patrick.net

Who are the buyers ? From my experience, people whose patience has run out are buying. They also see that they are not paying more than what the would have an year ago.

House are selling, but house prices are NOT increasing. Nor are buyers in any hurry. So depends on what you mean by spring bounce ? Uptick in sales or in price ?

BA market is like a stock priced for perfection. Just because a stock is overpriced doesn't mean it will fall. It can stall and trade in a range. Only when something changes the price starts moving lower. That can be increasing foreclosures, or rates or the economy slowing down.

The subprime problems have started at the right time for any spring bounce to remain very short, even if it happens.

Until it becomes common knowledge that buying a house is a bad idea, people will continue to buy. All they know is, their friends just bought a house and they don't have one or that their friend's house is bigger than theirs or something like that.

The low wage girl in my office was gushing on Friday because she and her boyfriend were approved for some enormous mortgage. She is buying, and I suppose others like her are buying.

Someone bought the condo across the hall from me back in November. They have yet to move in. Bizarre.

A touch off topic and off geography but how funny to live in a 4 season region and see a listing as "just listed" with pictures from last or previous summers!

http://tinyurl.com/26llxm

The subprime problems have started at the right time for any spring bounce to remain very short, even if it happens.

The average joe cannot link subprime problems to the housing market. As a result, the mortgage shakedown may not change the desire to buy homes. It takes a while for the effects to be felt and it takes a while for the prevailing view of the market to change.

A touch off topic and off geography but how funny to live in a 4 season region and see a listing as “just listed” with pictures from last or previous summers!

LOL! Perhaps it is "climate controlled" ?

A quote from the AOL real estate page:

"The smart money this year is on undervalued foreclosure properties that have been oversold due to jittery emotions in the real estate world."

This is refering to cities with high forclosure rates, such as Denver.

Incredible. So it is the "smart money" who are those "willing buyers."

This on LA, number 4 on the best buy list:

4. Los Angeles
Total Filings: 300 (2,700 pre-foreclosures)
Outlook: Housing has been a major component of the high cost of living, which makes 2007 a rare window of opportunity for homebuyers or investors.

Smart Money? Not likely. Just heard that one of the largest real estate typhoons put all his properties on sale.

Nigel,

Nice link to your blog; after all they aren't making any more land and there is certainly a shortage of housing! That is why rents are screaming higher!?! You're right, this time is different, it will be much more painful than previous downturns!

Paul

"However, it is clear from the defensive posture that the realtwhores are a little less confident this year. Four months without a commission can do that to one’s psyche, I suppose."

Since no sale equals no commission, do you think that this hunger may cause realtors to actually scream at the clients to "lower the price NOW!"

wtf,

I think Real Estate Typhoon was a freudian slip. I think it's a perfect name for the perfect storm that could take down the bloated real estate market in the Bay Area.

SP,

I do think that it is the Realtors' interest to start asking people to lower their expectations/prices. Would they rather get $0 from their share of an unsellable /Marina style 3/2' in Bernal Heights priced at $1,000,000 or the $10,000 that they'll get (after splitting/brokers etc.) of the same house at $500,000?

That half million extra isn't going to them, they'd rather take the bird in hand. The Freakanomics book had a good article about why Realtors (TM) sell their own houses for significantly more money than they sell other people's houses for. A quick sale, a quick commission, then on to the next.

On record, I must protest the use of the term "realtwhore", which I consider too degrading. It is not right to blame any one profession for the current situation.

Little link to a bit of the Freakanomics stuff. The guy is entertaining. The real estate agent article is under "Articles' and has a house next to it.

http://www.freakanomics.com/

FAB,

1800 Gough Street penthouse had ANOTHER open house again today. Honestly, that thing has been on and off the market for about four years.

On record, I must protest the use of the term “realtwhore”, which I consider too degrading. It is not right to blame any one profession for the current situation.

Could you say the same for Criminal Defense Lawyers?

This house is for sale for $7,750,000. It sold about 18 months ago for $10,875,000.

http://tinyurl.com/3cgt2a

Suds, welcome, but one thing, I live in $anta Barbara. hehehehehe

Dear Suds,

Thank you for sharing.

Please consider this: as you described it, your experience here is very limited in time, in geography, both on the continental scale, and also the the Santa Clara County microcism, in the sorts of people you come into contact with, in your life experiences in the USA.

Wisdom only comes with time and a diversity of experiences, which takes time. But you can learn through the diversity of others who share their points of view here.

But seriously, the term “realtwhore” is specific to a particular kind of real-estate agent - the sort who will say or do anything just so s/he can pocket the commission.

