patrick.net

I think the tax form has a moderately high chance of becoming law. It benefits most Americans and it reduces tax code complexity. It will have massive political support.

Just a while ago people laughed when I suggested that Schwarzenegger would run and win. (Back then he was not sure about running.)

What does good old Arnold think about this housing market?

He is supposed to fend for Californians, I guess. But he cannot run for the White House anyway. Also, he probably understands that the tax code needs to be simplified.

Yeah, but what are his beliefs as far as the housing bubble?….Does he believe it’s going to collapse?

I do not know.

But I knew people would vote for a brand-name instead of some nobody.

While Bush’s pronouncement against illegals is unlikely to result in the border being militarized tomorrow, it has certainly fed anti-immigrant** sentiment.

Sentiments will be there but policies will be different. The Hispanics is now a formidable political force. Information flows more easily and quickly nowadays. Globalization = global labor arbitrage.

(Did you know that "hanging, drawing and quartering" was legal in England less than 200 years ago?)

OT--Anyone have stats on inventory for San Mateo county?
Dqnews lists an approx -17% in home sales over last year, but no inventory stats.

My sister just bought a new house in that county, without selling the old one.
Well, I hope they sell soon!

My sister just bought a new house in that county, without selling the old one.

Strong demand for housing indeed.

Sorry, these might not be where they should go, but found some interesting links:
http://www.lewrockwell.com/north/north366.html
http://realtytimes.com/rtcpages/20051021_siliconvalley.htm

is this somehow related to the lost cat?

Huh?

(Did you know that “hanging, drawing and quartering” was legal in England less than 200 years ago?)

Yet, to this day...English food still is.

Yet, to this day…English food still is.

I love Yorkshire pudding though. Also, cream tea and finger sandwishes. Yum!

BTW, Devonshire cream is truly amazing on scones. 60% milk fat though.

I love Yorkshire pudding though. Also, cream tea and finger sandwishes. Yum!

And Brit-style Fish n' chips!

And Brit-style Fish n’ chips!

Wrapped in newspaper! Malt vinegar is a must!

What is a Bob Ross?

I love knowing that some on this blog will never get that disgusting image to separate with my name for the rest of eternity.

Agreed--that could be freakish!

Time to clear the mind....visualize Rob Ross, trapped in a Francis Bacon painting...for all eternity.

Jack, de-nile is not just a river egypt

I love that Peter P can find food to like in any culture. A true renaissance man.

de-nile is not just a river egypt

Wow, musant tipe wile intocicated.

Rent normally rise while prices decline.

Rents tend to become weaker as the market nears the peak because renters shift to being buyers, leaving a weak demand for rentals and causing stronger demand for purchasing. Rents are also weak shortly after the peak as the decline starts and the glut is still present. However, before long, the growing renter population causes a rental shortage to develop and rent increases resume their long term trend, going up as home prices decline. In tighter markets rents tend to go up at all, or nearly all times in the cycle.

Because new supply tends to come slowly in response to established demand, there is a lag in the supply adjustment. This leaves the market to be lead and driven by demand shifts.

Hey Surfer-X,

I've got a cool pair of wrap around Ray-Bans. They're so old, a boomer could have worn them in his youth...

;>

Instead of “The Screaming Pope”, perhaps “The Screaming Bob”?

LOL...I'd like to see that. Maybe I'll photoshop that, but in respect to Bacon, I'll skip.

Interesting Zephyr, and it makes sense, up to a point.

But in a place like the BA, where there is not a lot of new construction, isn't it all a wash?

Doesn't the home that houses the owner still have to house someone, even if the owner switches to being a renter? And visa versa? Ah, I see now. It is not exactly that easy to convert SFH to rental property and especially not that easy to convert apartments to condos.

It is funny to watch you guys predict inflation one week, then falling prices for everything the next. Don't you think that if the new Fed floods the market with dollars, which we all think he has to in order to inflate the US government out of its debt load, that rents won't go up as well?

I don't see a recession in our future, so much as a whiff of stagflation. Maybe not 15% a year Carter style stagflation but 7-8% easily, by the end of Dubya's term.

And attendant rent increases.

