patrick.net

MarkInSF says

I like to compare the ratio of prices in different cities pre-bubble, and post bubble. The ratio of home prices in the fortress areas to east bay is 20-30% higher than it was pre-bubble. (e.g. if a Palo Alto home cost $500K in 1996, and $1M for the same home in 2010, and a Fremont home cost $250K in 1996 and $415K now, the ratio was 2.0 pre-bubble, and 2.4 today - 20% higher)

For PA it went well above $1.5M. As for Fremont we went well above $1M as well. $250K would have gotten you a 1800-2000 sq ft home. No joke! Today $400K doesnt get you much.

37779 Alta Ct
http://www.redfin.com/CA/Fremont/37779-Alta-Ct-94536/home/1350365

Property History for 37779 Alta Ct
Date Event Price Appreciation Source
Oct 15, 2010 Listed $995,000 -- BAREIS #21029431
Sep 01, 2004 Sold (Public Records) $845,000 10.2%/yr Public Records
Jun 05, 1992 Sold (Public Records) $257,000 -- Public Records

http://www.redfin.com/CA/Newark/6242-Jasmine-Ave-94560/home/871719

Property History for 6242 JASMINE Ave
Date Event Price Appreciation Source
Nov 30, 2010 Listed $625,000 -- MLSListings #81056013
Nov 30, 2010 Listed $625,000 -- EBRD #40498928
Nov 29, 2010 Listed $625,000 -- EBRD #40498769
Aug 16, 1996 Sold (Public Records) $197,000 -- Public Records

robertoaribas says

klarek: I think the credit defnitely affected the bay area wide pricing, and the oft quoted case-shiller statistics about the bay area. However, I honestly doubt the credit had much effect on the penninsula prime areas particularly, as near million dollar purchases are not likely made based on an $8000 credit.

While you're right and there were probably very few cases in that range that got the credit, every person that did get the credit at a lower point in the spectrum created a move-up sale or two or three. It's just like the money multiplier effect. One sale might actually create several more, well beyond the target range of the credit itself.

Still, another explanation for the higher tiered homes might be interest rates, but I contend that it was the tax credit and the immediate shift in demand it created. We saw how wild prices got when easy-sleazy lending stimulated demand.

Not all of them were foreclosure sales. Besides, we're talking about the aggregate impact. Were it not for that demand shift forward, there would have been less sales at the higher tier. Whether 0% or 50% of those 1st time purchases were foreclosures is largely irrelevant in my opinion.

robertoaribas says

Time will tell what happens to the upper tier, however on a risk/reward basis, I’d say it looks pretty terrible.

The fundamentals certainly don't support those high prices. Large increases in equity pushed a lot of people into the homes, and that has kept them from going into default (hence no significant price discovery).

it has been in the news for so long its no longer news. Did you miss the whole robo-signing scandal? according to the chart we are about the at the tip of the smaller peak as far as rate resets. Since there is now a about a year long lag to foreclosures, we are still at the low trough of the chart as far as feeling the actual foreclosure affect. This isn't the stock market where you can see thing happen every second on the computer. There is a significant lag which the US goverment is actively pushing farther and farther back with the suspension of mark to market accounting rules.

The reason why subprime was such a shock was because we had all these major banks fail, and even then, it didn't all happen all at once. It took a couple years starting from small grumblings of weak banks failing (that nobody in the main stream media paid attention to) to full scale collapse of AIG and Lehman (which shocked a lot of people but came as no surprise to many people here).

Actually, almost all of the people foreclosed by robosigners deserved to be foreclosed. The banks have no incentive to foreclose if the owners can pay. My point is the sheer number of foreclosures required robo signers to process the paperwork and there is STILL a huge shadow inventory that is being held back.

will we see another string of collapse like AIG and Lehman?... I doubt it because now the government is aware of the affect and will most likely hand out generous loans to any of the "too big to fail) who is short of cash (B of A and Citi) because they are already committed.

This doesn't mean real estate is out of the woods by any means. What I'm predicting is a long painful slow drop for the desirable areas until the PRICE RATIO BETWEEN THE DESIRABLE AND THE NON-DESIRABLE AREAS DRIFT BACK TO HISTORICAL RATIOS. people keep predicting prices to drop down to 1998 inflation corrected levels, I think its a pretty good guess. However, its not inconceivable that prices can drop BELOW that. people need some time to re-adjust their expectations from the bubble years and it could take years of beating and frustration before capitulation.

best guess time frame? (peak of option arm/alt-A reset + 12months) = 2013

it may take much longer...decades like Japan... or quicker in some neighborhoods depending on local employment or if robo-signing puts enough foreclosures to a halt that it totally freezes the market.