Which is all of them that are still in the business.

An agent with integrity who truly represents their client and uses his/her knowledge, expertise, contacts and experience to get the best possible deal for the client - that kind of agent is a professional.

Which is all of them who left the business because they couldn't compete with the Realtwhores.

SFWoman Says:

> SP, I do think that it is the Realtors’ interest to start
> asking people to lower their expectations/prices. Would
> they rather get $0 from their share of an unsellable /Marina
> style 3/2′ in Bernal Heights priced at $1,000,000 or the
> $10,000 that they’ll get (after splitting/brokers etc.)
> of the same house at $500,000?

The best Realtors can look in to the eye of a seller and tell them with absolute certainty that the market is tanking and convince them that if they don’t lower the price they will never sell and moments later look in to the eyes of a seller and tell them with absolute certainty that this house is sure to go up in value that if they don’t write an offer at this moment is will be sold to someone else in the next hour (this is one of the reasons that I left the world of investment brokerage)…

P.S. to Suds thanks for the info on your situation. Remember to always ask yourself where information is coming from since it is possible (as I learned as captain of the debate team) to find support almost anything (as many skilled real estate people do every day)…

P.P.S. I can’t speak for others on this BLOG, but my life will not be any different if you continue to rent or buy three investment homes in AZ…

SFWoman Says:

> This house (2863 Pacific Ave. in Pacific Heights) is for
> sale for $7,750,000. It sold about 18 months ago for
> $10,875,000.

I was going to ask if you heard the story on this place. Tax records show that the $10.875 Million sale recorded less than a year ago and I heard that the buyer was a Kellogg Guy and the CEO of a Biotech Firm.

A Pacific Union Realtor from the Presidio office (who has not had a sale in a while) said that the place was first listed for sale at just over $6 Million and she actually had a buyer that was interested but heard the place had multiple bids and was told it was under contract at $7.25 Million.

Many of the homes in that area are just about 100 years old and it is interesting that it took almost 90 years for one to first sell for over $3 Million and in recent years some have gone up by $3 Million in a single year and now it looks like we are seeing that (like other high beta assets) that they can also go down in value by $3 Million in a single year…

2006 was a transitional year, but I think 2006 allowed people’s income and confidence to catch up to housing prices.

Hilarious.

Peter (! "Peter P") :

Congratulations on your home. There is enough difference of opinions on this site. What you are saying is perfectly fine. You know you might be paying more for the house, you suspect housing prices might be going lower in real terms and you are aware of the big ownership premium. You made an informed decision that is right for yourself.

What most people on this site are against is "it always goes up" and "American Dream" type arguments. In various flavors.

Speaking for myself, I believe buying a home will be a right decision for me. But I am convinced it's not the right time for me. I am willing to take the risk that prices may permanently go out of my reach, because I believe the risk is extremely small. IMO if I wait, the only thing that will happen is I will have more down payment.

Now I see what kind of "sweet deals" was Casey talking about:

http://shortsalemagic.com/lp-coaching-white.htm

This guy has the ads on zillow.

"we might throw out a $350k offer" ... that seems to be too much.
Considering the 50% crash you should be shooting for 250K.

There is really nothing wrong with buying so long as one has realistic expectations.

A friend and his bride purchased late 2005 in LaJolla.

On a guess, I'd say it was a combination of peer pressure and 'starting a new life'. Tiny bungalow at about $800k, but as that's ~2x their combined incomes, they should be fine if perhaps a little conflicted.

FAB,

I heard that the guy who paid $10.875 for the house was CEO of a neurosciences company (they must be paying a lot more than when I was working in biotech!).

Hey, the price reduction (for asking price) is only $3.1. Maybe they'll start a bidding war?

I have a couple of friends who live on that block, and a few on Raycliff, but none of them know the people who own the house.

What you guys won’t admit, is housing isn’t a stock, housing provides a function: shelter.

Won't disagree with that.

As long as people move out of their parent’s homes, graduate from college, get higher paying jobs and have children, housing will have demand.

As long as FB's foreclose on their houses, builders overbuild and people just want to get out, and most of all, tighter lending standards, there will be much more supply than demand! ...and where are these higher paying jobs?

Stocks aren’t the only investment vehicle out there, but houses are the best shelter vehicle. We don’t live in hotels or cars, we live in houses and apartments, with houses being the more desirable option.

That's why it is a much better to rent a house and invest money elsewhere.

Bay area housing has always been expensive, yet people still live there and they’ll still buy homes. With the current perceived weakness in the market, people feel the time is right to buy. Mortgage rates are still low and believe it or not, most people don’t take out subprime mortgages.

