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CrazyMan
2011 Mar 21, 2:57pm
I’m waiting for prices to “plunge.†I’m in San Francisco and in reasonably decent and safe neighborhoods the home prices are staying pretty obstinately high. I’m pretty tired of waiting but since I have no choice I’m continuing to wait. If you want to buy in an unsafe neighborhood, you can definitely find something inexpensive but in all moderate to good neighborhoods, prices haven’t moved enough to make a real difference. Now I’m noticing a trend toward condo-izing of private homes, I guess that way sellers are hoping to sell two units and get the total money they want out of their sale price. We’ll see if that works. I looked at one yesterday and for $650,000 you had no garage. If people are stupid enough to pay 2/3 of a million dollars and have to be running around moving their car from one side of the street to the other, then maybe they deserve to pay it I guess.
There's already a handful of examples of SF proper houses selling for below 2001 prices. Your best bet is to do what you're doing. Wait.
CrazyMan
2011 Mar 21, 3:49pm
I don't think prices will ever go below what the house can rent for, +/- 5 - 7%. I'm a bear as much as a bear can be, but I just don't see anything lower than that. It's not going to happen.
If you can find a house that you like within 5-10% of what its rent value is, you should buy it and be done. Anything beyond that is wasting money IMO, as there are, at that point, better investment vehicles.
Roberto please keep posting twice a day about the fabulous properties you are buying in that shithole; your wisdom and ah shucks humility simply command for us to all be silent...we just listen. It's Roberto's world and we just live in it.
I for one am on the edge of my seat, somewhat breathless, but determined to survive until your next explication of genius.
klarek
2011 Mar 21, 11:02pm
“Home sales tumble, prices are near 9-year lowâ€
that’s awesome.
Yes. Yes, it is.
I believe Thomas Wong said on this blog once that prices could go down to 1998 prices, plus inflation-adjustment. The mean was around $275K at that time I believe, that would mean $375K adjusted for inflation. I would love that but can hardly imagine they’d go down that far from where we still are now.
It has happened before, and will do so again. Look at San Diego over the prior 20-25 years. $375K would be around 3.5-4x incomes today , sounds reasonable to me. Banks would be much more willing to lend at lower prices than $450-500K today.
http://www.housingbubblebust.com/OFHEO/Major/SoCal.html
I don’t think prices will ever go below what the house can rent for, +/- 5 - 7%. I’m a bear as much as a bear can be, but I just don’t see anything lower than that. It’s not going to happen.
Rents can and do fall. Certainly more rapidly than prices. Overall, places like Silicon Valley are seeing a shrinking job base with maturing industries. Not the rapid growth we saw back in the 80s. Places like Fremont and Milpitas are seeing 20-25% R&D facility vacancies. I wish it was different, but high costs are driving jobs, even by local employers elsewhere.
closed
2011 Mar 22, 12:09am
Loans don’t exist for many condos, that puts a death spike through their prices.
Why would it be harder to get a loan for a condo than for a house? (I’m referring to condos, not TICs. I know it’s harder to get a loan for a TIC).
I can think of a few reasons that could make it hard to get a loan: Onerous HOA fees that take too much of your income; too many units are rentals; homeowners association is in litigation; large special assessments; insolvent HOA because of unpaid dues...
looking at the bay area
* the graph is a bit misleading.
the starting point of the green inflation line is not lined up with the starting point of the other lines.
* the last time all of the lines were at or under the inflation line was in 1986. i don't think we'll see sf/sj under the green line any time soon.
* the last peak-to-trough was around 7 years(1990-1997)
* the last peak-to-trough had very consistent price declines over this 7 year period (no government stimulus to bump it up)
* sj/sf started to appreciate about a year before(1996) the other less expensive areas
* the last peak-to-trough just before the index started to rise the declines slowed down noticeably; i expect the same this time (2009-2010 doesn't count because it was caused by the stimulus).
* this current peak-to-trough(2006-present) is about 5 years in; but there was a year of heavy government intervention so call it 4 years.
