patrick.net

I am not aware of this. Randy, can you explain?

For a while, a bunch of US wealthy citizens started bailing and taking all their assets out to avoid taxation. They shut the door on this buy implementing severe capital controls in the form of special expatriation taxes. I don't know what the limits are now, but they used to be pretty low, like $100K per adult, the rest being taxed away. People still do it, but they have to commit tax evasion fraud to facilitate the movement of their funds. They can never come back to the US, either, or they'll be arrested on tax fraud. They also have to be careful when traveling because some countries like the UK have reciprical agreements, and you can be arrested there and sent back for trial.

First of all, how will you define a rich foreigner? 1M networth? 2M networth?

Merill Lynch publishes a report on high-networth individuals, and allegedly according to their economic modelling, there are 7M of them. The definitnion leaves out all property holdings and counts only the liquid assets. Coming from Asia myself, I have to say this grossly under-estimate rich Asians. Most Asians put their money in properties, not stocks. A typical Asian portfolio is at least 50% property, less than 50% stock and cash equivalent.

In the last decade or so, most of the growth is concentrated in Asia, and the growth did benefit quite a few individuals. Rich Asians don't trust their own countries, so parking money overseas in a developed nation is a common practice. A lot of them are not that rich by US standard, their networth is probably between 1-2M, not much higher. Therefore, you won't see them buying 2M+ properties. But they are a buying force in certain neighborhoods in SoCal. Immigration from Taiwan was a major force behind SoCal's 1990 property bubble, or so I was told. Immigration from Hong Kong was another major force behind Vancouver's property bubble in 1991.

Of course, these "rich foreigners" alone won't make the bubble. But they set an example in a low-interest rate environment that is extremely conducive to realty speculation. In a way, they are sort of an opinion leader in the property market, and their behaviors were emulated by colleagues and friends. When the general public catches on, there is no looking back.

Surfer-X,

I am not saying that the future home price in CA should be 5X your income. But be prepared for 4X or even 4.2X.

First of all, how will you define a rich foreigner? 1M networth? 2M networth?

100mil. Everyone in the BA is worth over 1M, shit, my cat makes 2M.

I am not saying that the future home price in CA should be 5X your income. But be prepared for 4X or even 4.2X.

That I can handle, but what is it now? Like 10-12X income, this is bullshit and where the bloodletting begins.

Surfer-X,

I don't think it is 10-12X. I looked up household income and median home price data of neighborhoods that I am familiar with, I am seeing something like 5.5X around here. Where do you live?

I am not saying that the future home price in CA should be 5X your income. But be prepared for 4X or even 4.2X.

My guess is 3.75X. :)

Loan amount of 3X income with 20% downpayment = home price of 3.75X income.

OwnOcp, Pismo Beach, median income around 50K, median SFH around 650K, about 12/1

I don’t think it is 10-12X. I looked up household income and median home price data of neighborhoods that I am familiar with, I am seeing something like 5.5X around here. Where do you live?

From Patrick's site:

"My dad made money on his house, and it will work for me too."

FALSE. Your dad bought his house when houses were cheap compared to salaries, maybe 3 or 4 times annual salaries. Go ask him. Things are different now. Here is a chart of median house price vs median income in Palo Alto:

Year Median House Price Median Income Multiple
1980 148900 24743 6.0
1990 457800 55333 8.3
2000 910000 90377 10.0

I don’t think it is 10-12X. I looked up household income and median home price data of neighborhoods that I am familiar with, I am seeing something like 5.5X around here. Where do you live?

Sorry man, median home price in the BA, 685K, median income 88K, roughly 8/1. Ahhh the BA filled with nothing but dot.com riches and googlebucks.

That's interesting. Somehow I saw much higher median household income on realty sites. Can they be lying? I remember seeing most West Valley communities making in excess of 200K median household income.

Or did you quote median income per person? Most families have dual incomes now.

