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dunnross
2013 Mar 21, 5:50am
Go check out Portland or Seattle or Denver or Dallas or Houston or Chicago or Boston or Minneapolis or Salt Lake City or Phoenix or Atlanta or Philadelphia
All those cities have house prices anywhere from 5 to 10 times less than in the SF Bay Area, so picking on my comment about diversity is just a straw-man argument. Basically, my point is that there is absolutely no advantages in the Bay Area which justify paying such a high price for housing and any of the reasons you might give are absolutely irrelevant to the price, because the price is based on nothing but hype.
The weather has been nice in the Bay Area for probably at least hundreds or thousands of years, so the weather should have been priced into the housing market from day one.
It isn't as if the weather suddenly started becoming good in 1996.
Eman
2013 Mar 21, 11:47am
Any insights are appreciated...
Of course it will go down again in the future. The next housing bottom is 2021-2023.
Change the base case to say 1990 and your graph will look different.
you mean adjust from rational no bubble no hype year 1980 .. to a inflated price year 1990 which ultimately saw prices in CA fall 30-40%... back to rational prices during the 90s.
all of this to still justify irrational bubble still with lots of hype today by some greedy vested parties...
yea.. thats really giving context to fraud..
My positions are the following:
from 1-4 is based on workers being able to negotiate higher pay due to higher inflation.
Think back for several decades for the SFBA, Roberto... how many times outside of Govt unions have you seen strikes for higher pay ? It doesnt exist in the BA.. for private sector fact is when costs to employee workers goes up due to rent/home prices.. employers move jobs elsewhere. so even rents go down.
as usual, you are out of your league on here.
hardly.. the price pattern in your neck of the woods is back to normal ...
just like vegas and miami.. SFBA.. is pending its full price correction.
Thomas, according to this chart, sf and sj prices haven't tracked inflation since 1988. 25 years. After how many years would it be a trend that some area's houses don't track inflation? 50? 100? Long term thinking is good, but let's not get carried away.
I think you have a point here, but when I read that I think, "OK, so it has been rising for 25 years. That is a long time, but doesn't that seem like buying now is like buying high so you can sell low later?
Don't you think that (plus the super crappy economy) make it more likely that it is on the way down instead of on the way up?
I wasn't comfortable buying in California in 2005 and I am not now either.
I totally agree with you. My spider sense is tingling.
Bg - SiO2 stated.. prices dont track inflation.. yet the fact it does. eventually either being 1989 or even 2006 prices go back down to the normal trend. as for 1970 to 2000 we had a fundamental boom in the local economy. new industries/business/companies and raising incomes and in migration with a growing workforce.. yet all we can say from 1970 to 1995... is prices being flat adjusted for inflation. If anything like so much of the local economy.. the RE boom happened in the 70s .. not post 2000. For the past 10 years we had more of contraction in local workforce and incomes. Welcome to the trends.. eventually it falls back to the long term norms.
Inflation doesn't work that way. Generally, incomes trail inflation, so over time, your purchasing power drops.
Ask anyone living off of earned income with real expenses who pay most of the taxes and do all of the work and they know this to be true.
Roberto Aribas thinks we are built to serve him, however, because he can borrow masses of taxpayer funded 0% money and get-rich-quick matthew lesko style by doing nothing. Doing nothing is what awesome economies are built on, Roberto knows this, he teaches and preaches it.
I wasn't comfortable buying in California in 2005 and I am not now either.
I totally agree with you. My spider sense is tingling.
The reasons to be here and to live here are long gone. Its a low quality of life wage slave state now.
The reasons to be here and to live here are long gone. Its a low quality of life wage slave state now.
That statement is waaay too vague. There are plenty of reasons to live in the SFBA if you have the right job, have family in the area, etc. That being said, there are also plenty of reasons not to live in the SFBA if you can find a decent job in a locale where the cost of housing is more reasonable.
That statement is waaay too vague. There are plenty of reasons to live in the SFBA if you have the right job, have family in the area, etc. That being said, there are also plenty of reasons not to live in the SFBA if you can find a decent job in a locale where the cost of housing is more reasonable.
the greatest job in SFBA is working out of state for Tech company which is much cheaper. therefore your generating revenue for your employer... and as such you get a big fat commission out it... higher incomes (much higher than engineer) and living far more cheaper than most..you might even retire earlier. If your region is the the north west , south or east coast.. you have a wide choice of cities to select from to live in. i have known many Engineering who flipped over to selling due to high income potential.
The high price has nothing to do with the weather.
Is it because of too many high tech/pay jobs?
Is it because of too many Asians?
dunnross
2013 Mar 23, 12:11am
The high price has nothing to do with the weather.
Is it because of too many high tech/pay jobs?
Is it because of too many Asians?
