patrick.net

Is David Lereah eligible for some job retraining money?

Peter P,

Thanks! I needed that.

PAR,

The "Boiler Room" model for stocks anyway has changed, quite a bit actually. Now they have "marketing firms" that "raise awarenes" among brokers. Usually some OTC BB penny w/ "great growth potential". Then they ask the brokers if they'd want to buy on behalf of their clients. So the distribution isn't directly to the public and the sales guys aren't sec. licensed.

So rather than being "bucket shop" driven it's more a matter of the companies themselves going to these sales organizations to have THEM pump up the stock! Mostly it's a waste of time b/c unless you're RIA you can't touch pennies anyway (most firms now have regs. about soliciting penny stk. trades)

Also the Bulletin Board has a new "rating system" with a skull and cross-bones for no info, a Stop sign for limited filing and a Caution sign for full compliance. FWIW

Makes me wonder if buying is like renting always is - you find places by getting out there and walking the streets. Just look for signs.

I know there's a "public" MLS then there's the RealtWhores' MLS..... it's been that way for years.

Just wondering, when you guys consider a good time to buy a primary residence. For investment it’s different. Investors have to wait for bottom.

Working backwards:

Investors do not *have* to wait for the bottom. The oft revered Buffett makes the point broadly that he doesn't care where the bottom is.

Investors are more aware of, educated about, and prone to accept risk. Homeowners are often dreadfully ignorant that risk even exists in the world.

Finally, there is a simple rule: buy when it makes sense, qualitatively AND financially. It takes a whole-lotta-qualitative to plug the gap left by the simple reality (where I live) that for roughly equivalent housing, all opportunity costs considered (including taxes), rent = about 1/4 mortgage et. al. And 5 years makes almost no difference. I'll even spot you 10 more and it still doesn't make a difference. The sensitivity in the equation at this scale of purchase price rests almost entirely upon that price, not on any amortization or tax benefit.

If so called _buyer's agents_ weren't benefiting from the intentional misperception that they are acting as fiduciaries, then there wouldn't be a problem. But as it stands now it's more like a sleazy drug dealer pretending she's your doctor.

Yes Barb, we think you’re smokin’ dope. And this is one of the country’s “top” realtors? Barb, no one would like to see an end to the violence more than the folks at Patrick.net but does ANYONE here see any relationship between the two? Anyone?

Sure, when all the Marines/Airmen/Soldiers/Sailors return from Iraq and... uh... the other country that we're fighting a war in that no one remembers, they'll immediately want to go out and buy houses and cars!

Just like after World War II!

Sure, when all the Marines/Airmen/Soldiers/Sailors return from Iraq...

See, Ron Paul will save us all!

ptiemann Says:

> Just wondering, when you guys consider a good
> time to buy a primary residence.

1. When you decide that you are planning to live in the same place for at least 5 years.

2. When values are at least close to the historical multiples that have been around for the last 100 years or so (2.5-3.5x average household income in the area & 10-15x annual rent).

3. When you have saved a big down payment and can easily afford the monthly payments using a 30 year fixed loan.

P.S. Nice to have Randy H. back…

Just wondering, when you guys consider a good time to buy a primary residence. For investment it’s different. Investors have to wait for bottom.

Look at this listing.
http://www.mlslistings.com/Reports/Main.aspx?propertyId=795677

When such 50 year old, 1300 sqft home is listed for 1M, it is not a good time to buy. Heck, it is not even good time to go to open house.

Here is what at least one RE agency is working right now. It is a recognized big-name agency in the Peninsula/South Bay area - my friend is an agent.

If a seller is flexible (i.e. willing to negotiate), they keep the listing private and market it to their own list of buyers. My friend did not (or could not) accurately say how far these private sales were below peak prices, but hinted that it was a "good bit below last year's comps" in and around the fortress.

For sellers who are not very flexible, or for houses that don't sell privately after a few weeks, the houses either get dumped on MLS or just get stuck in the back of the private portfolio.

I don't know how long this is sustainable - all the unsold crap should eventually find its way on the market. But for the time-being, it looks like the agents are quietly turning the screws on the sellers.

Randy :

Now you are back ! Good to have you here again.

The sensitivity in the equation at this scale of purchase price rests almost entirely upon that price, not on any amortization or tax benefit.

I am absolutely certain that such thoughts are banned from entering the mind of a Fortress buyer.

ptiemann Says:
why should people NOT buy now? Because they might buy cheaper in 12 months?