The truth is, real estate is not black and white. There are gradients of desirableness and some neighborhoods will change faster then others. I'm sure there are some areas in San Jose and Peninsula are good buys NOW, as income properties. For me, the areas I'm looking at are still overpriced and will surely drop lower if I'm patient.

One thing that should be recognized is that total payrolls is less now than in 2000:

http://research.stlouisfed.org/fred2/series/PAYEMS

(same chart since 1996)

We've got $600B of hot money scheduled to flood into the system over the next 6 months, and thanks to fractional reserve lending that might be a pretty decent shot in the arm as far as business funding goes -- banks should be totally flush with cash and looking for money to lend out.

But if that doesn't work then there could in fact be another leg down from here. Initial unemployment claims peaked 1Q09, so these people who haven't found work will be purged from the rolls over the next 3 months.

Should California's finances start going haywire -- vendor vouchers, bond rate increases, abandonment of high-speed rail and other stimulus efforts, medicaid cutoffs -- things can get pretty bad here.

As for good news coming, what is there? I suppose a weakening dollar would help our food exporters, but said weakening dollar might also prompt domestic food inflation as producer prices increases and we lose more of our food supply as exports. To save housing we need WAGE inflation, not PRICE inflation, LOL.

That money is not intended to be spread around. (they might say it is) its to keep the banks solvent. Hmm where I've heard this this story before. Oh yeah, konichiwa! Welcome to our lost decade.

Troy says

I suppose a weakening dollar would help our food exporters,

A weakening dollar would help the entire manufacturing sector, not just food exporters...

Anon.

Here is my observations about your observations.

While salary/affordability is important, the real factor whether people can afford these homes are net worth. The top 10% of the population is doing better than ever as demonstrated by a 16% growth in new millinionaires in 2009 and another robust growth in 2010. These people do not live in places like Vallejo even if it is free and these people's wealth here are tied to the various financial markets, which for the most part is signficantly up.

The mortage interest deduction in the peninsula is the most lucrative in the nation, In Nevada, Texas, FL and 40 other states it is worthless or near worthless. The ratio does not account for many variables. I see no reason why a family cannot take on a conforming loan at 120K salary level based on current interest rates.

Super-Metro areas like Tokyo, New York, Singapore, London, etc. have one thing in common, large income/wealth disparity gap among the population. The Pennsula enjoys this same phenom as well there are a bunch of people working at fast food, Walmart etc, but there is a tremendous class of households making over 200K, 1M and large income gap/wealth gap as well. From that sense, it is not unreasonable to compare Penninsula region to a major metro market where 1,000 sq ft is the starting point for decent pocket of private housing.

Median salary should get you nowhere close to a decent house in the decent part of the penninsula. This represents about 20% of the housing stock and of that 20%, 90% have bought years ago and hold the propety til death. Then there are those who built wealth over time to compete with.

In the areas you mentioned, there have been essentially 0 new single family homes built in three decades while bay area population zoomed from 4 million to 7 million. These areas, once considered working class naturally are making home to upper middle class and upper class to elite class as more people come into the mix and make things competitive. That's just the demographic evolution and why true prime property is the last to fall and first to recover.

The most important factor in buying is safety, school, and proximity to job centers. These values grade out well in the areas you mentioned and that's why 6 milllion out of 7 million here would love to live in the area you mentioned cost nonwithstanding. 3,000 square feet mansion is way down the list of things people value as easily seen in places like Brentwood, Mountain house that tries to upscale market based on size and golf courses alone.

Foreign buying is very subtle. While these things are hardly published, do you even doubt that Canadians, Europeans, Asians and Middle East expat own more of US than ever and that the trend will continue. Foreignors buy prime.

SF ace says

Foreign buying is very subtle. While these things are hardly published, do you even doubt that Canadians, Europeans, Asians and Middle East expat own more of US than ever and that the trend will continue. Foreignors buy prime.

Sanchez, Wong, Nyugen, or Tran dont indicate foreign buyers. They been here for a long time.

SF ace says

The most important factor in buying is safety, school, and proximity to job centers.

