patrick.net

Oh, per side? Okay, then a 6.6% return. Uh, unless they've defaulted muni bonds don't require eviction notices.

Claire,

Yeah, now that I heard skibum's take, the pieces all seem to come together.

Most of these financial analysts (as opposed to honest to God real academic economists) seems to forget the relationship between housing costs and income. Right now, housing is so expensive that 80+% (apologies to DinOR) of CA can't afford to buy their own home on their own income with a traditional loan. A 10% increase in wages is not going to correct that situation. Housing prices have to go down.

astrid,

It's close enough. I'd heard it's actually 78% but when you're that high up in a range I'm not going to make a liar out of you over 200 bps!

DinOR,

Huh? I crunched the numbers

(12*1100-6,500-1,000)/400,000 = 0.01425

Assuming 6.5K in annual property taxes, 1K in insurance and other costs, and 400K as average selling price.

So the return would be less than 1.5% and you gotta pay income taxes on that princely return.

randomguy Says:

> I was very close to buying a condo in San Jose 6 months
> ago for $515K. I only make $75K a year…

Only 6 years ago you could buy a nice big home near downtown Mill Valley or in Burlingame Hills for $515K (and the average buyers made around $175K a year)…

> It came down to the last day where I was supposed to e-mail
> the condo guy and tell him if I wanted it or not. I got scared
> I decided against buying the place. I think this blog saved me
> what would have been a lot of buyer’s remorse and financial
> hardship.

The guy who bought the condo probably makes $60K a year and probably bought the place with no money down using a neg. am IO first and a 2nd. Odds are that he will soon have two mortgage payments and HOA dues that are more than his take home pay…

DinOR,

Oops, my bad. I heard city affordability numbers bandied about in the single digits, so I figure 80+% would be safe.

astrid,

Oh, no arguing here! And that "princely return" also assumes you collect the rent your damn self! When one factors in inflation and the devaluation of the Yankee dollar it's probably a negative number. Like I always say, "I don't have to slide down a bannister full of razor blades to know that will hurt"!

RE: CA Affordability

http://calculatedriskblogspot.com/2005/08californias-housing-affordability.html

austingal Says:

> There are some duplexes near us.
> Pretty nice, big yards, good schools.
> They are listed between 350-450k.
> Taxes are 6-7k a year. They rent for 1100/month.
> Now, am I missing something. Is there anyway
> that this type of property could be a good investment?

It does not sound like a good “investment” (since you will probably not get much of an actual return on your “investment”. If a $400K place has Gross Rents of $26,400 it has a GRM (Gross Rent Multiplier) of 15.15x about 50% above the historical average for homes and duplexes of ~10x (for apartments that average is ~8x).

A good rule of thumb for expenses (and a cap X) are $4K a unit + Property taxes so if we have Gross rents of $26,400 we will be lucky to actually collect 95% of that after vacancy & collection loss. If we subtract $14.5K in expenses from an EGI of $25,080 we get a NOI of $10,580 or a 2.6% Cap rate about 1/3 of the historical average for homes and duplexes (for apartments the average cap rate is a little higher just under 10%)

My bad,

http://calculatedriskblogspot.com/2005/08/californias-housing-affordability.html

Let's try that.

SFGuy,

Maybe you're right. I've always gotten advice to dress as expensively and as conservatively as possible for interviews and by that criteria, SFWoman's choices were impeccable.

Though I'd gone through a couple wedding registries of friends who work as scientist or scientist types. They seem to know brand names quite well or married someone who did.

alien,

Thanks! I just wanted to show all the lurking doubters that we here at patrick.net take this business seriously! (Although taken from market peak in Aug. 2005) you get the idea. Do you suppose it's gotten any better over the last year?

DinOR,

I guess it was 80+% after all at 16%, though their methodology is a bit different from what described.

Should I do an astrid called it victory dance around my chair?

astrid,

Uh...... you MAY!

I recall seeing an article on bankrate.com that said 78%?

I also saw I pop-up there that said I could get a 600K loan for $1,278.12 a month too though!

alien,

So right!

I think I ripped that off from the old joke about the Dr. that upon leaving the morgue says "Call me if the patients condition gets worse"!

DinOR,

I was guestimating while you actually bothered to source your evidence. The kudos go to you.

Mainly, I was looking for an opening to introduce the word "truthiness" to this blog. I think we'll find it very useful in describing FB behavior.

http://youtube.com/watch?v=nZy9OhEcLLc

DinOR,

Let's not forget that the "official" CAR reported housing affordability index bottomed out at 14% statewide, before they, uh, stopped reporting that stat.

The HAI conveniently went on "hiatus" for 8 months, just as median prices and interest rates continued to climb (which would indicate it probably dipped into single digits during this time), and even after they seriously re-jiggered the index, the best they could produce was an amazing 23%!

See Lies, Damned Lies, and the C.A.R.

Have you seen my damn HAI? I know it was around just a little while ago? Well.....anyway it was old, out dated, antiquated, busted, disgusted (and not to be trusted)!

