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Has anyone made a prediction as to how much house prices will drop by in Mountain VIew, Los Altos - Silicon Valley? I'm thinking 20-40%, but at the prices they want, that could be a lot of money, so I want to narrow the range down so I know when I see a bargain.

My companion feline Noelle is the boss I've had her for over five years. She has seen plenty of boyfriends come and go. Cats are far superior they know intinctively when your having a bad day and come by and brush up next to you. She has moved with me several times even across the country. She keeps grounded and she care less whether we are living in a 1/1 or a 2/2 condo.

Cat's rule

My friend who is putting her house on the market in Cupertino is arguing with her realtor. Apparently the realtor wants her to price it $30k less than my friend feels it is worth. She's not going to listen to the realtor, she's listing it at the price she believes it is worth. I'm curious to see if she can get her asking price or if the realtor is right in this case.

mike,

Thanks for your comments. I agree with your reasoning, although I'm not sure it's a specifically political-partisan phenomenon. I believe our lack of leadership in general by both parties has led us into this spiral.

I'm also not sure that the "Mexico" outcome is inevitable. The US has been much further along the road to ruin in the past, and yet has managed to emerge stronger. So long as we are able to balance free-market capitalism's "creative destruction" with common sense (stopping that destruction before it's irreversible).

I definitely agree re: price reductions. I think a lot of folks waiting to buy into neighborhoods inhabited largely by those who have benefited from this economy will be disappointed by how little prices fall. Maybe only 20%, which puts the area I'm in now only back 12-18 months in value.

The junky house says that it's: Pending: Continue to Show

This past 3 day weekend we decided to drive up to Seattle and back. After reading a lot about Bend, OR on Patrick.net, I thought we will drive up 97N ( also wanted to see Klamath and Crater ) and see for myself what this Bend in Oregon is all about. : ) I dont think 97N runs through the best parts of Bend but if it does, I dont understand why anyone will want to move there after living in California especially the Bay area. Other than white trash, I didnt find decent people living there, trailer park homes and manufactured houses. Whats the median income and housing price in Bend again?

I think a lot of folks waiting to buy into neighborhoods inhabited largely by those who have benefited from this economy will be disappointed by how little prices fall. Maybe only 20%, which puts the area I’m in now only back 12-18 months in value.

Or... they see a 30% reduction but they do not want to buy any more.

Or... they see a 50% reduction but suddenly they cannot afford even the new price.

We may not want to underestimate the newly-created wealth but we definitely cannot underestimate the fatality of human actions.

Phil,

Our "resident expert" on all things Bend, OR is Michael Anderson. Perhaps if we can pull him away from daytrading for a minute he could insert his thoughts on the matter?

As I live closer to Salem, OR I can only say that the "appeal" regarding Bend has always mystified me. There are A LOT of really great towns in Central and Eastern OR, so why Bend? What exactly does it have over Silver Lake (or Paisley) for that matter? What could possibly be worth dealing with all the speed traps and traffic out in the middle of NO WHERE? Is it nice? Sure, but there's no employment (of course outside of building, selling or financing real estate). I have so many friends that grew up there and their memories are not of the fond variety. The described it as "poverty with a view". IMHO.

The Federal Reserve has raised interest rates 17 times since mid-2004 in an effort to curb inflation.

Yes, blame the Fed. Were they cheering when interest rate was lowered to 1%? It would not have needed 17 hikes if they were not at a measured pace.

Now they can start lowering prices at a pace that is "likely to be measured".

Actually the Fed has been quite proactive this time. The bubble could have been much, much bigger.

Peter P,

Excellent point. Mass psychology was extremely important in creating the housing bubble and odds are it'll be extremely important on the way down.

People will be much less eager to buy when their FB friends are $150K underwater on their mortgages.

People will be much less eager to buy when their FB friends are $150K underwater on their mortgages.

I think they may even puke, literally.

Frank,

Very "quaint" listing you have there! "Cozy" some might say. I have a term for the type of people that put this kind of filth on the market; "Rip Van Flipper". I swear it's like they've been asleep for a hundred years, woke up, found there WAS a housing "boom" going on and decided now was a good time to cash in!

Earth to Rip!

(Go back to sleep and try in another 100 years)

Is this pathetic or what! I almost feel like feeding the squirrels my damn self when I hear some HB or realt-whore go on about the SEVETEEN int. rate hikes and how it's derailing their "feedbag"!