Housing is overpriced, face it; and just because people are buying, doesn't mean prices are holding either. There also isn't nearly enough buyers to absorb current inventory inventory and come springtime, there will be a whole lot more.

On top of that, financing is more accessible to people who were previously disenfranchised.

Standards are tightening; leverages is limited.

Suds says :
1. It is not possible that every single buyer who buys now will regret it 10 years later.

I think, very few buyers today will regret it and of those who do even fewer will admit it. There are lot of intangibles associated with the house. And there are enough mental accounting opportunities to feel warm and cozy.

Say one buys a 1M house today that rents for 2.5K, and sells it for 1.1M after 10 years. You think the person will regret it ? Gas might be $5, gold might be 1000 and the 12 oz soda at 7-11 might cost $2.50. Even then, they would claim to have come out ahead.

This is the real problem. It's not just whether buying is right or wrong. Most people don't even know how to evaluate that right or wrong. Hence spread the word about the bubblizer. At least people will make more informed decisions.

This is the real problem. It’s not just whether buying is right or wrong. Most people don’t even know how to evaluate that right or wrong. Hence spread the word about the bubblizer. At least people will make more informed decisions.

Even if it makes sense by way of calculating all expenses; the prices will continue to fall and there is no way to factor that in using any kind of calculator.

I think what people really need to be aware of is that prices have gotten very heavy by way of exotic financing and will soon collapse under their own weight; the subprime market is in a downward spiral and soon there won't be anyone willing or able to finance the suicide loans. Without this crazy funding, it is impossible for people to pay those crazy prices!

Anyone who buys now without using a suicide loan is going to be buying a real POS and even though they may be able to afford it, they will eventually see what they really could have gotten; not a pleasent experience.

If there is anything worse than paying the mortgage for a premium piece of real estate, it's paying that same amount for a POS!

someone wrote.
"I think, very few buyers today will regret it and of those who do even fewer will admit it. There are lot of intangibles associated with the house. And there are enough mental accounting opportunities to feel warm and cozy."

Well, under the present circumstances, there's a loose negative correlation between that sentiment and the number of years that someone's lived in Santa Clara County. The shorter the time they've lived here, the more likely to have that sentiment.

Peter Says:

> I’ve been reading this site for a few months now and
> it’s kind of funny sometimes. It’s almost like there’s
> an expectation that people should NEVER buy a home

Many of us have owned homes and plan to buy again, but not when the property tax bill is getting close to or in some cases even more than the rent of similar homes and condos (like it is in parts of San Francisco)

> The prices have softened, that’s why we’re buying a new
> home. It’s a great buy in my opinion. Sure we could rent
> and save maybe $1000 a month

You are not going to get many people giving you a hard time if you are only paying $1K more to buy than rent (in doing my taxes I added up all the costs of my race car for 2006 and I’m paying almost $1,000 a month for a toy I use less than 10 times a year)…

P.S. Where in the Bay Area did you buy a place for just $1,000 more than the cost of renting?

allah,

CEPR attempts to factor in the erosion of equity basing their calculations on that particulat market's overvaluation. Granted, it's a guess at best but for the time being it's one of the better tools out their. Give it a try just for a goof! :)

particulat? How about particular?

PAR,

Good summation. Totally accurate, and good for you btw! My youngest sister lives in Thousand Oaks and my accountant brother-in-law has repeatedly said that many of the folks that bought recently in their area simply can't afford to offer any kind of price reduction. Buyers at or near the median came in w/zip down or MEW'd out cash so they HAVE to ask close to what they owe if they expect to walk away without a short sale.

There's not a lot of wiggle room. For sellers above the median "many" came in w/equity from previous sale so these are the ones that can take a loss (however unpleasant that might be).

allah,

CEPR attempts to factor in the erosion of equity basing their calculations on that particulat market’s overvaluation. Granted, it’s a guess at best but for the time being it’s one of the better tools out their. Give it a try just for a goof! :)

I checked it out and yes it is just a guestimate; it seems that the combo box for fixed rate/ARM doesn't seem to have any effect. Wow, for my area he has the appreciation at -56% (yikes!) which is worse than I thought.

The problem with this calculator is that many people who buy will put down 30 years as the amount of time they will stay in the house and this will usually favor buying. The problem is, can you honestly plan out the next 30 years of your life? Some people just don't get it!

Going and looking up the tax information and sales history on a property you're interested in can be telling. A few of the houses on the market that my wife and I have looked at have been priced at 6% over the loan amount made 2 years ago.

Gee... I wonder where they got their price point? :D

Those are the people PRAYING for a spring bounce.