So why in heck didnt buyers in past decade think like this? All these factors keep changing year over year most of all proximity to your next job is a huge unkown.

The home buyer tax credit was not available to any house over 800k, which cuts out a majority of the houses you guys are talking about

For those that think the pensinula is immune to overpricing.

Think again:
BayArea/Peninsula Foreclosures and Pre-Foreclosures

All those tiny red dots are distressed properties.
Homes that have missed payments or homes that have foreclosed.

The link shows Palo Alto and Los Altos. The fortress. If you view Sunnyvale, Santa Clara in the south or San Mateo, Belmont in the north it gets worse.

I'm not sure what your map proves. West of El Camino in Palo Alto, Los Altos and MV have very few dots. If you were to put blue dots of serious potential buyers on the map, which color would you have more of? If it's anywhere close to the same, you aren't going to get much of a drop.

ch_tah says

I’m not sure what your map proves. West of El Camino in Palo Alto, Los Altos and MV have very few dots. If you were to put blue dots of serious potential buyers on the map, which color would you have more of? If it’s anywhere close to the same, you aren’t going to get much of a drop.

wow. okay ignore the data.

btw, most homes west of el camino in palo alto are only available for purchase by stanford faculty; they are priced at a substantial discount from market rate hence the lack of foreclosures. but it's good you can ignore the rest of palo alto which does have significant distressed properties.

The argument all along from you guys is that fortress area residents all have unlimited magical Chindian wealth and are immune to foreclosures and short sales. This proves the there are in fact many distressed properties in the fortresses. If thee are so many rich Chindians waiting to buy, how are these homes even making to foreclosure? Where are all the potential buyers? Let's see some data other then hand waving speculation. Arguments are not valid if you cant back it up with data. Mortgage applications? Sales numbers? Foot traffic? Let's see it.

ch_tah says

I’m not sure what your map proves. West of El Camino in Palo Alto, Los Altos and MV have very few dots. If you were to put blue dots of serious potential buyers on the map, which color would you have more of? If it’s anywhere close to the same, you aren’t going to get much of a drop.

If you think long term don't you think some of the blue dot guys will go into foreclosure in the future?

anon says

but it’s good you can ignore the rest of palo alto which does have significant distressed properties

there's plenty in East PA, but EPA is not PA.

anon says

ch_tah says

I’m not sure what your map proves. West of El Camino in Palo Alto, Los Altos and MV have very few dots. If you were to put blue dots of serious potential buyers on the map, which color would you have more of? If it’s anywhere close to the same, you aren’t going to get much of a drop.

wow. okay ignore the data.
btw, most homes west of el camino in palo alto are only available for purchase by stanford faculty; they are priced at a substantial discount from market rate hence the lack of foreclosures. but it’s good you can ignore the rest of palo alto which does have significant distressed properties.

I used el camino mainly for MV since the better part of MV (94040) is west of el camino. Just about all of PA has very few dots.

Serpentor says

The argument all along from you guys is that fortress area residents all have unlimited magical Chindian wealth and are immune to foreclosures and short sales. This proves the there are in fact many distressed properties in the fortresses. If thee are so many rich Chindians waiting to buy, how are these homes even making to foreclosure? Where are all the potential buyers? Let’s see some data other then hand waving speculation. Arguments are not valid if you cant back it up with data. Mortgage applications? Sales numbers? Foot traffic? Let’s see it.

I've never seen such an argument by anyone (e.g. immune to foreclosures and short sales). My argument and presumably other people's argument is that the number of foreclosures and short sales is small compared to the amount of prospective buyers out there - which means there won't be a signifcant decrease because demand still outpaces supply. Compare your selected cities with Hayward, San Mateo, Santa Clara, etc. So many more dots, which is why there have been big price declines in those areas.

As for data to back up my view that prices aren't collapsing in PA, Los Altos and that there are plenty of buyers out there:
http://www.city-data.com/city/Palo-Alto-California.html
http://www.city-data.com/city/Los-Altos-California.html
http://www.city-data.com/zips/94040.html

Good enough?

ch_tah says

Good enough?

Nope. No area exists in a vacuum. Falling prices in surrounding areas will most certainly affect the more affluent places.

Atherton might be an exception, others, not so much.

