patrick.net

Mind posting how you obtained the sales data from Marin?

I used the Ditech appraisal calculator, which often gives what the property previously sold for; I hear Domania.com provides info too. This resource was discussed before on this blog, but there was concern about its accuracy. But, cross-checking with realtor sales records, I have found their numbers to be 100% accurate sofar.

http://tinyurl.com/9mxc5

Sonoma contractors are still able to charge top dollar as there is still plenty of work around.

Wow, that's a surprise to me, given the increasing inventory. I'm betting that situation will change by next spring. With the affordability index for a median home @ 7%, Sonoma is looking at a significant correction.

We get to pack up and leave on December 28th. Merry Christmas and happy newyear in a new home.

When is the end date of your lease? Are you on month-to-month?

"I used the Ditech appraisal calculator, which often gives what the property previously sold for; I hear Domania.com provides info too. This resource was discussed before on this blog, but there was concern about its accuracy. But, cross-checking with realtor sales records, I have found their numbers to be 100% accurate sofar."

I tried it on a dozen properties and found the sale price to be correct, however one property that actually was sold in 2003 was reported as last being sold in 1995. As far as the estimated values, they are dreamland estimations!

As much as i want that to happen, Aint gonna happen. You’re never gonna see a $250k house in Marin, Napa, Sonoma, Santa Cruz, etc…

Yes, I realize "aint gonna happen" is your tune...but what data can you provide to support a continual flattening prices or resumed appreciation, given economic fundamentals? You're not just going by your lack of optimism, are you? $250K is a bit of a "low target", but it may be possible in some areas. Once investor activity dries up, there's only so many boomers that will continue to move into Sonoma.

And, guess what? Inventory is really ramping up in Sonoma, with many "reduced price" signs appearing. Granted, prices are still high, but I have no doubt we'll see a repeat scenario of previous RE boom/busts. This time is no different, except perhaps in its magnitude.

Currently median price is 610K.
I suspect this will drop to about 350K.
BTW, thanks for the ditech info.

Glad to help!
Yes, doing some research/calculations...I reckon a 40-50% correction isn't impossible; something's gotta give.

@Thom:

Assuming you don't have a lease, check the date of her official notice of termination. If it's before Nov 1 (and your rent is due on the first of every month), you're out of luck. But if it's the first or after, I think she has to give you until Jan 1. (I don't know CA tenancy laws though..)

You'd still be mostly out of luck, but the 28th is an odd deadline. If it will make it more convenient for you, make sure you determine its legitimacy.

Beware of tenancies-at-will. They sound convenient, and they sometimes are...for the wrong party.

Currently median price is 610K.
I suspect this will drop to about 350K.
BTW, thanks for the ditech info.

Unless there is a major recession, which may be in the cards, this is not likely to happen.

Prices for given houses will drop that much, but the median may stay lofty because people will just buy larger, better homes with the same amount of money.

Prices for given houses will drop that much, but the median may stay lofty because people will just buy larger, better homes with the same amount of money.

Yeah....I'm guessing "buying up" is our plans, to a degree--since excess money might be better parked elsewhere. People may someday rue their urge to dump $100K into kitchen/ba rennovations.

Peter P,
350k was the median price 25 months ago.
I have no doubt, your comment notwithstanding, this will again be the median price in the not too distant future.
Unless “this time it’s different” of course.

I hope you are right. :-P

Also, if interest rate goes up significantly, median price will fall significantly too. :)

"As much as i want that to happen, Aint gonna happen. You’re never gonna see a $250k house in Marin, Napa, Sonoma, Santa Cruz, etc…
So you might as well just move out of state and be done with it and kiss your bay area dreams goodbye."

This is the reason it will happen....No area can be "rich only", there has to be cashiers, bank tellers, mechanics and the like.....these people are not rich! If they leave, who is going to fix a rich persons car? Who is going to ring up the groceries? Who is going to handle their banking needs? You are forgetting a very important factor here....many people have speculated and they have used suicide loans to do the buying because they figured they would get some signal as to when to get out but it is too late now........If the housing inventories in these areas aren't high right now, they soon will be. Remember, rich people don't get rich by making foolish investments.