WTF! I want everyone to get up and do a little *astrid victory dance around their chair right now!

Yeah you too alien!

I think they are installing a new server or something and it is taking a bit longer than expected?

Okay so if they bail out the FB's I guess that we become F'ed instead?

skibum,

Nice catch re the Merc article. So far the dq news report has not made it to the front page at sfgate.com. I'm waiting to see what they publish.

Ben’s blog is back up.

Not quite. The main page is there, but no content. But at least we know he's "working on it".

SFWoman,

I guess that's the value in a Kelly or a Birkin bag. Hellaciously expensive but timeless.

I am not sure how the bailout can actually happen. Has anything this massive ever been bailed out ? LTCM is nothing compared to the bubble we have.

After none of the stock market crashes, were the investors bailed out. I don't even even think it's practically possible.

On the other hand lowering rates or ZIRP is not out of the realms of possibility. What effect it might have is an interesting debate and we did that many weeks ago.

But bailout ? That's being paranoid.

The only LV bag I have isn’t really LV but a knockoff my Mom got in Thailand. I wouldn’t buy it myself, but hey, I’ll take a cheap bag as a gift. I know women who’ve paid $250 for a knockoff. Silly for a purse.

LV bags are quite well-made though. I personally like them.

RE: bailouts for this mess, I predict the target for a Fed bailout will be the mortgage/MBS/credit industry. After all, this is as much a credit bubble as it is a housing bubble. The FB's who default or "short" sell? They walk away with bad credit ratings. The ones holding the bag are the suckers who bought these MBS products from the issuers who bought them (eventually) from the loan originators, who in turn sold them off asap to get rid of them and pocket a profit. Hedge funds (and a surprising number of mutual funds), Fannie Mae and Freddie Mac will be the poster children of this mess, just like LTCM was and the Keating 6 (or however many of them there were) before them.

CB Says:

“These bags are really easy to be taken care of, it’s made of PVC and you can just wipe it with a damp cloth”. PVC, maybe he became a RW and made lots of money since.

That way, when Paris Hilton pukes from drinking too much, or worse yet gets someone (else's) bodily fluids all over the bag, it's easy to clean!

"“These bags are really easy to be taken care of, it’s made of PVC and you can just wipe it with a damp cloth”. PVC, maybe he became a RW and made lots of money since."

That's where truthiness kicks in. It doesn't matter if the Burberry bag is exactly the same as a knockoff at 1/20th the price, as long as your gut tells you it's valuable.

Ben's blog is back --for real this time. Content and everything:
http://thehousingbubbleblog.com/

My hybrid is my first new car. My other car I bought two years old in ‘94 and still have.

Lexus' hybrids are top notch. However, I still do not see a reason to get one yet.

PVC!? I *heart* my Tumi bag, but it's made out of a semi-durable material. (Counts back... it's been 10 years since I got it, and none-the-worse for wear.)

They are asking $842/square foot for an apartment that is uglier than any college dorm I have ever lived in.

Who needs such a huge laundry room? Why do they have multiple machines in such a small apartment? Is this about the 2x of everything again?

He gave it to me as a gift (an odd gift for someone who never washes or cleans her car).

Don't worry. Lexus gives you a free wash everytime you bring it in. :)

It is one of those apartment building laundromats.

Huh? 8-O

This apartment at The Brannan costs less than $800/sqft:

http://tinyurl.com/r2h54

Why would anyone want an apartment with communal laundry at that price?

SFWoman Says:

http://www.sfarmls.com/scripts/mgrqispi.dll?APPNAME=Sanfrancisco&PRGNAME=MLSLogin&ARGUMENT=9%2FoO2od4QnB890WxsI26ZKKu9IiMM07LbNaqq54WqYo%3D

I enjoyed looking at the turquoise-colored bathtub.

I guess they *can* say the the kitchen has a stainless steel appliance.

New thread: Brave New Market Revisited

SFWoman,

That realtor should have stuck to one picture (of the street). The more I see, the less appealing it looks.

I consider any parts of my body expensive realty, why would I pay $$$ to put other logos on my body? Shouldn't the manufacturers pay ME to put their logos on my body parts?

I will carry a LV briefcase with the frigging LV motif all over it if LV pays me $100 a day for carrying it around, not too much to ask for, right?

OO Says:

I consider any parts of my body expensive realty, why would I pay $$$ to put other logos on my body? Shouldn’t the manufacturers pay ME to put their logos on my body parts?

You mean, like this?

http://www.sfgate.com/cgi-bin/article.cgi?f=/n/a/2005/06/30/national/a064000D81.DTL

SFWoman..

...ah yes, the chav cuture...one of the things I really don't miss about living in London any more.

The worst culprits for 'logo on everything' seem to be the cheaper stores like Old Navy or A&F. Its next to impossible to get a T-Shirt there that doesn't have thier logo blazoned across the entire front. Why pay good money for advertising when your shoppers can do it for you by wearing your clothes?