Do I think Palo Alto will ever fall to be affordable by most? Most certainly not, but further price corrections will come.

ch_tah says

Serpentor says

The argument all along from you guys is that fortress area residents all have unlimited magical Chindian wealth and are immune to foreclosures and short sales. This proves the there are in fact many distressed properties in the fortresses. If thee are so many rich Chindians waiting to buy, how are these homes even making to foreclosure? Where are all the potential buyers? Let’s see some data other then hand waving speculation. Arguments are not valid if you cant back it up with data. Mortgage applications? Sales numbers? Foot traffic? Let’s see it.

I’ve never seen such an argument by anyone (e.g. immune to foreclosures and short sales). My argument and presumably other people’s argument is that the number of foreclosures and short sales is small compared to the amount of prospective buyers out there - which means there won’t be a signifcant decrease because demand still outpaces supply. Compare your selected cities with Hayward, San Mateo, Santa Clara, etc. So many more dots, which is why there have been big price declines in those areas.
As for data to back up my view that prices aren’t collapsing in PA, Los Altos and that there are plenty of buyers out there:

http://www.city-data.com/city/Palo-Alto-California.html

http://www.city-data.com/city/Los-Altos-California.html

http://www.city-data.com/zips/94040.html
Good enough?

linking to city-data doesn't mean anything since it's too general. It doesn't show prices going up or high demand.
it's like me linking to http://en.wikipedia.org and telling you that the information is there, just find it.

Here's specific data for 94031 (the good zip code in PA).
Value at Median $ per Sq. Ft.
2010 16 $2,705,000 2,790 $983 $1,118,890
2009 101 $1,760,000 1,978 $855 $973,130
2008 123 $1,950,000 2,024 $1,050 $1,195,165
2007 27 $1,542,500 1,849 $911 $1,037,063
2006 28 $1,475,000 1,523 $927 $1,055,199
2005 38 $1,600,000 1,851 $799 $909,467
2004 46 $1,080,000 1,710 $666 $758,245
2003 40 $980,000 2,207 $548 $624,746
2002 45 $925,000 1,782 $608 $692,645
2001 24 $857,000 2,116 $565 $643,622
2000 28 $1,025,000 1,858 $650 $740,681
1999 41 $702,000 1,596 $446 $508,606
1998 35 $695,000 1,544 $435 $495,459
1997 38 $750,000 2,254 $375 $426,940
1996 33 $465,000 1,524 $337 $383,934
1995 36 $485,000 2,167 $304 $346,280
1994 39 $490,000 1,778 $300 $341,451
1993 38 $420,000 1,634 $281 $320,062
1992 30 $541,000 2,296 $280 $318,947
1991 25 $499,000 1,957 $256 $291,695
1990 23 $480,000 1,946 $288 $328,020
1989 21 $614,000 2,126 $314 $357,568
1988 29 $465,000 2,024 $270 $308,177

Median $/sqft is up 15% from 2009 but sales are way, way down - 84% decrease in sales volume from 2009.
The 2010 median price is $2.7M which is 53% higher than 2009s $1.76M.

Even if 4 more homes sold in the next 3-4 weeks (which would be 25% of the 16 homes sold in 11 months) it would be the lowest number of homes sold in this data set going back to 1988.

The question is: Why are there 85 fewer homes sold compared to 2009? Why did sales drop 84% this year?
Shouldn't the chindians be buying up these highly desirable properties in the most sought after PA zip code?
Your theory there's high demand can't be taken seriously.

Can you claim prices are higher? On a $/sqft certainly.
But on such low volume, (lowest since the data has been tracking), I'm going to say prices will fall.
I didn't say crash. Folks in PA are generally richer than normal and they can hold out longer than normal.
So a slow price decline is much more likely than a fast crash.

People don't seem to realize, in fortress areas there's a lag meaning cheap areas fall first, rich areas fall last. but they both will fall. everyone thinks because PA hasn't fallen yet, it won't. but it most certainly will. it's just like in 2007 everyone thought BA prices, in general, wouldn't decline and of course today they did decline almost everywhere except the peninsula.

Serpentor wanted proof of sales, potential buyers, etc. I think what I provided is more than sufficient.

anon, the links I provided showed pretty graphs of sales and prices. I think it was pretty specific in terms of what was asked.

PA looks to have about 15 short sales/foreclosures. That's not enough to put much pressure on prices. Look at the number of short sales/foreclosures in Hayward. That's pressure.

Can you provide the link for your data? Hopefully, you are being honest, but without knowing how many months are left in 2010 in your data, it's hard to know how 2010 stacks up.