Except in places that are overbuilt like Las Vegas, which should see a collapse in both home and rental prices.

Which will bring in a flood of people looking for a cheap place to live, laying the seeds for the next boom.

Well, please noone shoot me for going off topic here ;)

Anyone who's tracking inventory notice a surge today? A few comments on ben's blog from people in non-bay area markets (dunno where, exactly) mentioned this. Then, when I came home and updated my spreadsheets for santa clara county & south san jose areas, I saw a big jump as well (biggest 1 day jump in 40 days). I think we are still seeing sellers' reactions to the relatively recent spike in RE bubble news (not to mention FED comments, interest rates, etc.)...as in, once someone changes plans & decides to sell sooner rather than later, it takes a little time to bring the property to market.
Anyways, be on the lookout for possibly even more open house signs this weekend.

Hard to say whether rent will be up or down. Let me try to take a stab.

I think the lower-end condo/apartments/townhomes will see a hike, but the higher-end will see a decline. Here is the reasoning. Employment will definitely be affected, so will the consumer confidence when the RE bubble pops. So the market will see more renters, but renters who refuse to spend too much on their residence. They may share homes, live with parents, instead of going for a larger, nicer apartment. So the lower-end apartments will have more renter demand while the mid-to-higher end will see a decline.

So the people who are buying up really run-down apartments and doing some basic cosmetic work to make the rooms look tidier and cleaner will do quite well. The individual landlords who plan to rent out their million dollar Mcmansions will have a very hard time achieving a meaningful rent.

For the BA, I believe anything under 1,200 a month will see a rent hike. Anything above 2,0000 will see no takers. 1,200-2,000 will be sort of be stagnant.

lol I would never rent anything for 2,0000

Sound like good reasoning to me, ownerocc.

My big question is the % of property owners who can afford to rent at lower prices, compared to the (recently increased) % of owners who are cashflow negative & will be puting more aggressive upward pressure on rental rates. I guess this depends on the degree of recent speculative purchasing...which is far less in the immediate bay area compared to satellites (i.e. modesto, stockton). All of this of course has to be put in the proper context of supply/demand being the primary driving force.

I have been tracking an obscure part of LG, the LG Mountains for about 6 months. I chose this location because I know that part well, and believe it is a quite marginal area where the effect of boom and bust will be very apparent.

It is a mountainous area clsoe to Loma Prieta (ring a bell?) where residents have to get private/mutual water, propane gas and rely on septic tanks. It is a community for people who REALLY want to live in the mountains and tough it out. For many years, that part of LG sees a median price at around 50-60% of what LG can achieve in general, until this recent boom, it went up to almost at par with the rest of LG, well, typical of any bubble when it is at the top. Morever, properties in LG mountains start to market themselves as INVESTMENT properties, yearight, like a normal renter is really interested in getting stranded in winter by falling trees and driving in the thick fog every night on barely paved roads.

So since about 2 months ago, the properties I have been tracking are either re-listed at >50,000 less, or just priced at a cut without relisting, but the word *reduction* seldom appeared in the flyer. For 1M+ properties, the typical reduction is 150,000, one of them was already marked down by 300,000 from 1.5M. For sub 1M properties, the reduction is around 50,000 to 100,000. Many of them have been sitting on the market for more than 5 months, and some of them have already gone through two price cuts.

I believe the bubble pop has already started. Such an area-wide price reduction may not be apparent in some blue-ribbon areas, but is definitely becoming an undeniable trend in some less-than-stellar areas.

I keep seeing the same damn craftsman mansion on craigslist in LG hills...months & months & months. I never bothered to track the ask price...but it's been there since...January or something? I also kept seeing the same damn $389K shack in SC mountains with something like an acre of land on it...ugly brick red thing...yeah, I think they called it an "investment property", too. These propertie may gone now...or maybe I just don't notice them anymore. But for sure the high end around here is stinking it up. Also, I drive down this one street, can't remember the name (1 block east of N.SC ave) from LG blvd, & I keep seeing the same for sale signs over the course of weeks...mos now maybe?

People’s behavior gets REALLY ugly when when it gets that bad, and the upcoming depression just may.

No need to worry. Ben "Helicopter Drop" Bernanke will make sure that it does not get REALLY ugly.