That’s interesting. Somehow I saw much higher median household income on realty sites. Can they be lying? I remember seeing most West Valley communities making in excess of 200K median household income.

Or did you quote median income per person? Most families have dual incomes now.

Median household income.

Where did you see the 200K number?

I'll just say this: Once this little RE party is over and the market turns, foreign investors won't want to keep their money in our housing. Their best laid plans will not matter. And I agree with X-man, a "new paradigm" is BS; this won't go on forever.

However, in the meantime, I say let the investors buy up every single property: from $1M waterfront condos in Belvedere just sitting there to the sh!tboxes littering hwy 80 into Sacto. Buy it up, buy it all. Then, pack those (lighter) suitcases and turn tail homeward.

OwnOcp, this type of BS I do deeply dig. The median income of the BA is NOT, I repeat NOT 200K.

http://tinyurl.com/aj9zu

http://tinyurl.com/76jz4

Median household income in Santa Clara is roughly 75K. Remember G, for every dot.com king of the universe there are 10 people making 30K a year.

Quoting SFGate:

The median household income in Santa Clara County, adjusted for inflation, fell 10.6 percent between 2000 and 2004, from $83,370 to $74,509. In Contra Costa and Alameda counties, median income was steady -- about $47,000 in Contra Costa and $59,000 in Alameda County.

Somehow I saw much higher median household income on realty sites. Can they be lying?

OwnOcp, of course not, you can rely on the Realtors, their trade agencies, and groups to provide you with clear, accurate, truthful, unbiased data, kind of like Fox.

OwnOcp, of course not, you can rely on the Realtors, their trade agencies, and groups to provide you with clear, accurate, truthful, unbiased data, kind of like Fox.

Yes, they will tell you that the typical family makes 400K as a financier and buys a 1.5M home in a Prime(tm) location.

As a result, anyone who makes less scrambles to buy a shitbox for 800K.

You guys are right. I don't know where I got this impression that the household income is doubled-up, I thought we BA residents were a lot richer, lol. Based on the official data, obviously the housing price is set up for a serious correction.

There seems to be a quite common misconception that everyone in the BA makes a ton of money. This just isn't true. I know far more people making 60K than I do making 120K.

There seems to be a quite common misconception that everyone in the BA makes a ton of money. This just isn’t true. I know far more people making 60K than I do making 120K.

Still, P/E ratio is my favorite argument.

Mine too. My adopted Dad, and his suitcase of money toting title company working wife, took their suitcase of money to Albq. NM to buy properties that are + cash flow. Now why would this be?

Mine too. My adopted Dad, and his suitcase of money toting title company working wife, took their suitcase of money to Albq. NM to buy properties that are + cash flow. Now why would this be?

Because they are smart?

Surfer-X, it is time for you to create a new thread. ;)

Randy - I'm totally stunned - although it makes perfect sense - that you can't just take your money with you when you leave the U.S.. That seriously screws up my plans.

What a crock of crap - totally to be expected - how stupid of me to assume otherwise.

Damn.

Actually not exactly so, I believe. If you renouce your US citizenship, then you will be taxed on your asset when you do so, and also be subject to a series of IRS investigation. If you keep your US citizenship, then you should be fine since you are taxed globally anyway. You do get a 80,000 exemption when you are overseas, although you can't escape the SS and medicare. I am not sure if the 80,000 exemption is adjusted for inflation, but that was the case when I was stationsed overseas.

Randy - I’m totally stunned - although it makes perfect sense - that you can’t just take your money with you when you leave the U.S..

LOL! You *can*, but you just have a few caveats:
1) You have to be willing to become a criminal in the US and subject to arrest in all the English speaking countries.
2) You can *never* come back to the US (they don't make exceptions for illness, death in the family, weddings or high-school reunions)
3) You'll need to learn a foreign language and be willing to set up shop in either a socialism or a despotism, the first which will tax you to death and the latter which will just death you to death.

It was the general consensus that one could not expect much more than 3 to 5 percent appreciation into the forseeable future.