Had the Fed the courage to do what was necessary and institute some MEANINGFUL increases much of the damage could have been avoided!

The bottom line was that everybody and their long lost brother KNEW the Fed was going about this thing with kid gloves and had absolutely no fear they would accelerate the cost of money. Happy now?

DinOR,

Well, the realtors need to find Some way, any way, of jump-starting their income. I hear of solidly experienced realtors who haven't had a commission in months. Did you see the Fed minutes from the last meeting? Only 2 members wanted to raise rates. Everyone else was sanguine about current inflation, and wanted to wait to see what the previous (paltry) rate increases would do. Boy, we're in for a mess.

Could someone remind me what the rent to house price ratio should be? I am trying to figure out from our rent what houses should really be selling for.

Could someone remind me what the rent to house price ratio should be?

You should compare only post-renovation price and rent. It makes a big difference.

The price/rent ratio for fixers are very high because one can always renovate a purchase but your options for a rental are very limited.

Thanks DinOR for the info.
I saw flatlands there so I am not sure what is the view that all are talking about. I dont understand people wanting to move from California to live in OR. I stopped by at OSU to meet up with a friend who is doing his PhD there so I assume he has been in OR for a while. He told me that the weather there is such that you have drizzle all the time. It just does not rain and stop and thats the kind i really hate. And so is Seattle. I saw a lot of propaganda that Seattle is not the wettest place in the US and such.

It just seems that rent is much more sensitive to renovations/appliances/amenities than price.

Could someone remind me what the rent to house price ratio should be? I am trying to figure out from our rent what houses should really be selling for.

Claire,

I recommend you read through the March, 2006 thread: Housing Price Rules-of-Thumb. It covers this exact topic extensively.

Phil,

I believe Hilo, HI is the wettest place in the U.S and although many places in the "lower 48" get more rain than the PNW we have the most days with rain! I can't remember the exact year (I think it was 1997 or 98) Seattle didn't HAVE A SUMMER! It rained up to and through mid-August, they had a few clear weeks and the dreaded rain started the day after Labor Day! Great place huh?

That is an interesting question, whether rent is more sensitive than price to frills?

More interestingly, this varies from person to person.

If you absolutely do not need newer bath, kitchen, and other frills, it is LESS sensitive to you.

We might buy a pig stye intending to fix it up, but I can’t say I would rent one.

In a bubble, the "potential" is usually priced into the house. So you do not save too much with a fixer. When the bubble bursts, fixers will just sit there. You may be able to get one at a steep discount.

Do people demand more when renting?

You cannot change the rental.

expect less when buying?

They expect more in appreciation. So proportionally less in everything else.

Yes, and varies with income levels and price levels. The more “you” make and spend the more is expected?

Not necessarily. It is probably more related to how much TV one watches. :)

mike Says:

> Where I live in the Thousand Oaks/Westlake area, where a joint income of
> $250,000 is not unusual, I have a feeling the prices will drop over the next
> few years but not as much as one would expect or I once thought. A
> $650,000 property might drop to $525,000 but that’s it.

Odds are that prices will drop a lot more since there is no reason for anyone to buy a house while values are dropping when they can rent in the same area for half as much.

Fifteen years ago people who lived in Thousand Oaks/Westlake made a lot more money than average and that didn't stop the average home price from dropping ~50% from 1990 to 1994.

Prices will stop dropping when people (like me) can buy the homes and rent them out at a profit. As a rule of thumb most investors won't buy real estate until the monthly rent is more than 1% of the purchase price.

Then goober Says:

> I think Randy H. is dead on! The wealthy look out for themselves and
> other “haves” no matter which way the lean politically.

"The Wealthy" may "look out for themselves" but they can not control the economy. The "wealthy" did not do very well trying to stop the price of S. Cal Real Estate from dropping in the 90's (lots of "wealthy" people lost millions) or stop the huge drop in tech stock prices a few years back (I have some "wealthy" Borrowers who lost tens of millions from 2000 to 2001).

But will consumers switch and value saving their a$$ to valuing overvalued real estate?

Of course. Greed and fear.

"In a bubble, the "potential" is usually priced into the house."

