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Why prices will continue to fall in the Bay Area/Peninsula
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2010 Dec 1, 3:48am 38,028 views 144 comments
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Serpentor
2010 Dec 23, 7:03am
Lol why is it that you always go back to theories that theres no data? rich foreigners, secret incomes, gold egg laying dragons, lol. Fantasy
Do you think only palo alto residents under report their incomes?
Serpentor
2010 Dec 23, 7:09am
Pop quiz, if most of the high income families have already lived there for decades. How does that skew the income distribution for people who bought during the bubble years?
pkowen
2010 Dec 23, 9:21am
That's a new one - housing prices are high because of tax evasion. Love it.
Cvoc13
2010 Dec 23, 10:04am
Man, I can't see it, how some of you think that Housing is going to sustain upwards pricing, and even rents are going to have to come down, in my outlook. I am not looking for sudden crash (dah that happened) While we could get a fairly big BANKING Crisis II (smaller chance) but still, our economic health is in need of an, the state is broke, the fed is running a trillion plus deficit, yet they still have to BAIL out all of these Bankrupt local governments all over the USA... Holy cow, we are going to at best a rough ride for a few more years, and then the big unknowns are so big. NOT IN ORDER OF Trouble, just some of the biggest issues I see heading our way.
1) Aging and retirement of the baby boomers (large % have ZERO in bank to retire with)
2) Energy prices going to spike way way up
3) Food possibly going to get very much more expensive.
4) Healthcare Costs going to eat major parts of the now used for housing home budgets.
5) Large term structural unemployment over 9.2% for years! and in Ca. over 11% (U6=15-18% LONG TERM)
whats the income distribution of Palo Alto again? I don’t think majority there makes anywhere near $500k. Median HOUSEHOLD income is more like $100-130k (City data, zillow, plenty of other sources). Wealthy, but not enough to justify 1.2M price of an avg home. I’d be willing to bet the higher income residents are old money and have been living there for decades
Old is in how many years back ?
Last 20-30 ... not likley.
Most came to wealth from stock options over the past 10-12 years. As it turned out someones gain was another persons big time loss. That is how long we had a housing bubble way back then. Spent it like drunken sailors, because "it was free money".
http://www.paloaltoonline.com/news_features/real_estate/fall2000/2000_09_22.lowmarkt.php
Publication Date: Wednesday, Sept. 20, 2000 & Friday, Sept. 22, 2000
Breaking into the market
Yes, Virginia, it is possible to buy a first home in this area--if you're willing to make compromises
by Jocelyn Dong
So you're looking to buy your first home in Silicon Valley. How do you get into the market?
"Stock options," says real estate agent Chuck Atwell dryly. "Being a multi-millionaire."
He's speaking only partly tongue in cheek, of course. Atwell, who specializes in the Mountain View housing market, is familiar with today's real-estate maxim that those who have the most money win. But first-time homebuyers who haven't cashed in on the high-tech boom can take heart. While $2.5 million properties grab newspaper headlines, more modest deals can still be had for a half-million dollars or less.
Serpentor
2010 Dec 24, 5:34am
yep... the height of the stock options feeding frenzy was in the late 1990s/early 2000s... Those were good times!
LAO
2011 Feb 16, 11:10am
So there’s a whole lot of people with several hundred thousands of dollars to use as a down payment to bring the monthly payment affordable for an average income.
By "WHOLE LOT OF PEOPLE" you really mean... less than 5% of the population under the age of 40. That is the reality of the situation! Not enough people to move markets...
American in Japan
2011 Feb 16, 11:28am
@Cvoc13
>1) Aging and retirement of the baby boomers (large % have ZERO in bank to retire with)
>2) Energy prices going to spike way way up
>3) Food possibly going to get very much more expensive.
>4) Healthcare Costs going to eat major parts of the now used for housing home budgets.
>5) Large term structural unemployment over 9.2% for years! and in Ca. over 11% (U6=15-18% LONG TERM)
Very good points. I am not yet sure if 2) and 3) are long term or short term (1 year), but the other points will last for years/decades.
B.A.C.A.H.
2011 Feb 16, 11:42am
AIJ and CVOC13:
pricing for item #2 and #3 will be based on demand outside of the USA. Leaves less money for stuff that's not in demand outside of the USA. Like, housing inside the USA.
@thomaswrong
Hey, post an answer, how much did hom prices fall since november 2010, when you posted this????
the correction is still in play for SFBA all thanks to the govt hand outs...
either prices fall, or we will see many more jobs get shipped to other states...
you want to news clip of that ?
The median price paid for a home last month was $256,000, down 3.4 percent from $265,000 in September, and down 0.4 percent from $257,000 for October a year ago. The year-over-year decrease was the first in 12 months.
Hey how much did bay area home prices fall, since 2010 when you posted this, thomasWRONG?????
you are using the press release of ALL CALIFORNIA prices and stating it was SFBA prices.. which even by California standards SFBA are STILL over inflated over priced and need to correct...
Me sorry. Me immigrant, me ingles no too good.
thez translate to "I completely fucked up 3 years ago, and my predictions were all dead ass wrong! I am a fucking idiot when it comes to real estate!"
you Messter thomas, iz the native... iz that true meaning of words?
you want to explain that to the other posters as well ?
really now.. you think im the only one who thinks SFBA prices are not back to norm?
You give me too much credit ...
iz that true meaning of words?
you be a good boy buggah.. and go back to playing with your houses..
YOU said prices would go down. 3 years ago, 2 years ago, 1 year ago.
Instead, they have gone up, and gone up alot.
THAT IS THE DEFINITION OF BEING WRONG.
Are you always such a liar? just admit you were completely wrong in your predictions. Completely wrong.
that's it.