* this bubble is so much larger than the last, i would expect time of correction to be more than 10 years.
we've probably got another at least another 6 years of slow price declines (until 2017).
i do not expect sf or sj to get back in line with the green inflation line, if sf/sj gets to 400-450, around 2000-2001 prices i'd call it decently affordable.
this year and next will be very interesting to see how prices react without any government interference.
tatupu70
2011 Mar 22, 12:30am
One more point for Klarek and rigged. Take a look at the above graph from mid 2009 to present. Are you really arguing that the lines aren't pretty much flat?
klarek
2011 Mar 22, 1:07am
Take a look at the above graph from mid 2009 to present. Are you really arguing that the lines aren’t pretty much flat?
HPI quarterly data smoothed out and crammed on the right side of the graph. Sure, if you want to call that flat, be my guest. I could make a flat line from today's DJIA mark to two years ago, but I would never be disingenuous enough to call that the market flat.
tatupu70
2011 Mar 22, 1:26am
HPI quarterly data smoothed out and crammed on the right side of the graph. Sure, if you want to call that flat, be my guest. I could make a flat line from today’s DJIA mark to two years ago, but I would never be disingenuous enough to call that the market flat.
Not sure that's really a good analogy... If you look back at earlier time periods, there is variation similar to what we've had over the last two years. Like I said in an earlier post, flat doesn't mean prices stay EXACTLY the same.
As long as the unemployment rate is high, the house price will keep dropping.
Plain and simple.
Cvoc13
2011 Mar 22, 1:28pm
I could not have said it better then this, This agrees with all I have been saying. 50% down side, and 10 year supply. That is indeed what I am thinking.
http://www.madhedgefundtrader.com/march-21-2011.html?source=patrick.net#caption
FNWGMOBDVZXDNW
2011 Mar 22, 9:23pm
^We were expecting to rent a place next year. If we put down 20% on a 170K condo, the 30 yr mortgage payments are $700 per month. Rents are $1500 to $1600 on equivalent places. Because it is so much cheaper to buy, we are thinking of buying, and then renting it out in a year or three. We are expecting prices to drop a bit over the near term & rents to drop 10 to 20% as well.
We are considering buying because it is so much more expensive to rent, so I expect that others will do the same. That is not a tenable spread long term & sustained lower house prices should lead to lower rents. I would expect that the spread expensive rents relative to mortgage could live on the lower end for a while if people had a hard time getting loans and / or interest rates shoot up.
I don’t know to what extent, but either way rental prices are affected by supply & demand, so more rental investors would make the situation more favorable for renters up to the point where being a rental investor is no longer… rentable.
That and I think that if Craigslist were to charge for postings like the good old fashion days, that rents would immediately collapse. No more overpriced listings come out over and over again for many consecutive months. They're already charging for some categories in certain areas.
FortWayne
2011 Mar 23, 12:56pm
still has a long way to go. This article also points out that California is going to lag a lot more because of all the land speculation that happened after the initial crash.
http://www.businessinsider.com/gary-shilling-house-prices-2011-3?source=patrick.net#yui-main
I have seen this first hand so far. A lot of speculators are buying up properties with cash, but end up flipping it at a loss so far to other speculators. Don't know about other states, CA still has a few crazies running around trying to balloon the tulips all over again.
It is very much the same in other states, Chris. There is always a contingent of knife-catching investors chasing yesterday's news. There are even (gulp) those who invest(ed) in Detroit real estate hoping to make a quick buck with a flip. The new census numbers indicating a massive 25% drop in the city's population in just ten years must not be welcome news for them I imagine.
Once real estate is revealed in plain sight to be turning over (it already is and is now being carried in all of the media) it is going to cause FEAR in those who bought recently thinking they were picking up bargains. Since these individuals were acting speculatively concerning these recent purchases and because fear is the most powerful motivator of all, I expect some panic selling/dumping. From there things probably get icky.
There is no "flat." We have reached new lows - support has been breached, period.
What's ESPECIALLY concerning is that these new lows are NOMINAL meaning that the real, inflation-adjusted losses are TERRIBLE.
Ick.
tatupu70
2011 Mar 24, 9:14am
No correlation between rising rents and rising home prices.
Really?? Have you read anything on this site?
Really?? Have you read anything on this site?
