patrick.net

Rubicon says

Bay Area is nuts

During errands I'd drive past this gem frequently.

It wasn't on the market very long when it sold at "peak" last summer.

In a ghetto neighborhood (note bars on windows), one house over from a busy road with one of the worst public high schools in the Bay Area on the other side.

Note the estimated rent versus ownership price (3800 vs 6700).

The privilege of ownership.

https://www.zillow.com/homedetails/1785-Hopkins-Dr-San-Jose-CA-95122/19727040_zpid/

B.A.C.A.H. says

During errands I'd drive past this gem frequently.

Has a gorgeous view out the front of the East bay hills! What's not to like?

B.A.C.A.H. says

Rubicon says

Bay Area is nuts

During errands I'd drive past this gem frequently.

It wasn't on the market very long when it sold at "peak" last summer.

In a ghetto neighborhood (note bars on windows), one house over from a busy road with one of the worst public high schools in the Bay Area on the other side.

Note the estimated rent versus ownership price (3800 vs 6700).

The privilege of ownership.

https://www.zillow.com/homedetails/1785-Hopkins-Dr-San-Jose-CA-95122/19727040_zpid/

Wow.

Serious question: what do most of these people do for a living? I can't imagine being a Doctor and live in something like this.

B.A.C.A.H. says

The privilege of ownership.

https://www.zillow.com/homedetails/1785-Hopkins-Dr-San-Jose-CA-95122/19727040_zpid/

Are the bars to keep the adrenochrome child slaves from escaping, or the local thuggies from invading?

GNL says

Serious question: what do most of these people do for a living? I can't imagine being a Doctor and live in something like this.

Yes, and where do the janitors, waitresses, and other lower wage folks live?

What good is it to be a professional power couple if this is all you can afford?

Rubicon says

in mind a professional couple makes 250-300k combined there.

Isn't that poor for 2 people in SV?

GNL says

What good is it to be a professional power couple if this is all you can afford?

This says a lot about the love/hate relationship about the Bay Area. $250-$300k/year for a couple is pretty much hand-to-mouth. People, who make it here, love it. It’s the land of opportunity. People, who struggle, either move out of state, or whine and bitch about it. I would think the same applies to other expensive cities like LA and NY.

I like the Bay Area. I just hate its politics and the CA politicians. The moment we have to pay more than $50k/year in state income tax. I’ll buy a place in NV and claim residency there. Not there yet, but I’m working towards that way.

GNL says

what do most of these people do

Well..... one thing those savvy SF Bay Area homeowners do is pay property taxes.

One of their Privileges of Ownership for this "property" will be a tax bill of about $1,000 per month.

"It's ok, - you get it back on the appreciation". (Sky Is The Limit).

If you say so, homie.

HeadSet says

Yes, and where do the janitors, waitresses, and other lower wage folks live?

Far out, (but that's getting insane also), or in shabby beat up 1970's RVs on the streets. In backyard sheds, "not converted" garages, and being exploited hot bunking in shabby old apartments (those are everywhere, - just ask eman).

Increasingly, fewer of those folks exist in these parts. It's part of the reason queues are long, hours are shortened, restaurants close. Not enough of the Exploited Class go around serving the elites.

Does anyone have knowledge of why some high end areas have gone bust throughout history in some areas? Lots of reasons I suppose. Interesting to see where the Bay area is in 10, 20 years or so. It would stand to reason if no "staff" can afford to live close enough, the place will change. I'm no Nostradamus though. Maybe the left really do see themselves as the elite. It might explain why all of a sudden they now allow ADUs?

As much as the Bay Area is expensive, I can always find deals and live in a decent part of town for less than others. There’s always a solution for a problem. Be a problem solver rather than a whiner.

Just look at this 4plex in a decent part of town. It’s being surrounded by SFHs costing $1.5M or so. I checked it out last year. I asked the family if anyone wanted it. We could buy and keep it in the family. No one said anything.

I know both listing agents on this deal so I know at what price and terms I had to offer to get it. Live in the 3/2, and have 3 rentals for just over $2M. It’s right by the hospital so other units could easily convert to travel nurse rentals and collect $3.5-$4k/mo/unit. Why settle for a small SFH on Hopkins? 🤷‍♂️

https://redf.in/oK96Xz

GNL says

Does anyone have knowledge of why some high end areas have gone bust throughout history in some areas? Lots of reasons I suppose. Interesting to see where the Bay area is in 10, 20 years or so. It would stand to reason if no "staff" can afford to live close enough, the place will change. I'm no Nostradamus though. Maybe the left really do see themselves as the elite. It might explain why all of a sudden they now allow ADUs?

Can you share some of these high end areas that went bust? I’m not familiar with them.

Eman says

I know both listing agents on this deal so I know at what price and terms I had to offer to get it. Live in the 3/2, and have 3 rentals for just over $2M. It’s right by the hospital so other units could easily convert to travel nurse rentals and collect $3.5-$4k/mo/unit. Why settle for a small SFH on Hopkins? 🤷‍♂️

Who in the flying fuck wants to live in a 4 unit? Shared walls? Noise? City? Fuck that. I'd rather have minimum wage income than live like that out in the country. Been there and done that in Chicago. It was awful. Hell it was an 8 unit.

I don't really care about the net. At the end of the day you're living in a shit hole. Even the best of neighborhoods. Again, been there done that. Cities are the absolute worst place to invest currently.