My broader point was that the _purpose_ of even having a "buyer's agent" is to get impartial market intelligence on the right circumstances to buy. Not like my damn-fool of a realtwhore who tried to make me over-bid on the house - we refused to budge and still got the house. If I had listened to that sh*tface's advice, I would have forked over another 25K-50K for no reason.

Randy H Says:
January 9th, 2008 at 4:06 pm
"If so called _buyer’s agents_ weren’t benefiting from the intentional misperception that they are acting as fiduciaries, then there wouldn’t be a problem. But as it stands now it’s more like a sleazy drug dealer pretending she’s your doctor."

The new pharmaceutical marketing doesn't even want them called doctors. "Be sure to ask your prescriber before..." They are even sure to get the repetition in at least three times in the ads. "Talk to your prescriber.."

The rereport.com folks have their 2007 annual report out. It's a great read, almost devoid of any BS.

http://rereport.com/scc/annual/index.html

The sales have dropped to half of 2004. And many other nice stats.

ptiemann Says:
I had assumed that all bubble sitters here have a couple hundred $ in cash

Couple hundred bucks? That sounds like what one of our heroic homedebtors would have in their savings account. :-)

ps. I know you meant couple hundred thousand

“almost ALL told me not to sell now”..

In today's slow market, the dynamic has changed. Realtors don't want to be burdened with unrealistic sellers and have to show up to open houses every god damned weekend as a listing languishes on the market. Over the past few years, they've become used to short DOM and getting bids on an offer date, etc etc. Now that they may actually need to WORK to sell a place, it's like, not worth it to them.

I am not sure that prices will drop in all areas to 3x annual household income. In rural areas, certainly. In prime areas, I don’t think so

I don't care about London/Paris and even to an extent SFO.

But even in THE Fortress, houses were close to 3x to 4x of a dual-income techie household - as late as 2003-4. Incomes have NOT gone up that much, mortgage rates are higher, credit has tightened and psychology has changed.

So what's going to stop the prices from going to that level in BA ? Or is BA a rural area ?

Here is what at least one RE agency is working right now. It is a recognized big-name agency in the Peninsula/South Bay area - my friend is an agent.

SP,

You describe classic pocket listing BS.

SP Says:
For sellers who are not very flexible, or for houses that don’t sell privately after a few weeks, the houses either get dumped on MLS

I just realized that this may also explain why everything on the MLS is still priced unrealistically because, well, only the unrealistic sellers are being listed there. I am thinking of tagging along with my friend to see what kind of stuff is available 'privately'. Will post my findings if I decide to go waste some time on this.

I am not sure that prices will drop in all areas to 3x annual household income. In rural areas, certainly. In prime areas, I don’t think so

Even now, 600K can buy a reasonable townhouse in a not-so-bad neighborhood here. But that does not mean that prices cannot go lower.

I don’t care about London/Paris and even to an extent SFO.

I would not want to live in London or Paris. I rather live in Arizona.

Bay Area is nice but it is overrated.

This house does not even cost $1M in Thousand Oaks:

http://realestate.venturacountystar.com/sales_details/1751-500052

Statistics showed that Thousand Oaks is a lot safer than SF.

Peter P,

You can also get a similar sized brand new home in Windmere, San Ramon for a similar price. I know a family who just moved there. If you are willing to go in a different direction then you can get that 30% cheaper in Mountain House. And in Gilroy too. Morgan Hill has a fabulous collection of these "luxury" homes at that range.

The effect of so called "fringe" areas has started to show on BA proper or Fortress or whatever. Don't want to wait for the bottom, fine, just wait for a few months. It will be "cheaper" if not the cheapest.

My broader point was that the _purpose_ of even having a “buyer’s agent” is to get impartial market intelligence on the right circumstances to buy.

When I bought my town house in 1991, my agent had to do a fair bit of work. For example, only she had easy access to all the listings and she drove me to all of the places I wanted to look at. Back then houses were a lot cheaper so the 3% that she splits with her company gets is a lot less than what agents get nowadays.

But even back then her interest was getting the deal to close, she provided me with comps but I remembered she urging me to accept the counter offer from the seller saying that was reasonable. A buyer's agent will almost never negotiate hard for you except if he or she is a personal friend.

Our first Peninsula house was about 3.1x our earnings in 1996. Our second home in 2002 was about 3.3x our earnings.