Rents post 2000 declined as much as 30%... even back in 2004 they were calling for higher rental rates, which never happened. We are still well below inflated 1999-2000 peaks. Concessions and free rent was very common. Home prices went the other way.
2002
Jul 23, 2002 - Rents in the San Francisco Bay Area fell during the three months ending June 30, the sixth consecutive quarterly decline according to RealFacts, a Novato-based research firm. In Alameda and Contra Costa counties, rents have fallen for five consecutive quarters, mirroring the declining ...
From Oakland Tribune, The : Bay Area rentscontinue decline - Related web pages
docs.newsbank.com/g/GooglePM/OKTB/lib00634 ...
2003
Jul 17, 2003 - The average monthly rent for a vacant Bay Area rental unit was $1295 in the second quarter of 2003, according to Novato-based RealFacts, a tracker of rental data ... "Even at the height of the dot-com boom, the heat seemed to lag behind San Francisco, San Mateo and San Jose," he said. ...
From Oakland Tribune, The :
Area rents still declining - $1,295 average … - Related web pages
docs.newsbank.com/g/GooglePM/OKTB/lib00634 ...
2004 Apr 22, 2004 - The decline in rents was most pronounced in San Jose, which has borne the brunt of the high-tech bust. There, the average rent for a one-bedroom apartment tumbled 6.5 percent year-over-year, to $1124, RealFacts said.
In the San Francisco area, the price for a similar unit dropped 1.2 ...
From Bay Area rents soften up / Prices are lower than in 2003 web pages
www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2004 ...
2005
Jan 20, 2005 - RealFacts concluded that the Bay Area's economic weakness contributed to the fourth consecutive year of declining rents in the region, although there are signs the downturn is nearly over. While the San Francisco Bay area has been struggling to recover from a high-tech slump that has ...
From … Democrat, The : SURVEY: 2004 NORTH BAY APARTMENT RENTS …
docs.newsbank.com/g/GooglePM/SA/lib00168 ...
2006
Jan 19, 2006 - AP Archive After four years of decreases triggered by the slumping technology job market, apartment rents in the San Francisco Bay area rebounded in 2005, according to a survey being released Thursday. The average apartment rent in the San Francisco metropolitan market rose 3.7 percent ...
From … Archive:
Rents in San Francisco area rebound after 4 years of decline -
docs.newsbank.com/g/GooglePM/APAB/lib00581 ...
2007
Jan 18, 2007 - RealFacts, a multifamily data analyst based in suburban San Francisco, said the changes mirrored national trends and predicted that rent growth rates probably will decline as apartment owners seek to fill vacancies. Average rents in Kansas City rose by $5, or 0.1 percent, in the fourth ...
2008
Jul 21, 2008 - Both San Mateo and Alameda counties saw an 8.2 percent increase in the past year . The only other area with a greater increase was San Francisco at 10.3 percent, according to RealFacts. Foster City and South San Francisco have the highest average rents. Foster City has an average rent ...
From Small studio, apartment rents decline - Related web pages
www.smdailyjournal.com/article_preview.php?id ...
2009
Jul 14, 2009 - Apartment rents in the San Jose area fell an average of 3.8 percent from March to June, the biggest drop in the country, according to a report issued Wednesday . Rents in San Francisco posted the second biggest decline in that period, down 2.7 percent, according to a national study of ...
From San Jose area tops US in Q2 rent drop
Silicon Valley / San Jose … - Related web pages
www.bizjournals.com/sanjose/stories/2009/07/13 ...
Apartment rents in the San Jose area fell an average of 3.8 percent from March to June, the biggest drop in the country, according to a report issued Wednesday.
Rents in San Francisco posted the second biggest decline in that period, down 2.7 percent, according to a national study of rents and occupancy by RealFacts
Read more: San Jose area tops U.S. in Q2 rent drop |
Silicon Valley / San Jose Business Journal
The severity of the drop in the San Jose market varied by type of apartment and location. One-bedroom units fell 9.9 percent to an average of $1,372 a month from the first quarter to the second quarter. Two bedroom, two-bathroom units were down 8 percent to $1,812.
