patrick.net

There are plenty of wealthy people that want to buy homes. Prices will continue to climb, albeit slowly.

This is a really bad assumption. I rather you have said "they are not making any more land".

People, especially the wealthy crowd, buy only if housing is a good investment. When the expectation is low, watch out.

While buying a house is a huge decision in and of itself, if you add kids to the equation, it’s a whole different ballgame.

True enough. :)

"2) There are plenty of wealthy people that want to buy homes. Prices will continue to climb, albeit slowly. A $500k 3bdr house north of Santa Clara will never become a reality."

You are totally missing a very big part of the picture! The fact that house prices rose so much has VERY LITTLE to do with people being wealthy. It has a whole lot to do with the creative financing that is now fading away. It also has to do with the "wealth effect" of the boomer generation that has convinced them that using equity in their house to buy another was a smart thing to do.

Things are changing right now, inventory of houses are rising, sellers are slashing their asking prices and still there are so few buyers.......Seems to me that the sellers are trying to bail out their sinking boats using a teaspoon....When it really starts to sink in and they make bigger cuts in their price, there will be an avalanche. I have seen RE signs in my neighborhood come down yet the post remained.....I figured they were probably thinking they will put the sign back up next spring......just recently I started to see those same signs go back up, I guess they are starting to realize as far as selling that it is now or never.

"In my experience what the parents do (not just say) have a lot more bearing on children’s education that anything else. "

I agree completely. My opinions on education are shaped mainly by having studied to become a teacher and having done observation and student teaching in various kinds of schools, from one rated highly in Virginia, and others that were rated poorly in the so-called 'hood. All that matters really is the parents.

I had a professor in college who said that the best value in education is a public one supplemented by strong parent involvement and supplementation at home, and that's always stuck with me. (I had another professor I respected who believed private schools were the only way to go, so clearly opinions vary ;-)).

There are plenty of wealthy people that want to buy homes. Prices will continue to climb, albeit slowly.

How about Hong Kong and Japan? Literally tons of money have been made in the two cities in prior equity and real estate booms. Those wealthy people apparently did not prevent a real estate meltdown.

"How about Hong Kong and Japan? Literally tons of money have been made in the two cities in prior equity and real estate booms. Those wealthy people apparently did not prevent a real estate meltdown."

.........and they are no longer wealthy!

I don’t think that’s a fair statement. In my view, having kids, like buying a house, is a privilege, not an obligation. Also, it’s quite a generality to imply that people who choose not to have kids are more superficial. I know of countless parents who are among the most superficial and materialistic people I know…and their kids are yet another trophy.

I agree with you. I am not even sure whether I can bear the responsibility of having kids. Cats are so much easier.

There are so many variable to raising a child in today’s world. It’s no longer a given that good parents = good child.

Absolutely.

My post for today:
Hard data on how much the bubble has driven up pricing in my area of SF Bay (Marin):
http://tinyurl.com/9vs2b

Price 1 is previous sale price (and date); price 2 is current price on MLS.

A tale of insanity and greed.

A tale of insanity and greed.

I await the panic and fear. :twisted:

I await the panic and fear.

"All good things come to those who wait..." ;)

"A tale of insanity and greed."

AAAAARRRRRRHGGGGGHHHH!

Thanks for the post, KurtS. Those price jumps make me sick, but it's still good info to have. ;-)

Thanks for the post, KurtS. Those price jumps make me sick, but it’s still good info to have...

Yes, it's frustrating, if we consider these prices permanent. However, I think this data clearly suggests serious price instability--that must correct itself. Btw, very few of these homes are actually selling

"they were horrified when they did some back of the envelop calcs on what it takes to raise a kid and put him/her through college."

Then they were probably looking for an excuse not to have kids. Trying to apply a monitary value to the experience is beyond my comprehension. There are plenty of valid reasons not to have kids, but cost seems like a pretty heartless one.

"anyone do a cost analysis on what it takes to raise a kid these days??"

I contend that it can cost a lot less than most people think. But I won't go off on that tirade again. :-P

If you buy the arguments in Freakonomics, a child’s success is primarily the result of being born to the right parents.

Do not underestimate the role of fate in one's life. I believe that success is 50% fate, 30% luck, and 20% hard work.

I believe that success is 50% fate, 30% luck, and 20% hard work.

Let me add that fate and luck are treating us pretty well already. Otherwise, we would be eating bugs in Sub-Saharan Africa. We should work hard.

"I await the panic and fear.

“All good things come to those who wait…” ;) "

.......and the meek shall inherit the earth.

But without the work part it will be hard for one to have the luck, to take advantage of the luck and to keep the luck.

Very true. But if fate and luck do not cooperate, life is futile.

How about Hong Kong and Japan? Literally tons of money have been made in the two cities in prior equity and real estate booms. Those wealthy people apparently did not prevent a real estate meltdown.

I don't know much about HK, but after reading the Japan section in 'Devil in the Hindmost' I am not confident that Japan is a predictor of what's to come in the USA. I used to think that people there took honestly earned money making superior products like Toyotas and that the RE boom and bust 'just happened'. But 'Devil' talks all about the endless government-backed literally "can't lose" financial schemes that everyone was part of. When that cracked, the economy fell apart. Had the housing boom been sustained by a realtively 'honest', uncorrupt economy, then I imagine the prices would not have plummetted.

The question goes back to the same thing...in the BA peninsula (because that's all I care about today):

1) Are people continuing to buy because they have money, make good money and expect to continue to do so?

Or

2) Are people irrationally buying?

And/or

3) Is the economy bound for a day of reckoning?

I can *almost* buy 3) in the sense that RE is fed by the RE industry ('the 40% of new jobs in RE' figure).

-mw

1) Are people continuing to buy because they have money, make good money and expect to continue to do so? No.