Inflation adjusting 1996 dollars to 2007 dollars, a couple earning what we were then would have to pay nearly 6x their income to buy that same "starter" home, which now lies in a slightly _less_ desirable area thanks in part due to rapid turnover and flipping.

The whole "not buying today is losing out on buying something that someone else will instead, thus denying you that option" is spurious logic, to the extreme. It presupposes that we can move forward and backward in time exploiting every option at every point of the decision tree. In reality, for those of us lacking time travel superpowers, the best we can do is make decisions in the present and evaluate future options while they're still in the future. By your logic every time I fail to buy a lottery ticket is allowing someone else to win the lottery.

I think in most RE busts this is typical. I remembered when Hong Kong had its bust there was a saying called "price is there, but the market isn't" (literal Chinese transalation of 4 words, maybe OO can attest to that).

There exist a point where prop. are unrealistically priced but with almost no transaction volume. I think after that denial comes the big price drop.

Inflation adjusting 1996 dollars to 2007 dollars, a couple earning what we were then would have to pay nearly 6x their income to buy that same “starter” home, which now lies in a slightly _less_ desirable area thanks in part due to rapid turnover and flipping.

And the Bay Area has not become more desirable than before.

Statistics showed that Thousand Oaks is a lot safer than SF.

What I always remember from my SF trips: hearing about people getting run over by cars in "hit and runs"

Or is BA a rural area ?

Why don't you ask a cow-worker? :)

cb,

you must be referring to "have price, no market" :-)

OK, here is the deal. If you are a college grad, and have an above-average IQ (smarter than Bush that is), you should just consider getting a RE license yourself and bypass the agent entirely. It is very easy, some of my friends have it (their FT jobs cannot be further away from RE). It is different from the broker's license, which takes a lot more effort. If some 51-year old waitress can manage to study for the exam, it should be a piece of cake for everyone here.

I think it is fun to study, particularly when such effort entails a saving of ~$20K or more (raw land's agent fee amounts to 10% to be split by both parties). A friend told me that he finished his RE reading materials on the toilet. You may not even need to get the license, just know enough to be dangerous so that you can draw up your own offer, at least I have a friend who offered to draw up my next offer for a dinner. Listings? In 4 years, there won't be a pocket listing problem, all listings will hit the street in desperation.

I actually wouldn't mind paying the seller's agent if she can pass on some insider info about the seller which helps my negotiation. The buyer's agent is completely useless.

Just watching Barbara Corcoran on CNBC w/ Diana Olick and Steven Moore (WSJ) and Barbara says; “You may say I’m smoking dope"

Yes I saw that as well. The other comment was how sexy San Francisco is!
Many Europeans/Asian are paying big bucks to live in the sexy city.

PS I dont expect BC to come down to Mitchell Brothers and give out lap dances for 5 bux.

Sweet....

“Home sales continued to plummet and prices fell in many San Mateo County cities in December as the worst housing slump in more than 20 years deepened, a new report revealed Tuesday. With buyers being extra cautious, home sales declined 34 percent in December compared to December 2006, according to the County Association of Realtors.”

“‘Sales are almost coming to a grinding halt in some areas,’ said Denise Aquila, broker in San Carlos. ‘People are nervous. Nobody wants to overpay on a home, and many buyers are scared the bottom will come crashing down if they do buy.’”

“There’s a huge sales slowdown on the coast, in places like Half Moon Bay and Pacifica and points in between. There’s also a big sales decline in Daly City, San Bruno and South San Francisco.”

“Cities hit hardest with median price declines included Daly City, East Palo Alto, South San Francisco and San Bruno, where an increasing number of homes are going into foreclosure and banks are taking over properties.”

“The median price of a single-family home countywide in December fell to $875,000, down from $922,500 in November and just over $1 million in October.”

“A year or two ago, home sellers were in the driver’s seat. Two out of three of them received more than their asking price. Now, many are lucky to get 90 or 95 percent of their asking price, the report shows. Some get less than that.”

“‘The trend is increasing toward homes sitting for a longer time on the market,’ said Richard Calhoun, a real estate agent in Santa Clara. ‘This year is going to be a very lean year, and a lot of real estate agents will be leaving the industry.’”

“Calhoun hasn’t seen sales this poor since 1984, and doesn’t expect a recovery until 2009.”

ptiemann Says:

> I am not sure about waiting for the historic averages.
> Waiting for that may mean you lose something that
> you could get now (someone else may buy it).