Tech jobs are not high paid any more. Other professions like doctors, lawyers, politicians, bankers, financial analysts make much more. If you own your own business, chances are, you make more money than an engineer.
Asians - yes
Building Restrictions - yes, but that is not sustainable.
what did you "spider sense" tell you in 2010? if it didn't tell you to buy, what the F good is it? you missed the chance of a lifetime, go ahead and rationalize away now!!!
2 chicks at the same time - that's a chance of a life time (for a guy). Buying and selling assets really depends on the individuals circumstances, the amount of money they can invest and the short, mid or long term horizon they are looking at and the risk they are willing to take. I mean most have acknowledged that prices have risen in the last 3 years, but calling that a chance of a lifetime is hyperbole.
I found Patrick's blog before moving here a bit over two years ago. When landing here, decided to rent. After 6 months, our rent was scheduled to double, making it cheaper to buy. All around me, people convinced that prices would continue to nose dive warned me about the foolish decision I was to make with the purchase of our home. I explained to many why I believed that the housing market bottom was close at hand. Most simply made fun of me. I can still see on this blog many who simply deny that this market has taken off again. Not sure why as the numbers prove otherwise.
OTOH, yes, there are always market fluctuations but it will take yet another perfect storm to sink prices another 40% as they did in 2007-2011 time period.
I still routinely see places in SF that sell below the asking price, maybe there's something wrong with them. My friend bought a condo out of foreclosure for which I though was a good price, but my rent is damn good here by the ocean, even without rent control. But I admit that I am simply not interested in owning a house which is why I am not competing, so good luck to those who are. If I were interested I would likely pay cash though if possible. If somebody's rent doubles and they are tired of moving around, then why not buy? I have never heard of a place where your rent doubles after 6 months though :) In fact, renting for close to 15 years now, I have only had 3 rent increases in the various places I lived. Making fun of some body who bought a house is as foolish as calling this the chance of a lifetime. Becoming a debt slave for 30 years is never the chance of a lifetime. If you're a flipper and are flipping now, then surely it was a great deal.
Mell; I am certainly not making the claim that a 100% rent increase is the norm, but it did in fact happen to me and all other residents of my tower. What shocked the hell out of me was I thought the place would empty out and stay empty. It didn't. All of us were running for the exits but the moving vans were unloading as fast as we were packing to get out. So, from this analogy alone, I took it that they were in fact getting market rents if people were willing to pay. BTW, we had a sweeping view of the Ferry Building and the Bay so perhaps they were trying to gouge people in advance of the America Cup race. Even so, when we went searching for a comparable type place, the rents were much the same. Outrageous. I don't look at buying as being a rent slave. My output is far cheaper than renting and I have to live somewhere. I simply stabilized our 'rent' if you will. I took on the risk of the place being worth less than what I paid, and it did drop in value for several months, but I also took the risk that it would appreciate, which it now has by over 30% in 15 months based on local comps & $/sf.
Mell; I am certainly not making the claim that a 100% rent increase is the norm, but it did in fact happen to me and all other residents of my tower. What shocked the hell out of me was I thought the place would empty out and stay empty. It didn't. All of us were running for the exits but the moving vans were unloading as fast as we were packing to get out. So, from this analogy alone, I took it that they were in fact getting market rents if people were willing to pay. BTW, we had a sweeping view of the Ferry Building and the Bay so perhaps they were trying to gouge people in advance of the America Cup race.
Ok , that explains. I used to live down there (Main@Harrison w/ view to the bay) when I was single, best location to party and work hard & play hard. Girls dig it ;) My rent was not cheap to start with but my landlord never raised it in all these years which was fantastic. So sure, but this is prime location and most buildings don't fall under rent control. The prime locations are scarce and will always attract the wealthy. Most of Pacific heights and Marina is similar to South beach in pricing and competition. So yeah, I can see that it would make sense if you want to stay at the same or a at a similar location. When family happened I moved out to the outer sunset which is somewhat boring for some, but the rents are great (even the house prices are ok), the beach is next door and the air is clean and you can bike and run all you want. I had a friend who lived next door in south beach and she sold her place in 2006 bc she moved outside of the US and made out big time. Anyhow, good luck to you and south beach is still my favorite area - if I just could be 28 again.. ;)
SJ
2013 Mar 23, 7:24am
I am sticking to my game plan to buy real estate OUTSIDE of the bay area. Just not worth it for a single guy to spend that much here.
I think you have a point here, but when I read that I think, "OK, so it has been rising for 25 years. That is a long time, but doesn't that seem like buying now is like buying high so you can sell low later?
Don't you think that (plus the super crappy economy) make it more likely that it is on the way down instead of on the way up?