It looks like 2008 and 2009 were anomalies in terms of volume and somewhere in the upper 30's/low 40's is normal for your area. Still, 16 versus 40 is a big drop.

You also are leaving out part of the equation when you say sales are down. How many listings are there? If there were fewer listings, then likely there would be fewer sales. That doesn't prove there isn't demand.

It all brings us to the main point...how much do you expect prices to fall in PA and if they fall that amount, will you buy? You, anon, said prices won't crash. So does that mean they are going to drop 10-20%? Let's suppose they do, are you able to afford a $900k house? Or is this all just for mental exercise?

anon,
I looked up your 94301 zip code on redfin. 22 total houses for sale. I'm not sure this is a great zip code to prove a point about supply and demand. With that much inventory, I compeletely agree that 101 houses won't sell by the end of the year.

So from above we can conclude that you do not make the cut. Either you or your wife together cannot make $120k.

As I said before, "prime bay area locations will never experience a significant reduction in price" There may be a glitch one or two, but will not be in large scale.

chip_designer says

So from above we can conclude that you do not make the cut. Either you or your wife together cannot make $120k.
As I said before, “prime bay area locations will never experience a significant reduction in price” There may be a glitch one or two, but will not be in large scale.

I don't know who you are referring to or how does someone making $120k have anything to do with any arguments. Just because you've stated before prices won't crash, doesn't mean it won't. You might want to keep chanting that a few thousand times.... it might be like a magical spell where your wish might come true. if you repeat it often enough. LOL.

since you are a supposed "chip designer", how about formulating a logical argument on why option arm/Alt-A exploding won't affect the locations in discussion.

and no, magical Chindians with unlimited money won't cut it as a logical argument unless you have actual proof of wealth transfer numbers going into the Bay Area from China and India.

Serpentor says

since you are a supposed “chip designer”, how about formulating a logical argument on why option arm/Alt-A exploding won’t affect the locations in discussion.

I'm no chip designer, but how about this possibility:
1) rates stay incredibly low, so the option arms don't actually explode, but rather just increase the payments slightly
2) people refinance out of option arms
3) banks convert option arms into interest only loans for 5 years, pushing 2012/2013 doomsday until 2017/2018
4) since prices haven't dropped much yet, people whose loans are coming due start selling now or sold in 2008/2009 and are long gone before their loan exploded
5) there is a decent amount of wage inflation between now and 2017, and these monthly bills don't look so bad, or again, the people who can't afford, sell.
6) the few red dots on your screen are foreclosed on and people who can afford the houses, purchase them.

They may or may not all come true, but they are all just as plausible if not more so than a collapse of prices down to year 2000 prices.

I think 30% is a good number that is pretty believable, and yes if it drops 30% from today's number I MIGHT consider buying in "some" fortress areas.... but I'd also consider the other areas just outside of the "prime" areas. I'm no location snob but I'm also not averse to hanging out at low crime areas with decent restaurants. Its all about value to me.

You may not have said specifically prices won't drop but its a moot point... you don't think the prime areas are were inflated by the bubble and I disagree.

I know you guys have a vested financial and emotional interest in the prime areas not crashing. I'm sorry you guy yourselves into your overpriced McAlbatross. My advise is to get out while prices are still high.

@ ch_tah

He wasn't talking to you, he was quoting "chip designer".

1. Look up mortgage recasts, not resets. They're OPTION arms. These things will begin to detonate next year. I've seen some of the recast #'s and it's obnoxious.

2. Refinance with negative equity?

3. Maybe

4. Lowest sales count on record. Who are they selling to again?

5. Not with 10%+ unemployment.

6. Most certainly possible.

30% declines aren't out of the question at all. The gains from 1997 would still be incredible.

E-man says

Serpentor says

and no, magical Chindians with unlimited money won’t cut it as a logical argument unless you have actual proof of wealth transfer numbers going into the Bay Area from China and India.

Serpentor
I haven’t read all the posts from above to know what others are saying. However, this is how I envision it.
If homes in PA and other fortress areas were to drop from $1M to $800k from here, are you or some of patnet readers a buyer at $800k or even at $700k for a 1,200 square foot 3/2 home?
Based on my experience, home prices in the low-end market, below $400k had stabilized. Home prices in the $500k to $700k are stablizing with potential minor downward price pressure in the $700k. Thanks to the conforming jumbo loan limit of $729k.
Therefore, if home prices in PA or other fortress areas were to drop to $800k, I believe move up buyers in proximity areas like Santa Clara, Sunnyvale and San Jose, would likely be potential buyers rather than the Chindians.
What do you think of this scenario?