The historic average sale price of a new car in America is about 95% of sticker price. When the NSX, Miata and Viper were brand new some were selling for over 200% of sticker price. The people that waited got them for about 95% of sticker price…

> I am not sure that prices will drop in all areas to 3x
> annual household income. In rural areas, certainly.
> In prime areas, I don’t think so.

You can never be “sure” that historic averages will come back but it is a good bet even if Realtors are telling you that homes will never drop below 6x the median family income in the area (just like Brokers were telling us in 2000 that tech stock PE ratios would never drop below 50x next years earnings).

> By the way, I don’t consider the peninsula ‘prime’.
> It’s just where _currently_ there are good schools –
> that can change, and _currently_ there are jobs.

If Atherton, Woodside and Hillsborough are not “prime” what is? The free Public Schools in Burlingame and Hillsborough have been good since well before I was born and the odds are good they will remain good at least until anyone that buys today sends their kids to college

> London, Paris, Manhattan, San Francisco, Moscow..
> you will never get anything for 3x the avg household
> income. Not even a 1-BR condo.

In parts of SF (like the Castro with a lot of households with two good incomes) we are not that far away from 3x household income for decent 1 BR condos today. I’m not saying that homes in Atherton will drop to 3x the “statewide” median income I’m just saying that they will drop to about 3x that the average wealthy family in Atherton make. The census.gov site has changed and I have not found a way to dig down to the census track data but around 2003 I looked at 100’s of Bay Area (and dozens nationwide) census tracks going back to the 1940 census and not one ever had average home prices below 2.0x the average income and none had average home prices above 4.0x the average income.

"Atherton will drop to 3x the “statewide” median income I’m just saying that they will drop to about 3x that the average wealthy family in Atherton make. "

Then how do you explain the 3-4x income of the 80s and 90s?

Capital One warns.

http://biz.yahoo.com/ap/080110/capital_one_outlook.html?.v=5

From Bloomberg :
http://tinyurl.com/37lwhj

Japan Stocks Fall After Credit Suisse Sees Real-Estate Sell-off
Jan. 10 (Bloomberg) -- Japanese stocks fell, led by real- estate companies, after Credit Suisse Group said U.S. subprime- mortgage losses may prompt overseas investors to sell their property holdings in Japan.

WTF ? I thought Japanese RE bubble burst happened eons ago. Knew about UK, Spain etc bubble. But wasn't aware of any speculation in Japan.

StuckInBA Says:
Capital One warns.

Someone I met at a new year party works for HSBC's office in Gilroy, or maybe it was in Salinas. He said HSBC was desperately chasing sub-prime credit-card business, in competition with Cap-One. So I would expect HSBC is seeing some pain as well.

OO, if you're there, have a look at this article, re your enquiry about whether the Big 4 banks had significant subprime exposure -- it turns out they do -- and they were quiet about it for some reason! -- mainly exposure to a Coutrywide bailout, tho -- Oz banks went in, but Asian banks did not...

$1 billion hit to (Oz) banks from US
http://www.news.com.au/business/story/0,23636,23029820-462,00.html

AUSTRALIA'S big four banks have a $1 billion direct exposure to the US sub-prime mortgage market, despite months of assurances that they were immune from the deepening financial crisis.

The revelation came as the Commonwealth Bank, Australia's biggest home mortgage lender, raised its variable home loan rate by 10 basis points to 8.67 per cent in response to the global credit crunch and independent of any action by the Reserve Bank. The National Australia Bank last week lifted its rates by 0.12 of a percentage point, and the ANZ followed with a rise of 0.2.

The CBA, NAB, ANZ and Westpac's exposure to the US sub-prime market comes through an almost $1billion investment in troubled US mortgage group Countrywide Financial, which appears close to collapse.

The major players were part of a syndicate of 40 banks around the world that threw the embattled lender an $US11.5billion ($13 billion) financial lifeline last year.

CNBC

Breaking News: Bank of England holds key rate steady at 5.5%

Wow it looks like someone out there is going to fight inflation. Too bad he is not in America. Despite the damage it would do, I think we need another Volker like chairman. Drive those screws into the thumbs of those banksters!

WB Randy, HNY!

"you must be referring to "have price, no market"

(how does when say, "When going after revenge, sometimes you have to dig TWO graves"?)

"the houses get dumped on MLS or just get in the back of the private portfolio"

Could it... Is it... is it just possible buyers have returned to viewing homes as homes... and NOT "investments"!? If that's the case the NAR is in REAL trouble.