly lose faith in US Fed and Treasury, if they're going to keep up piling up debth and printing money for few more years (and there is nothing that can suggest otherwise). I already have.
sure, US default (unlikely) or massive money printing (most likely), may and probably would lead to world-wide recession and USD losing reserve currency status and maybe becoming not freely convertable, but other countries would recover soon, kick out US of free trade agreements as currency manipulator or quit themselves and set up trade barriers and will go on...
everybody would survive, some with their asset quite devaluated in real money, others not so much.
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San Carlos, CA
And in actual news, Bay area house prices and sales fell in October.
"The median price of a house or condominium dropped 1.8 percent from a year earlier to $383,000, the first annual decline since September 2009."
"Sales in the nine-county Bay Area fell 23 percent to 6,122, the second-lowest tally for October since the company began keeping records in 1988."
Read more:
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2010/11/19/BUHO1GE6LC.DTL
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47 male
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Nobody says
You're right. I'm delusional. I actually AM a real estate agent but I keep that fact hidden from my friends and family. My wife actually thinks I'm a ballerina for the San Francisco Ballet Company.
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iwog says
Very soon now your detractors will ask you to prove it by performing a pirouette.
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Skokie, IL
One reason housing is not coming back is because HELOC, home equity line of credit, is over.
And it ain't coming back any time soon.
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I think rates may be going down to 3 or even 2% in the next 3 years. This will drive home prices up some, iwog will claim to be right. But in reality i will be able to afford more house for less a month in 2013 with lower rates. Just like i can afford more house in 2010 than 2009 because rates dropped nearly a full percent.
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Bellingham, WA
shrekgrinch says
Loss of their primary export market.
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robertoaribas's website
skenk, it is hard to say. The government could cut all outpays by 10%, and get a bridge loan from the IMF, (and probably heaven help us, the chinese).
Raise taxes, etc..., and restore confidence. I would expect interest rates to rise, but not inflation if strict austerity measures were taken. Notice that not Ireland, Iceland or Greece has led to inflation... * yet! but who really knows??
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iwog says
Always, as in during the past year and a half? How about this: if you are going to use this hypothesis, then maybe you could explain why it happens. That's sort of how economics works.
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robertoaribas says
Not even 2005. I want to know if there is any correlation in a normal market, like before the bubble. This micro, 2-year view is extremely selective and covers a time frame of tax credits, scheduled expirations, extensions, and an eventual expiration.
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Burbank, CA
In over 300 documented historical cases, paper money has ended up being worth virtually nothing. In fact, it's happened twice in the USA; the Revolutionary War's "Continental Dollar" and Lincoln's Civil War "Greenbacks." Our current Federal Reserve Note, i.e. "dollar" will end up on the same trash heap, IMO. When Nixon closed the gold window in 1974, he in effect ended the Bretton Woods Agreement of 1944 that established the Dollar as the world's reserve currency. In that agreement, the world's major currencies were linked to the U.S. Dollar and in effect, were tied to gold because the U.S. Dollar was. There were also strict limits as to the ratios of paper currencies allowed to be printed in relation to the amount of U.S. Dollars in circulation. America’s printing & credit binge has led to an increase in like manner in all the major economies. With the removal of the link to gold, paper money can obviously be created out of thin air, allowing politicians to spend recklessly (“officially” $14 trillion & counting) while achieving and maintaining power over those that want handouts from the government, etc. Inflation becomes the politician’s best friend because it is, in effect, a secret, gradual tax on the, for the most part, unsuspecting people. Considering human nature, paper money can only lead to its ultimate failure at some point.
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At one point in time in this thread there was a comment by IWOG, since deleted, purporting to contain a quote of something I had supposedly written in critique of a use of median (rather than average) as pricing measure.
That particular comment seems to have disappeared, and that is good because I don’t think the attribution to me was correct. Moreover, I don’t think I have ever generally spoken out against using the median price as a measure.
However. there are plenty of slurs left of the type seen here:
iwog says
iwog says
I suppose a retraction is to much too expect.
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RayAmerica says
I know this is not what you mean, but paper money is already gone. My job pays my digital money into my digital bank account that I use to buy things digitally with my credit card.
Who cares if paper money fails? We will just replace it wtih something else just as all the previous paper monies were replaced.
Gold is FAR too inefficient to be used as money in a modern world. Real estate in free countries? That is a bit different. If the dollar needs to be backed by something, backing it with real estate makes a hell of a lot more sense.
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The only thing that chart shows is that every time the asking price/sf increases the actual sale price/sf decreases. So, apparently the wishful thinkers are raising their prices and that historically means the properties that are priced lower/sf are the ones that sell. From this chart, the time to beware is when the ASKING price/sf goes down. That seems to trigger people purchasing properties for higher prices/sf than they had when the prices were lower/sf.