2) Are people irrationally buying? They buy "rationally" under extremely flawed assumptions.

3) Is the economy bound for a day of reckoning? Yes.

But ‘Devil’ talks all about the endless government-backed literally “can’t lose” financial schemes that everyone was part of.

Sounds like the "Greenspan Put". I am seeing more parallel with Japan now.

'Devil' is a good book. But the theme of the book is mania, which reminds me of the current bubble.

Futile in having financial success? Yes. But if you just want to enjoy life, your luck has to be pretty tough to stop you.

True enough for anyone born in the developed world.

However, if a person is born in Somalia during a Famine, how is he going to enjoy life at all? Luck would be required just to find some worms to eat or to dodge racial cleansing by some warlords.

Everybody did get the "Hotel California" reference, right?

I do feel like that "I am a prisoner of my own device". Or at least, electronic devices. I have checked any time I've liked, but even "those voices calling from far away" I don't know that I can leave.

If we ever have a get together we'll have to have some pink champagne on ice.

Nope...there are lots of Walshes out there (Joe, Bill, Brandon & Brenda) and I'm not related to any of them. Andew Wyeth the painter is a distant cousin.

"Take your 250K and buy a house out of state, in a non-bubble area."

Just hold on to your 250k and rent for just a while.......see what everything looks like come 2007/8. It surely can be no worse than today! Or you could give me the 250k and when it all hits the fan, you would realize that it was a good idea since if you bought with the money, you would not only have lost the money, but you would have destroyed your credit.

"is prop 76 the new cali measure that will allow horrible teachers to be fired ,"

Forgot to answer this earlier. I don't think so...I believe it deals primarily with funding for schools and such. I tried to read a complete description of the proposition earlier and my eyes glazed over and my brain went temporarily comatose. Government is needlessly complicated, I agree. Besides, my husband is the legal CA resident, not me, so he can go do the boring reading and decide what to vote.

"Does it allow the state to raid money from local school districts?"

Here's a complete analysis:
http://www.ss.ca.gov/elections/bp_nov05/voter_info_pdf/entire76.pdf

Enjoy your coma. ;-)

Does it allow the state to raid money from local school districts?

Considering that school enrollment is dropping and families with kids leaving, do not expect the state to be more school-friendly in the future. Parents with school-age kids (Gen-X) have no political power whatsoever.

(Illegal immigrants will not be of help because they cannot vote.)

Good point, Peter P.

I suppose I am naturally inclined to oppose anything that Ahhnold proposes, just because, but that's not very logical.

Excellent article from Perma Bear... I mean Prudent Bear.

http://tinyurl.com/9hsrw

Morality dies when everyone is afraid to say “hey that’s wrong”

Yep. Many people think that it is wrong to say that anything is wrong.

This sounds crazy, but goes to Peter’s buyers union.

You mean Patrick's buyers union?

A tale of insanity and greed.

I know I'm late to the party on this, but this line (from Kurt S) really stuck with me. Clean and simple, it really captures the essence of the age in which we live. Almost Shakespearean...

Housing bubble:
A tale of insanity and greed
Propelled by idiots
Full of sound and fury
Signifying nothing.

Pop! -- Thanks for the link, nice article.

Here's one that might interest you: http://tinyurl.com/82xmh
This could be the answer to David Liar-eah's "Are You Missing the Real Estate Bubble (er, Boom)?"

Eagles, Pink Floyd, Shakespeare and fresh poetry from newsfreak & Wayne S --we're on a roll tonight.

"If I was a real estate agent and sales were slow, I would be convincing the seller to lower the price. Wouldn’t an agent want 3 sales of $400k versus 1 sale at $600k?"

That is exactly what all the realtors are trying to do, but they are in realtor hell because the seller is too stubborn to lower their price. The realtors have egged on the sellers all this time that RE just keeps going up and you'll get your price........but now they created their own hell.....The realtors refer to it as "pricing it right".......calling it cutting the price or anything else like that is considered bad etiquette in the business. This is the worst time to be a realtor when the boom starts to go south.

When is this market gonna roll over and die - the stops on my shorts are looming close - need a breakdown soon

I cannot tell the future with much certainty. Let's hope that it will turn before your stops are hit. But if they do get stopped out, we will still stay to trade another day. :)

They just got a bid for some renovations for $400k.

Ouch! They should wait till next year when contractors will be hungrier for work.
Also, hiring a firm out of Sonoma county might be cheaper--you think Jack?

Perhaps a firm out of Eureka? Naaaaa

You're right--time to contact a contractor in the Yukon.

Here's an interesting quote I found:

from SF Chronicle article Feb. 14, 1996
on Homeownership v. Buying:

..."Price appreciation is going to be mild in coming years--not like what we saw prior to the recession," says STeve Cochrane of Regional Financial Associates....He estimates prices will keep up with the 2.5 percent to 3 percent annual rate of inflation over the next 10 years.

Well, that's not quite like it happened, is it? Of course, we could always go back to that 2.5-3%...

Why in the world would I rather take $2700 rent = $32,400 p.a. less $18,000 property tax p.a. less maintenance (let’s say $5,000 p.a.) minus depreciation instead?
Without depreciation, that comes down to only about $9,600 p.a. taxable net income, give or take. With depreciation, the figure is lower.

Girgl, your figures illustrate why I scratch my head over people who drop serious coin to buy 2-6 extra homes. But, as you say--homes are mostly a long-term expense, possibly a hedge against inflation, but only seldom a good investment. And it's not just a recent trend, as I'm hearing that people have done this for decades in CA. I suspect this RE myth has simmered unchallenged for decades, and is now reaching the boiling point as economic conditions and wannabe investors hit critical mass.
The downside to this boom could finally dispel those myths.