Yeah...that seems to be the number I run into. 5% is a generous long-term rate, given there's often flat spots/small downturns. Btw, have you ever tried this...take a local property value from the mid/late 90s, tacking on a generous 5% per year into 2005...and what do you get? As I mentioned before--big difference!

Oh btw--any news from that open house in your area this weekend?

the first which will tax you to death and the latter which will just death you to death.

Oh, what a delightful turn of phrase.

Well played! Well played!

Cheers,
prat

"the first which will tax you to death and the latter which will just death you to death."

Useful that.

The US Government imposes no material restrictions on US citizens investing abroad. There are no limitations to amount or type of investment that I know of, and I have made foreign investments personally and for various US corporations. I have participated or led the formation of many foreign companies by US citizens and US corporations.

We had major name accounting and legal firms to assure that we complied with all US laws. The US laws were minimal and totally non-restrictive to our formation and investment. In fact, it was actually easier to incorporate and comply with US tax law as a foreign company than if we were incorporating in the US.

The US does make it hard to renounce your citizenship for the purpose of no longer paying US income tax. To do this you must pay what amounts to an exit tax, and I believe you must continue to pay US income tax for five years after you begin this process. I am not sure about these specifics, just what I recall from informal sources.

If a person decides to simply not pay their income taxes and leave the country to avoid prosecution, then they will be exposed to the nasty consequences described in some earlier posts.

US tax laws and tax rates actually give foreign companies an advantage over US domiciled companies selling in the US. The law of unintended consequences is causing our capital to flee the country. It is not obvious to everyone yet. But it is happening now.

The US does make it hard to renounce your citizenship for the purpose of no longer paying US income tax. To do this you must pay what amounts to an exit tax, and I believe you must continue to pay US income tax for five years after you begin this process. I am not sure about these specifics, just what I recall from informal sources.

This is what I thought. Thanks for the clarification.

I believe anyone who has renounced his/her citizenship for tax purpose is inadmissible under US immigration laws.

(Not legal advice)

I’m amazed about how many people on this site regard Cali as a prime area to live. I grew up in Australia where I met my American wife and moved to the BA about 5 years ago. It was the biggest let down in my life. California is way over hyped.

Hence Cali-phonier.

Tim--------

Nail
------
Head

1995 is an artificially low starting point for any comparison. If you want to test today’s market against the bottom, I guess it works, but measuring the rise from the rock bottom will tell you nothing about the reasonableness of today’s prices. Another comparison is to test today’s prices against the last peak to see how the breaking point of 1989 compares to today.

Stanman, good summary.

Now it is a Socialist Democrat state.

Very true.

Tim,

no offence. I have quite a few close relatives in Oz. I love Oz, but, as compared to the Bay Area, here are why I would rather be here:

1) Oz has no big mountains, because your land is more ancient, most mountains are eroded down to nothing short of a flat pancake, with the exception of the Northern Queensland area, which is just as humid as Florida.
2) East Coast Oz has a relatively narrow band of weather zone, and hence flora and fauna.
3) Too many poisonous insects and snakes down under. You guys have 9 of the world's top 10 killer snakes, and even sharks in the river! Speaking of the beach scene, did you forget to mention the stingers that kill in a matter of seconds? We have colder and foggier sea, that I admit, but man, that stinger jellyfish scares the hell outta me.
4) The worst of all, the Oz tax system. CA is quite bad, but compared to Oz, we a quite a few notch better. Oz essentially wants to make sure nobody gets rich and everyone is as equal humans can ever be, speaking of a democratic socialist state!

Aside from that, I love Oz and I vacation down under almost every year.

Also, California is the only state with a grizzly bear on its flag.

Let the people leave, let the people come. We Californians don't need to worry about people who don't want to be a part of us. We only need to care about people who will stay to be a part of the solution.

Similarly, those who left California should never look back and move on with their happy life instead of questioning and looking for schaden freude. Life is short, enjoy whatever path you take.