Nov. 2, 2005--As housing prices cool and interest rates continue to rise, TrueCredit -- a leading provider of credit management services -- teamed with Roper Public Affairs to survey homeowners' views about a potential burst in the real estate bubble. Nearly seven in ten (68%) report that a sharp drop in housing prices would be somewhat or very unlikely to have a negative effect on their finances. However, when asked about the impact of increased interest rates, only four in ten (42%) said they would be able to continue to comfortably make their monthly mortgage payments. One in twenty (5%) say they would be forced to sell their house at a loss if an increase in interest rates occurred in the next year.

Frank

Those are some interesting #'s. Was that a national poll, CA or somewhere else?

Nearly seven in ten (68%) report that a sharp drop in housing prices would be somewhat or very unlikely to have a negative effect on their finances.

How many realize that a sharp drop in housing prices will affect their ability to refinance?

Everything will just continue to be ever increasingly, rich people and then people to serve the rich. Those of us in between we will be forced out of state.

It is those in between that caused the housing bubble. Not the rich. Not the poor. Sheeple. A financial mania. Nothing more. They all end the same way.

are you gonna tell me that the median household income in a place like Santa Rosa is 100k then? Nope sure aint. What does all this mean- it means it aint a good place for working families to live.

Haven't you answered your own question? Ultimately, home prices are driven by incomes, ie those who actually live there. Certainly, a few part of Sonoma, Napa, even Marin are settled by the wealthy, but certainly not most--and it will never be. Even Marin, where currently only 11% can afford to buy a median-priced home.

What does all this mean
This is not the end of the middle class, or affordable housing. However, I do think it means a lot of foolish buyers are going to lose their shirts.

It is those in between that caused the housing bubble. Not the rich. Not the poor. Sheeple. A financial mania. Nothing more. They all end the same way.

Couldn't have said it better Peter.

And regarding our friends in the UK...

Latest figures from the Department of Constitutional Affairs show a huge rise in the numbers of mortgage possession procedures issued in the county courts.

Nationally the number of possession actions entered into in the three months to September 2005 rose to 29,991, up from 19,359 from the same period in 2004 - a rise of 55%.

The number of orders made in the three months to September 2005 rose to 19,687 from 11,682 - a 66% jump.

...

"At long last the Chancellor has now accepted there is a bubble in the housing market. Now he needs to recognise that for many homeowners it is sadly bursting and that he needs to take action.

SactoQt: Here's my source...

http://home.businesswire.com/portal/site/google/index.jsp?ndmViewId=news_view&newsId=20051102005251&newsLang=en

I think you’re overestimating the number of wealthy people in the bay area who are going to snatch up these houses.

Exactly. What are they going to do with them? They certainly don't appeal to them as residences. Let's say they do buy them all up, a scenario that's increasingly unlikely btw, because they're far more profitable routes than being landlords to the "renting middle-class", who would be enjoying low rents due to glut.

I think you’re overestimating the number of wealthy people in the bay area who are going to snatch up these houses. Was that MIRAGE or ILLUSION, I forget which acronym makes the most sense here, but it’s just not the case.

It has been said that Nikkei would not drop below 18000-20000 because wealthy Japanese businessmen all over the world will save the market.

It dropped below 8000.

Was that MIRAGE or ILLUSION, I forget which acronym makes the most sense here, but it’s just not the case.

It is SHARP.

Supportive Home-buying from Altruistic Rich People

This is a very interesting report. I wasn't aware that foreign investment was so prominent, particularly from Europe:

http://home.businesswire.com/portal/site/google/index.jsp?ndmViewId=news_view&newsId=20051102005788&newsLang=en

"Allah should repost that link to articles on I think it was Netscape, about the Great Depression. "

You mean this? http://tinyurl.com/7e8z2

"Even seattledude who is more pessimistic than I, cannot concieve of such a drop."