Wow, is that ever true! When I think of all the listings I've had to endure over the last 3 or 4 years that featured "the potential" I could just feed squirrels!

Tell you what, when you finish the barn, deck, garden, RV parking, 2nd. bath, guest house, garage and converted chicken coop please feel free to give me a call!

It just fries me when I see people that have sat on their @ss (apparently for years) attempt to cash in on the "boom" and think they can charge what thoughtful and diligent owners are getting! (This is coat tailing in it's lowest form).

Jon,

Excellent points. The big difference I see is that if we've been conned in the traditional sense, once our bank account is depleted the con has to move on and find a new mark. When it comes to FB's it's the con that never ends! The minute they scratch out the check for the mortgage payment/s they have 29 days, 23 hours and 59 minutes until it's "bohica time" all over again!

bohica*

(Bend Over Here It Comes Again)

Jon, excellent commentary on FB denial mentality. We should coin a new term for it (something more succint than "FB co-dependent denial syndrome") then add it to the HB Glossary. Right up there with "Escalation of Committment".

newsfreak Says:

It would appear you believe the Fed commission has no balls or no guts.

Most definitely. Now I'm picturing a bunch of economists sitting in a room without nads or innards. Just limbs, heads, and muscle. Presumably Janet Yellen has no balls as it is.

HARM Says:

Jon, excellent commentary on FB denial mentality. We should coin a new term for it (something more succint than “FB co-dependent denial syndrome”) then add it to the HB Glossary. Right up there with “Escalation of Committment”.

We need to see FB's on Dr. Phil.

Good new post from the So Cal Mkt. Guy at:

http://www.housingbubblecasualty.com/

I said:

I think Randy H. is dead on! The wealthy look out for themselves and other “haves” no matter which way the lean politically.

then FAB said:

“The Wealthy” may “look out for themselves” but they can not control the economy. The “wealthy” did not do very well trying to stop the price of S. Cal Real Estate from dropping in the 90’s (lots of “wealthy” people lost millions) or stop the huge drop in tech stock prices a few years back (I have some “wealthy” Borrowers who lost tens of millions from 2000 to 2001).

now I reply:

a) Wealth is relative, not absolute.
b) Just because the "wealthy" lost in absolute terms during the 90s real-estate downturn, does not mean they were no longer wealthy, comparatively.
c) In fact, the massive acceleration in wealth concentration with the top 1% occurred at almost that exact moment. These may just be interesting correlations, but many economists believe it was the early 90s recession that widened the gap between the rich and the not-rich.

Conclusion: just because FAB knew some rich people who lost $10s of millions, the odds are overwhelming that not only were they still "rich" compared to every else afterwards, but they were even richer, comparatively.

***correction:

The first quote is a response to my original quote.

FAB,

Yeah, how is it that a $1,088 payment becomes $1,660 again? SoCalMortguy and I are definitely on the same wavelength. Maybe I should just say the same things that catch his eye are typically among the first things I would notice too.

"New Spanish Tiled Roofs". WTF?

Oh! I get it, as opposed to the "old" roof meaning this are soon to be repartments?

-this
+these

Randy H Says:

> a) Wealth is relative, not absolute.
> b) Just because the “wealthy” lost in absolute
> terms during the 90s real-estate downturn, does
> not mean they were no longer wealthy, comparatively.
> c) In fact, the massive acceleration in wealth
> concentration with the top 1% occurred at almost
> that exact moment. These may just be interesting
> correlations, but many economists believe it was the
> early 90s recession that widened the gap between
> the rich and the not-rich.

I agree with all of this except that "the early 90s recession that widened the gap between the rich and the not-rich." since over time every country throughout history had had a wide gap between the rich and not-rich that just kept getting wider until there was some kind of revolt (it got wider during the recession, but the recession did not "make it wider", just like the planet is warmer, but the guys driving around in Hummers paid for with HELOCs over the past few years did not "make it warmer"). The US will be no different and the gap between rich and not-rich will just keep getting wider until there is some kind of revolt (this will hopefully not happen until I am dead). The point I was trying to make is that the "wealthy may look out for themselves" but they can not change macro economic forces and just like Tom Perkins (who just built a cool new boat for ~$150 Million) could not save his wealthy friends who owned tech stocks in 2002 Gordon Getty will not be able to help his neighbors who own $20 Million + for Pac Heights homes.