Possible, except the economy around here is not super crappy.
http://www.mercurynews.com/business/ci_22849139/bay-area-and-california-job-markets-are-far
It is definitely possible that in the long run, sfba will decline. On the other hand, this area has moved to newer technologies. Silicon -> systems -> software -> biotech. Unlike, say, Detroit, which stuck with auto all the way down.
I wonder about the motivations of those who live in sfba but complain about how terrible and expensive it is. If there's something I don't like, I won't buy it. Especially if it's expensive. I am willing to pay for something I like, and I do like living in sfba. Tech jobs (check my handle), things that I like to do, and yes, the weather.
Obviously a lot of people also like it here, hence the prices.
The high price has nothing to do with the weather.
Is it because of too many high tech/pay jobs?
Is it because of too many Asians?
high prices have nothing to do with high tech jobs either or foreigners... since
both were common in the 70s-80s-90s as home prices were more reasonable
as we had a booming economy. however the big lure of highly inflated
ipo stock as we saw in late 90s was not common... and that put SFBA along
with tech industry on the map ...
so why didnt this bubble form as big in the 80s.. why form after the tech industry
has peaked and matured.. and currently deflating with consolidations abound.
It is definitely possible that in the long run, sfba will decline. On the other hand, this area has moved to newer technologies. Silicon -> systems -> software -> biotech. Unlike, say, Detroit, which stuck with auto all the way down.
we always had semi, storage and software..thats been going on for 30-60 years plus years now...
biotech.....ugh.. I wont touch that.
its as deadly as driving a Ford Pinto..
The auto industry like most other non-tech industries does increase its prices over the long run regardless of competition due to inflation. Yet, tech companies which also at the mercy of inflation only discounts and reduces its prices which impacts margins and bottom line. Its a highly deflationary industry, highly competitive markets. Its a great industry to be in as a career, especially from 1980 to 2000, but its not the enriching machines some make it to be. There is a cheaper workers in another state with equal skills.
ask any veteran tech worker to CEO ...
so why didnt this bubble form as big in the 80s.. why form after the tech industry
has peaked and matured.. and currently deflating with consolidations abound.
This is easy to explain.
Before 2000, stock gives a very good return.
Hard to beat a 30% from a "safe" stock like Cisco.
After 2000, people start to look for a real "safe" way to invest.
They choose house.
Before QE 1, 2 and 4ever, there is always an undervalued asset.
Money supply is limited.
If Fed reserve decides to unload that 3 trillion dollars, we will lots of undervalued assets again.
Possible, except the economy around here is not super crappy.
http://www.mercurynews.com/business/ci_22849139/bay-area-and-california-job-markets-are-far
yes... we are always hiring.. the question is of all the hirings made by SFBA based employeers ... how many were within the SFBA.. and how many outside the region by state.. and grand total. When Intel adds 8,000 new jobs is mistakenly considered all SFBA, but not disclosed by location. The SJMN like so many other papers keeps missing this. Are we pulling jobs out of Texas and India.. take a sober look on major company career website... they are hiring way way more outside. Not a trend I like to see... its going to take a massive change in CA govt to change this.
This is easy to explain.
Before 2000, stock gives a very good return.
Hard to beat a 30% from a "safe" stock like Cisco.After 2000, people start to look for a real "safe" way to invest.
They choose house
this is all true 100%... what you stated above. cisco did go IPO at 20 and had to prove earnings before it doubled and split... by 1999 we had too many IPO stocks richly priced.
but today.. some still feel rich over priced IPO stock "is the norm".. we still have a casino mentality in SFBA... stocks and homes!
Ironically, its only after the major stock correction with sensible valuations have stock gone back to being safe investments.
what did you "spider sense" tell you in 2010? if it didn't tell you to buy, what the F good is it? you missed the chance of a lifetime, go ahead and rationalize away now!!!
About a year ago, I was thinking it was an OK time to buy in SF bay. I think it would have been fine. For a variety of reasons, we didn't. I don't need to rationalize.
I remember one time saying to you that you make better points when you don't attach people.
Possible, except the economy around here is not super crappy.
http://www.mercurynews.com/business/ci_22849139/bay-area-and-california-job-markets-are-far
It is definitely possible that in the long run, sfba will decline. On the other hand, this area has moved to newer technologies. Silicon -> systems -> software -> biotech. Unlike, say, Detroit, which stuck with auto all the way down.
@robertoaribas
See how this guys makes a counter point without insult or baiting?
I think some people are probably *stuck* here, not everybody has the luxury to work where they want to live. Being expensive is one thing, being crappy and expensive is completely different.
I do complain about Bay Area quite a bit, esp. to my husband, bcos I am stuck here bcos of him as he can't find semiconductor job outside Bay Area easily. Western food is not as good as East Coast; public transportation sucks. Weather, overrated for me since I come from tropical country. Secondly, coming from a third world country and my dad was in construction business and built our houses there, it is hard not to compare the quality of the houses here and there. Most are probably annoyed by some's willingness to pay more for less. We can't do much about but at least rant to release the frustration!