I didn't know you were pessimistic.

R Patrick,

Are you aware of a big movement of the younger generation off of long island? Are you aware of suozzi's/levy's attempt to try to keep the younger generation on LI with what they call "affordable housing"? Have you noticed when you went to certain stores and there were only one or two cashiers with long lines when there were 6 or 7 unused registers? .....and the boomers standing on line behind you saying "Whats wrong with this place...why don't they have more cashiers over here, this is ridiculous". I see this happening alot and I know many people who already left LI and there will soon be more to follow.

I see they have started to use computers for self checkout because of the lack of cashiers. This is no solution because they will still need people to watch and make sure people ring up everything and they will still need people to maintain and repair them when they break down.......and yet so many of the boomers cannot even figure out how to use them...and just like the ATM hasn't replaced bank tellers, there will always be cashiers needed.

If cashiers, mechanics and such are getting fewer, the rules of supply and demand will push up their salaries.....this will in turn be reflected in consumer prices which will surely affect those with fixed incomes. This will put more pressure on them to downsize and move out of the area.

"Austin is 78 and sunny today…"

Sounds nice but how do you stand the Texans? (;-) Just kidding ScottC)

I've tried to talk my husband into Austin, but he's afraid as a Californian it will be too much culture shock for him. San Jo-to-Austin, did you experience much culture shock?

RE: "This is not the end of the middle class, or affordable housing. "

I argue that - you bet it is. It has been the death of the middle class for a long time now. -hence the middle class shrinking. It’s a slow and agonizing death. Just wait til your kids end up living with you for ever or moving out of state.

Huh, what data-driven indicator supports this dire prediction? Again I'll let you answer your own question:

California was actually pretty “affordable” by the mid 90s.

That's right--after a housing boom (particularly in SoCal), prices corrected themselves, dramatically in some places. And, guess what--this boom is far larger and pervasive this time.

SanJose-to-Austin, do you guys get to lock down your property tax like we do with prop 13?

If you don't then it is scary 50 years down the road.

"Plus, if you like sports, beer, and BBQ, it is heaven."

Ehhhhh, sounds more like hell for me. :-) Joking. I've researched Austin and San Antonio quite a bit, and both are future possibilities. Do you find the humidity hard to deal with? That's my husband's other argument--he can't stand humidity and thinks it would be too much there, but I've read that it's more bearable than, say, Dallas, where the humidity in my experience really is horrid.

Good point about the schools/property tax. I was taken aback when I first saw what property taxes were there, but if it really means a noticeable difference in school quality I'm all for it.

"If you don’t then it is scary 50 years down the road."

Somehow most areas seem to do okay without prop-13 type measures, at least that's how it seems to me, because property values increase very slowly. Am I making some incorrect assumption? Prop 13 is important in a place like CA where the real estate values sometimes skyrocket, right?

As far as overall state tax burdens, if you google of a chart that compares all the states according to tax burden, Texas comes out among the least expensive. California comes out sort of in the middle, and East coast states tend to have the heaviest tax burdens.

"if you google of a chart that"

Meant to say if you do a google search FOR a chart...

"YEAH talk about shitty timing, Too bad I was too young back then to have rode the boomers 2nd wave."

Maybe you should wait for the third........it's coming soon and it is going to be much bigger!

"Actually, this boom is clearly no longer just a California phenomenon and I have friends in Maryland that are sweating their property tax bills now the same way Californians did pre-prop 13. "

The way the real estate bubble seems to have gone is that it has some spill-over near the most expensive areas. So, I would guess Maryland has been driven up some because of it's coastal location and proximity to Boston/NYC. etc, because people probably move there when they get pushed out of the more expensive markets. Sort of like how Arizona, Oregon, WAshington, etc, have had surges in property value partly due to Californians moving there.

(But the further you get from bubble areas, the more normal the prices are. I've compared a lot of different markets around the country, and while Texas has gotten an influx of Californians, there is so much land there that they can just build more houses.)