You bring up a great point in that all the locations are related. If one place drops in price, it brings in buyers that normally won't look in that area. This works in REVERSE as well. If a place like Sunnyvale drops 35% and PA drops only 7%... buyers looking at PA are going to think really hard about how much that extra couple hundred grand is worth to them. If that person decides that Sunnyvale is a better value then PA just lost a potential buyer and reduces the demand. As someone else here says, nothing exists in a vacuum. Fortress prices were affected by the "move up" affect during the bubble years, just like it will be affect by the price differential to its surrounding areas.

I said I'd consider looking in the fortress, it doesn't mean I'm going to buy there. I'm going to weigh my options and make my decision on what financially makes sense.

CrazyMan says

@ ch_tah
He wasn’t talking to you, he was quoting “chip designer”.
1. Look up mortgage recasts, not resets. They’re OPTION arms. These things will begin to detonate next year. I’ve seen some of the recast #’s and it’s obnoxious.
2. Refinance with negative equity?
3. Maybe
4. Lowest sales count on record. Who are they selling to again?
5. Not with 10%+ unemployment.
6. Most certainly possible.

I know he was. I was making a funny.
1. It's not as bad as you think
2. Are you sure it is negative? Prices may have gone up in the particular area.

I have to question the data on the 16 sales too. According to redfin.com the number is much higher. Maybe sales haven't dropped off at all. I thought we were having honest discussions here. According to redfin.com in the past 6 months, in 94301, there have been 82 sales. That's only 6 months. If I go for a year, it's 140 sales. What's going on here? 16 versus 140?

Crazy_man: Thanks for answering Ch_Tah's questions for me. You took the words right out of my mouth. I don't have anything to add to what you wrote.

ch_tah says
1. It’s not as bad as you think

orly?

60% of these recasts are in CA, of which the vast majority are in the BA and OC.

It's not bad, it's obnoxious.

ch_tah says

1. It’s not as bad as you think
2. Are you sure it is negative? Prices may have gone up in the particular area.

1. Prove it.
2. For the 1000x time, alt-a/option ARMs have a 5year fuse. Prices haven't dropped because the bombs have not exploded.

I can't answer the sales number because I didn't post it. I do seem to remember there was a discussion that redfin counts foreclosure as a "sale". No sure if that applys in this discussion.

ch_tah you're an idiot for implying i'm lying.

go check propertyshark; any house in 94031.

Anon is right. This is anecdotal but I imagine all too popular: I've got relatives that are completely assed out after purchasing their 53 year old POS San Carlos home for almost $1 million. They are house poor now and comps are going for $750k - $800k. They are not in default, and likely won't be, but they obviously won't be buying another home or buying much of anything for the next couple decades. Their hands are tied, all because they had to own. And they are in complete denial.

Same for my relatives in the East Bay. I have a feeling there's a lot of this up there. Extreme leverage, though not necessarily defaulting. Of course both families I describe were part of the bubble on the way up, buying already-overpriced homes early in the bubble, selling them, and then rolling their profits into larger, more overpriced homes. Then, BOOM. They got stuck in them. They both bought at almost the exact worst time.

How many other white collar, dual income families in the Fortress areas are tapped out like my relatives? I bet a lot.

http://articles.sfgate.com/2009-09-20/news/17207000_1_option-arms-fitch-ratings-payment-option/2

"When option ARMs recast, the payment shock is much more intense than we've seen (with other types of loans, such as subprime)," said Maeve Elise Brown, executive director of Housing and Economic Rights Advocates in Oakland, a consumer advocacy group. "That makes them potentially much more damaging."

Unlike subprime loans, which were more commonly used for entry-level homes, option ARMs started out with high balances. In the five-county San Francisco area, option ARMs average about $584,000 and were used to buy homes averaging $823,000, according to an analysis of First American data.

http://articles.sfgate.com/2009-09-20/news/17207000_1_option-arms-fitch-ratings-payment-option/4
54,000

Number of option ARMs in Bay Area

$30.9 billion

Bay Area option ARM loan balance

Source: First American CoreLogic

94%

Borrowers who make minimum monthly payments