I wonder about the motivations of those who live in sfba but complain about how terrible and expensive it is. If there's something I don't like, I won't buy it. Especially if it's expensive. I am willing to pay for something I like, and I do like living in sfba. Tech jobs (check my handle), things that I like to do, and yes, the weather.
Obviously a lot of people also like it here, hence the prices.
If you buy homes that rent for more than the mortgage, then they go appreciating at more than inflation, you make a lot of money.
How much more than the mortgage payment does the rent payment need to be? 1% 5% 10% The interest rate%
A family member told me they were renting a house they own for $100 more than the mortgage. They were very happy with that because, as you say, they were covering the mortgage plus. I wonder how well that really works. I doubt this math is a thorough accounting notwithstanding considerations around the weight of ownership and the time spent thinking and being as a landlord.
we could get very high inflation someday.
We will. Because people like you think money should be created from doing nothing. On leverage.
we could get very high inflation someday.
We will. Because people like you think money should be created from doing nothing. On leverage.
If that happens property prices and rent will go down as people need to focus on the absolute essentials, i.e. food and energy. They probably will live with their family or have more and more roommates.
we could get very high inflation someday.
We will. Because people like you think money should be created from doing nothing. On leverage.
Money doesn't get created by leverage, it gets created by central banks. Leverage is a way to multiply your profits and losses, and no matter how deeply you leverage up on, say, a house, you personally are liable for any leveraged losses or reap any leveraged gains. No money is created or destroyed here.
When money _does_ get created, is in the same scenario, you leverage up on a house, and the price drops, and you walk away on the non-recourse loan, leaving a big loss on the bank's books. If the central bank comes in and prints money to offset the loss at that bank, that's where the money got created. Do this enough times, and you get massive bubbles and bursts, as printed money tries to offset destroyed money since the central bank exists only to benefit other banks.
The current series of QE1, QE2, TARP, Operation Twist and now QE Infinity exist only to keep banks solvent due to their reckless leveraging and risk taking, and the talk of inflation and employment targets is just paying lip service to people who don't understand how economics work.
sfba got many suckers. Imagine a guy putting $200K downpayment, then buying a home in Dublin for $800K. After that, commuting from dublin to Sunnyvale in company bus every day. I see such folks everyday.
Sure we on this board think that these guys are irrational. But they have different reasons: (a) schools for their kids so that these kids can achieve the american dream; (b) no need to worry about rent increases and other problems associated with renting; (c) in good company with fellow home owners, who provide the psychological support of being a home owner; (d) existence of the next set of fools to buy these properties held by the current rational home owners (or 'fools').
All these reasons hinge on the assumption of producing the next generation of fools. The next gen fools are created by $140K tech jobs and/or by their wives and kids.
No money is created or destroyed here.
At least not outside the minds of the leveraged. Inside the minds of the leveraged they're rich! Look at all those zeros!
Everybody sorta wants different things and have different criteria in their lives. I don't object commuting from Dublin, only if you work in big companies that provide buses, and you can't quite count on staying in one job forever, or having company bus would be one of criteria for next job. Until public transportation between east bay and the part is bridged, East bay remains less desirable, not to mention, lack of restaurants choices, far away from othe grociery stores if you want to shop beyond Safeway.
In US, credit is too cheap. Ones don't have to save substantially to buy a house. With lower threshold, $300k down for a 1.5M house, higher likelihood to have reckless buyers to drive up the prices. Not to mention those flushed with stock money.
I always wonder, how many think buying $1.xM house is okay, but spending regular $200 on a dinner for two, $200 sweater, or $10k 1-wk vacation is too expensive. Somehow, when it comes to house, people tend to forget the few extra 0s. Sure, leverage ...
sfba got many suckers. Imagine a guy putting $200K downpayment, then buying a home in Dublin for $800K. After that, commuting from dublin to Sunnyvale in company bus every day. I see such folks everyday.
Sure we on this board think that these guys are irrational. But they have different reasons: (a) schools for their kids so that these kids can achieve the american dream; (b) no need to worry about rent increases and other problems associated with renting; (c) in good company with fellow home owners, who provide the psychological support of being a home owner; (d) existence of the next set of fools to buy these properties held by the current rational home owners (or 'fools').
All these reasons hinge on the assumption of producing the next generation of fools. The next gen fools are created by $140K tech jobs and/or by their wives and kids.
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Hi,
I wanted to buy a house last year, but could not. Now I can, but market is up at least 20% in the areas where I am looking.
Is it the right time? Can they come down? Please suggest.