We lived in Virginia Beach for a while, and a lot of New Yorkers/people from the northeast had a habit of relocating there. Sure enough, when I checked real estate prices there recently, they were crazy high for that city. And it's a very ho-hum city culture and scenery-wise, with not much big-paying industry, so to me, that says the property is being driven up by out-of-area people. I wonder if it's the same for Maryland.

Oh, and duh, I forgot, Maryland gets major DC spillover.

" reno gained 30% just this last year. but since they do 1/2 the people every year, and you get 2 years worth . some people will open up to a 40% increase in your property tax.
Doh!"

I went to a conference this summer in Reno and was surprised to find that everyone I met there was originally from the Bay Area. Maybe explains why prices are so ridiculously high there now? ;-)

Jamie,

austin is considered the most liveable place in Texas, and I won't be surprised that it will become much more expensive in the future as more people like yourself tend to look for a better exit from CA. Austin is still being discovered.

I traveled to Austin quite often in my previous job. The property price has gone up quite a bit, one could easily afford a very nice home in the Travis county for 200K, nowadays you are looking at 400-500K, that is less than 10 years. People from out of state (read: richer states on both coasts) into Austin tend to converge only in a few nice spots that remind them of home with true mountains, lakes, rivers, not just rolling hills and creeks. That is why you need to worry about prop 13. You won't be happy going to the "ordinary" part of Austin, at least I won't. Most people I know who are from CA and have been to Austin agree that there are perhaps only very few spots that we can camp out without complaining about the topography, and you can't pay us enough to settle in other parts of Texas. We actually like the Texans, just can't deal with the "flat as a pancake" sprawling plain.

But one thing you need to bear in mind, once you move to Texas, you are almost forever locked out of the CA realty market, unless you strike it rich on your own. So you really have to make sure you are ok with living there for the rest of your life.

I think when all the shit hits the fan, some companies are going to relocate to areas where the cost of living is cheaper..... This will furthur crush the richer areas....and at the same time boost the cheaper areas.

Not really. When BA price comes back to normal, people will come back again. We are complaining about price, not about anything else. There are many places in America that you have plenty of things to complain about, even if the price is good.

"can’t deal with the “flat as a pancake” sprawling plain."

Ahhh, yes, I've seen that sprawling plain where telephone poles count as scenery. :-)

"But one thing you need to bear in mind, once you move to Texas, you are almost forever locked out of the CA realty market,"

Well, sadly, we're already locked out of the CA real estate market since we've never owned a house (we move too frequently and didn't want to be out-of-state landlords), so unless there is a very significant correction, we could only live here as renters.

I research different areas trying to find some place that will suit us when it's time to stay in one place--if CA isn't affordable for us at that time, probably in a few more years. Mostly, it's a depressing search. I really love California.

Jamie,

I think you should continue renting, wait for the market to correct, and then come in. CA actually has a lot of inventory, if you are in the BA, just drive east, rows and rows of new houses are being built with nobody to occupy them. Right now they are selling for 600-800K, but in a year or two, I can easily see them slashed to 50% the current price. I am not sure if you are targeting the established neighborhoods, but it is definitely a myth that we are running out of land!

If you plunge in any property now, be it in Austin, Seattle or portland, your cash is translated into an inflated property which is bound to lose value later. The revenge of the renters will come, be patient. Why not keep taking advantage of the landlords who are bearing negative cashflow every month as you rent?

The correct way to build equity is not to buy, but to pay whatever is the least for your own living while investing the rest in income-generating asset. Buying a home right now is called an equity-destruction event.

"I think you should continue renting, wait for the market to correct, and then come in."

This is our plan.

"Right now they are selling for 600-800K, but in a year or two, I can easily see them slashed to 50% the current price."

I agree, I can see the outlying areas becoming affordable again pretty soon.

"I am not sure if you are targeting the established neighborhoods,"

Yep, it will depend on where my husband finds work, but I know he left his heart in SF. ;-)