Everything else you write, makes you a LIAR.
Sure.. corrections happen and still pending in the SFBA
Oh dear.. a vested RE investor called me a LIAR...
Gone up alot ? go back to bubble prices... so there will be no further correction in the future???
SFace
2013 Nov 23, 5:13pm
Sure.. corrections happen and still pending in the SFBA
If the correction has not happened for 33 years (back to the mean), you should just shread the damn thing and figure out that it is a "you" problem.
Here's some hint?
* why is the base case 1980, and not 1990?
* The world is not linear and not all locality are created equal, what are the transformative changes? interest rates, supply/population, taxes, etc.
* Based on that graph, you would buy in Vallejo/Stocton in 1997 and not buy in San Jose/San Francisco. Well that is a million dollar mistake based on your same revision to mean theory. lol
hanera
2013 Nov 23, 5:55pm
Reversion to the mean is an interesting theory. What if the mean is misrepresented? Inflation as represented by the green line may not be as indicated in the graph. There are many debates as to whether the inflation is correctly measured. How come the inflation is so low when people in SFBA felt that the house prices and rents have skyrocketed? Thought one of the component in inflation is shelter.
Here's some hint?
* why is the base case 1980, and not 1990?
* The world is not linear and not all locality are created equal, what are the transformative changes? interest rates, supply/population, taxes, etc.
* Based on that graph, you would buy in Vallejo/Stocton in 1997 and not buy in San Jose/San Francisco. Well that is a million dollar mistake based on your same revision to mean theory. lol
and maybe it is.. or is it different now...
perhaps you can provide reasons why SF Prime wasnt higher say mid 90s...it took nearly 15 yeas for prices to double since 1980 and than on a dime they doubled from 1998 to 2000 and doubled again, no such prior example for similar price inflation.
http://www.nytimes.com/1997/04/27/realestate/live-work-law-for-artists-roils-san-franciscans.html
A report released this month by the National Association of Home Builders put San Francisco's median residential price for 1996 at $285,000. With prices beginning at $175,000 to $200,000, lofts are the cheapest nonsubsidized units on the market, according to David Becker, a broker with Ritchie Commercial Real Estate. They are, nonetheless, still too expensive for the artists for whom they were intended, Ms. Hestor said.
Reversion to the mean is an interesting theory. What if the mean is misrepresented? Inflation as represented by the green line may not be as indicated in the graph. There are many debates as to whether the inflation is correctly measured. How come the inflation is so low when people in SFBA felt that the house prices and rents have skyrocketed? Thought one of the component in inflation is shelter.
yet Shiller will show we are back to normal prices be it Vegas Miami or even So Cal...
http://www.dqnews.com/Articles/2013/News/California/Southern-CA/RRSCA131112.aspx
SFace
2013 Nov 24, 1:04am
yet Shiller will show we are back to normal prices be it Vegas Miami or even So
Cal...
It is in Vallejo, Stockton, Vegas, Miami and whatever, but not in San Francisco, San Jose, Virginia, etc. Revision to mean theory are junk because the underlying theory (when it is all said and done, bottom line) is everything/everywhere are constant.
Revision to mean theory are junk because the underlying theory (when it is all said and done, bottom line) is everything/everywhere are constant.
its no theory since its been documented by sales data across several decades.
only the RE interest on pnet are disputing Shillers data and conclusion.
Your disagreement will not change anything...
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First some facts.
Decent Peninsula areas are Millbrae, Burlingame, parts of San Mateo, Foster City, Belmont, San Carlos, Menlo Park, Palo Alto and Mountain View
On redfin, there are very few houses under $600k in the areas I mentioned: redfin map showing houses under $600k
On the map we can see most of these lower priced houses (meaning those under $600k) are clustered in 3 areas: redwood city, the lower income east side of san mateo and east palo alto
if you want a bigger home it'll cost quite a bit more. A decent non-starter (meaning larger) house will start around $800k but can be much more if you want an established neighborhood (anything in Palo Alto).
If a household spends 30% of net pay on mortgage: $120k/year net; $210k/year gross.
If a household spends 50% of net pay on mortgage: $72k/year net; $120k/year gross
paycheck calculator
san francisco wages
san jose wages
looking at the median hourly rate, we can presume median wage is equal to or less than the mean wage.
meaning half the jobs probably make less than $61,940/$66,780.
you get paid more in san jose, so let's look at that city.
the mean wage for all occupational groups in SJ is under $100k, with the exception of: managers, engineers, lawyers.
there are 888k total jobs in san jose; 74k managers, 83k engineers, 6k lawyers for a total of 163k high paying jobs. that is 18% of all jobs.
this theory that most people in the bay area make $100k+ is nonsense. roughly 4 of 5 jobs pay under $100k.
Let's summarize the facts.
Now the analysis.
50% debt to net-income
you can have 2 people making the mean wage($60k+$60k=$120k); or one person making a high wage(at $120k) to afford a $600k mortgage. although they'll be paying 50% of their net take home for the mortgage+taxes.
but what is important is that there is no possible way (unless you have the mortgage fraud we had in 2005) that a single person with a median income can realistically afford this starter home. you need either two mean wages, or a high income wage at 50% of debt-to-net-income.
30% debt to net-income
if you do the more realistic scenario of 30% of net pay to pay a $600k mortgage; then you need one income of $210k/year or two high income wages (both at $105k/year or some combination) just to afford a starter home.
Conclusion
it's entirely unrealistic, without substantial price appreciation, for two high salaries to pay for a starter home that should be sold to the lower income demographic.
in a sane world, someone earning the mean wage or less would be buying this starter property(which would be priced much lower than $600k).
i'm hoping for people to come to this realization and maybe we'll see a return to sanity.
#housing