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SoCal Renter said:
>>>My job pays my digital money into my digital bank account that I use to buy things digitally with my credit card
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justme says
A. So median is just as accurate in describing the market as $ per sq. ft. or Case-Shiller?
B. Or not?
You generally don't like to be nailed down on anything. You even refused to call a direction for the RE market next year even while insisting I was wrong no matter what happened. Tell you what, why not go out of your comfort zone just this one time. If you pick A I promise I'll issue a retraction.
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carrierpigeon says
No, that's not what the charts are indicating at all. There are plenty of points on the graphs where asking prices and sales prices are both increasing together for many months. Almost 6 months in 2009 and 2010 on the San Diego chart are showing that.
Sales prices lag asking prices by 2-4 months. The reason I knew that sales prices would increase was that asking prices in the major California markets were increasing very quickly.
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iwog says
Typical IWOG. Instead of just saying "sorry I made a mistake in accusing you" he is now trying to bait me into some fake discussion where he wants me to defend myself against something I did not say. Meh. I think not.
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justme says
No fake discussion at all. You've now confirmed that median is not a good way to measure movement in the housing market. Yet you protested when I characterized you as believing EXACTLY that.
Why?
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Average income in our area is 60 to 70,000 per household. Houses are floating around 399,000 or 499,000.
499,000 / 70,000 = 7.1
399,000 / 70,000 = 5.7
Still a bubble since its above 3.0
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cvoronin91335 says
Seems okay, considering the low interest rates. If it had been 600K+ purchase with 70K household income I doubt any bank would give that kinda money.
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iwog says
I see that as a standoff between sellers and buyers. The more that time the more it favors buyers. One more thing that supports buyers is the banks unwillingness to lend.
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iwog says
You must miss me, IWOG. More lies and baiting. Are you THIS desperate for my attention?
Meh.
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cvoronin91335 says
I agree. One should look at prices from various prespectives, not just rent equivalent. But ratios as you point out. Once the ratios get out of hand, a sure sign a correction is sure to follow.
http://en.wikipedia.org/wiki/Real_estate_bubble#Housing_affordability_measures
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justme says
Lies? Baiting?
You're a real treasure to have a conversation with. What's your position on median home value as a way to track the market?
(note: This question will NOT in fact be followed by any sort of an answer)
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Our "conversation"
Iwog: Justme said median price is inaccurate.
Justme: Liar!
Iwog: Oh......so to clarify, median is A) Just as accurate as CS & $ per sq. ft. or B) not as accurate. Pick one.
Justme: B.
Iwog: Okay so you've confirmed the median price is not as accurate a way to measure the market.
Justme: Liar!
I swear this is EXACTLY the conversation posted to this thread. Can someone mediate and try to figure out what Justme is trying to say?
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iwog says
He's saying that he knows he's wrong but doesn't want to admit it.
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carrierpigeon says
this would make sense especially in a sector with the amount of surplus as the housing market. Asking prices go up, brings more inventory onto the market as those holding out for a better opportunity to sell think 'now's the time'. Cause and effect. Once too many properties hit the market at these higher asking prices, then you see the buyers gain more negotiating power, and as deals are made (at lower prices) purchasing prices begin to go back down and that scares some inventory back off the market. IMO it makes sense for this particular market that we've been living thru for the past couple years. That's why it will 'go sideways' in a rather tight band, because the government has done everything in their power to put a floor on price drops. I'd imagine they'd like to see a return to growth, but extend and pretend works moving sideways so long as there are no further significant drops.
IMO we have to absorb the bloat before we get back to the good ole days of 'affordable housing' where buying and selling houses can possibly be confused for an investment vehicle. Those that have been paying attention ought to know that at some point, the overhang gets absorbed into the market and we can get back to bidding eachother into miserable hell for insanely expensive dwellings. In part because of the lull in new builds, remember how poorly the builders were/have been doing during this mess. Aggregate inventory has not been growing, in fact i am of the opinion that at some point the Obama admin will pump some money to the demolition crews to tear down large parts of cities that have fallen to obscurity such as Detroit. Shitty real estate that bummy people once inhabited in Detroit shouldn't effect Calif house prices much if at all, but the problem now is supply more then demand. People are always going to need a place to live, as old industrial areas become obsolete people will seek to follow the jobs so places with growing industry, even the fly by nighters in the Carolinas, COlorado, and Penn. At some point, the lull in new building will help with all that overhang and the flight to desirable locations will push prices back up where people are willing to fight one another for a nice expensive house.
also, i've seen iwog refute the notion that one should make a distinction between REAL and NOMINAL prices, as far as their expectations for future market direction. I find that strange given all the other factors that come into play with that arguement, especially in our current atmosphere/situation. Real prices will at best move sideways, but given the massive devaluation to the currency, nominal prices will rise. sounds pretty simple to me.
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errc says
This is just for the analysis of when to buy. Real prices may have been flat during the 1970s but buying early paid off due to the nominal gains.
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Troy says
If we add a zero on the end of all of our currency, then problem solved. Hell let's get straight to the point and make two zeros
Washingtons will be the new Benjamins
We'll all be rich, baby