It might technically still be legal for High Treason. Any UK-law types know for sure?

Wow. Braveheart indeed.

It is a mountainous area clsoe to Loma Prieta (ring a bell?) where residents have to get private/mutual water, propane gas and rely on septic tanks. It is a community for people who REALLY want to live in the mountains and tough it out.

Does it have mountain people like in Deliverance?

I love that Peter P can find food to like in any culture. A true renaissance man.

To be frank, I have yet to develop a taste for Ethiopian food.

Does it have mountain people like in Deliverance?

It is much more toned down from Deliverance of course. But according to my friend living up there, you have electricity outage every other week in the winter months, roads blocked every month during the rainy season, and beasts of all kinds howling all night. And, it is freezing cold up there at night around-the-year. Residents do need shot guns to fend off wild animals.

Don't get me wrong, I love the mountain life, there are lots of upsides that come with it, the tranquility, the scenery, the fresh air, the acreage (although mostly on steep slopes making it quite unusable), etc. But it is not for most people, and definitely not at the current price level. For one, the wife may pull her hair out dealing with all the inconvenience of an "uncivilized" life.

LG Mountains is an area traditionally for vacation cabins of the valley worker bees who want an weekend exile. It is not a place where people think about "starter home" or "investment property". That's why RE bubble will start deflating there.

Residents do need shot guns to fend off wild animals.
As a kid, riding my bike in the hills, rumor had it that residents had shotguns to keep you from steeling their pot plants. No first hand experience of this.

I'm relatively familiar with the area...though I've never heard them referred to as "los gatos mountains"...only "santa cruz mountains" (though most just refer to them as "hills").
Which specific areas are you talking about? Because Loma Prieta is a little further away from Los Gatos compared to say, the Summit Rd/San Jose-Soquel road area. Is that the area you're talking about? Or Bear Creek Road area (i.e. east of Hwy 17 vs. west)?
Maybe because I grew up nearby, & drove all over those hills in high school, it's hard for me to consider them much of a weekend getaway. You're never more than 20-30 minutes from a LOT of civilization. But I suppose if you're not up for the 3-4 hour drive to the sierras....

OMG! It's like I was struck dumb by a thunderclap and the scales just fell from my eyes! I wasn't really following until the "Renting is for losers" part, but, man, after that, wow. Just wow.

_Aladdin voice_: It's a whole new woooooooooorld...

http://www.dinkytown.net/java/MortgageRentvsBuy.html

Of course, not everyone wants to live the life of a land lord. Some poor misguided souls even consider worrying about things like tennants silly and a waste of time in the overall scheme of things. They do things like... programming or lawyering or, say, doctoring. Tragic, but what can one do?

Cheers,
prat

ScottC Says: "Come to my seminar."

Buy a small, comfortable moderately-priced older home, build equity and save money.

Yes, I believe there'll be a time when this well known, time-honored tradition is once again the status quo.
Right now, however, it's just not possible. In many RE markets, there simply is nothing that is "moderately-priced," based on any standard devised outside of a nuthouse.
ScottC, you've proven to be very knolwedgeable about real estate, and you've been in the business very long; so I'm assuming you've seen the periods when real estate prices went up, and those when real estate prices went down.

The problem with most homebuyers I deal with every day is that they all want to start at the top. These are young people, twenty- and thirty-somethings with high ideals, suddenly earning a larger salary than they ever imagined, and they all want to buy their dream home cheap.

True enough. However, in a bubble, fixer-uppers usually have their "potential" priced-in already. On the other hand, starter homes are way overpriced because people are stretching to get in.

What you want is free and clear title to ownership, the right to possession of and rents from property. And the more properties, the better.

I agree. I want to eventually invest in real estate when the valuation is reasonable.

Renting is for losers. The real money is in ownership.

I guess I will be the "loser" for a while. ;)

BTW, I heard the Kalifornian speculators are buying up properties in Texas. What do you think?

the median home price in our county is about 500k for a median salary of 80k –>bubble

We are about 700K for a median salary of 80K -> hyper bubble!

We are about 700K for a median salary of 80K -> hyper bubble!

Similar median salary up here, but $900K "median" home.