Sunnyvale has seen the steepest year-to-year drops actual rents in the region, down 11 percent to an average of $1,492 a month. Santa Clara rents fell by 10.7 percent to $1,469 and Mountain View apartments dropped 9.8 percent to $1,562.
In San Jose, which with 150 complexes has the largest supply of apartments in the region, the average actual rent dropped 6.4 percent to $1,495.
Occupancy in the San Jose region's apartments fell by 1.6 percent to 94.8 percent in the area in the past year.
Apartment rents in the San Jose area fell an average of 3.8 percent from March to June, the biggest drop in the country, according to a report issued Wednesday.
Rents in San Francisco posted the second biggest decline in that period, down 2.7 percent, according to a national study of rents and occupancy by RealFacts.
The real estate analysis firm said higher-then-average unemployment rates in the region were taking their toll on rental rates in the second quarter. Unemployment in Silicon Valley hit 11.2 percent in June.
Year-to-year, the drop in the average rent asked in the San Jose area was 8.2 percent to an average of $1,552 a month and San Francisco fell by 4.6 percent to $1,544.
The severity of the drop in the San Jose market varied by type of apartment and location. One-bedroom units fell 9.9 percent to an average of $1,372 a month from the first quarter to the second quarter. Two bedroom, two-bathroom units were down 8 percent to $1,812.
Sunnyvale has seen the steepest year-to-year drops actual rents in the region, down 11 percent to an average of $1,492 a month. Santa Clara rents fell by 10.7 percent to $1,469 and Mountain View apartments dropped 9.8 percent to $1,562.
In San Jose, which with 150 complexes has the largest supply of apartments in the region, the average actual rent dropped 6.4 percent to $1,495.
Occupancy in the San Jose region's apartments fell by 1.6 percent to 94.8 percent in the area in the past year.
RealFacts only surveys apartment complexes with 100 units or more nationwide and 50 units or more in the Bay Area.
Down 20% per article.
Rents fall during tech slump ; San Francisco hits 2-year low
Chicago Tribune - Chicago, Ill.
Author: Michael Liedtke, Associated Press
Date: Apr 28, 2002
http://pqasb.pqarchiver.com/chicagotribune/access/116537716.html?dids=116537716:116537716&FMT=ABS&FMTS=ABS:FT&type=current&date=Apr+28%2C+2002&author=Michael+Liedtke%2C+Associated+Press&pub=Chicago+Tribune&desc=Rents+fall+during+tech+slump+%3B+San+Francisco+hits+2-year+low&pqatl=google
San Francisco rents are now almost back to where they were in September 1999, when the average stood at $1,692 per month, RealFacts said. Propelled by the Internet business craze that brought thousands of well-paid workers to the city, San Francisco rents peaked at $2,036 per month in December 2000, according to RealFacts.
tatupu70
2011 Mar 24, 1:12pm
Rents post 2000 declined as much as 30%… even back in 2004 they were calling for higher rental rates, which never happened. We are still well below inflated 1999-2000 peaks. Concessions and free rent was very common. Home prices went the other way.
That's why it's called a bubble. It's abnormal.
Normally, rents and prices move together, as they should.
What was the price of a cheeseburger, gallon of gas, milk, house 30 years ago? ...What do you think a cheeseburger, gallon of gas, milk, house will cost in 30 years from now?
Inflation is coming - the government wants inflation and will do anything to cause inflation. If they can't get the housing market off the ground, they will print and print and print until inflation hits that they get prices to go up that way.
http://news.yahoo.com/s/nm/20110321/ts_nm/us_usa_economy_housing#mwpphu-container
Back at April 2002 (just hanging on) levels - 9 YEAR LOWS!
Existing home sales COMPLETELY AND ABSOLUTELY TANK. The results are far worse than any of the 53 analysts openly previously opined (hint, they’re all morons).
NAR admits RE nationwide average loss of 5-6% in fiat for last twelve months. Stop lying - the RE bears were right.
When valued in wheat, corn, oil, ounces of silver or gold, RE is absolutely and totally collapsing. Even when you trash the unit of measurement, the USD in this case, RE is still as impotent as an overweight American - that’s not just sad, it’s laughably pathetic!
#housing