WookieMan says

Eman says

I know both listing agents on this deal so I know at what price and terms I had to offer to get it. Live in the 3/2, and have 3 rentals for just over $2M. It’s right by the hospital so other units could easily convert to travel nurse rentals and collect $3.5-$4k/mo/unit. Why settle for a small SFH on Hopkins? 🤷‍♂️

Who in the flying fuck wants to live in a 4 unit? Shared walls? Noise? City? Fuck that. I'd rather have minimum wage income than live like that out in the country. Been there and done that in Chicago. It was awful. Hell it was an 8 unit.

I don't really care about the net. At the end of the day you're living in a shit hole. Even the best of neighborhoods. Again, been there done that. Cities are the absolute worst place to invest currently.

Let’s just say you don’t know about the area, and we don’t share the same value. We’ll have to agree to disagree.

Eman says

GNL says

Does anyone have knowledge of why some high end areas have gone bust throughout history in some areas? Lots of reasons I suppose. Interesting to see where the Bay area is in 10, 20 years or so. It would stand to reason if no "staff" can afford to live close enough, the place will change. I'm no Nostradamus though. Maybe the left really do see themselves as the elite. It might explain why all of a sudden they now allow ADUs?

Can you share some of these high end areas that went bust? I’m not familiar with them.

Wasn't Detroit a kind of equivalent of Bay Area in the heyday of American car manufacturing?

Is it possible for a place to out price itself? Or does that even make sense?

RWSGFY says

Wasn't Detroit a kind of equivalent of Bay Area in the heyday of American car manufacturing?

Yup. It was.

GNL says

Is it possible for a place to out price itself?

Yes.

GNL says

Is it possible for a place to out price itself? Or does that even make sense?

Based on what I’ve learned about history, as an area becomes more and more expensive, the population is being replaced from one class of people to another. Real estate appreciation should slow down in the future to a more sustainable level, but it would still be expensive for the average Joe/Jane.

The only way for an area to have real estate price collapse is the industry in that area to get wiped out like Detroit. Every time I thought it was over for the Bay Area, new innovations was born to keep the area thriving. It’s simply amazing and madness at the same time

Eman says

Rents are cooling in some markets.

Surprised Yuma isn't on that list. Although the drop has been more recent.

mell says

Even leftoid Michigan is nice. At least last time I was in Ann Arbor it was pretty nice. May have changed by now who knows.

Biggest change would be the chemical smell and the acid rain..

Eman says

If I can work from home, I’m out of here. This explains the exodus of Californians to other states thanks to the pandemic and WFH.

People have been leaving in droves for years prior to the Scamdemic. The state has been anti-business since Adobe and Yahoo left. It's been anti-normal for a long time, and the normies got tired of it.

NuttBoxer says

Eman says

If I can work from home, I’m out of here. This explains the exodus of Californians to other states thanks to the pandemic and WFH.

People have been leaving in droves for years prior to the Scamdemic. The state has been anti-business since Adobe and Yahoo left. It's been anti-normal for a long time, and the normies got tired of it.

Stats don’t seem to agree with your observation. Indeed CA has seen people leaving since the pandemic, but not prior.

Does that chart account for illegals? Or the people who sold to move into a mansion elsewhere? On that second point they had to sell to someone, but I do give preference to long term residents over ones who just got here.

Eman says

GNL says

Is it possible for a place to out price itself? Or does that even make sense?

Based on what I’ve learned about history, as an area becomes more and more expensive, the population is being replaced from one class of people to another. Real estate appreciation should slow down in the future to a more sustainable level, but it would still be expensive for the average Joe/Jane.

The only way for an area to have real estate price collapse is the industry in that area to get wiped out like Detroit. Every time I thought it was over for the Bay Area, new innovations was born to keep the area thriving. It’s simply amazing and madness at the same time

The bay area isn't the only place.

Eman says

GNL says

Is it possible for a place to out price itself? Or does that even make sense?

Based on what I’ve learned about history, as an area becomes more and more expensive, the population is being replaced from one class of people to another. Real estate appreciation should slow down in the future to a more sustainable level, but it would still be expensive for the average Joe/Jane.

The only way for an area to have real estate price collapse is the industry in that area to get wiped out like Detroit. Every time I thought it was over for the Bay Area, new innovations was born to keep the area thriving. It’s simply amazing and madness at the same time

Northern Virginia is crazy also. I don't understand these housing doomers.

I can't help but believe somethings no Bueno though.

GNL says

Every time I thought it was over for the Bay Area, new innovations was born to keep the area thriving.

It's a self-selected population of newcomers.

Haolies and second generation of some non-haolie immigrants continue to leave. They're replaced mainly by Asian immigrants and south-of-the-border (including many illegal "migrant") types.

For these folks, even being packed like rats hot bunking in shabby old apartments and homes, backyard sheds and garages is comfortably palatial living compared to where they came from. This is the dynamism of "Silicon Valley" and the SF Bay Area. If you can't "make it here" like the ®eal Estate moguls of Hong Kong, well then you just don't have what it takes: you're a Lazy and Stupid Loser.

There are good reasons to get bearish on commercial real estate, especially the office space, but don’t overly be bearish. The owners and developers will find a way to make use of the space if they can’t lease them out. Here’s an example:

https://www.sfgate.com/local/article/viral-bay-area-zillow-listing-office-to-housing-18199614.php

I also saw an office building got converted into a Public Storage. Very well done.

A bunch of business's have to shutter due to economic downturn(reasons don't matter). Further people are leaving cities(again reasons don't matter). Further more people are working from home. CRE should have blown up at least a year ago.

“Northern Virginia is crazy also. I don't understand these housing doomers.

I can't help but believe somethings no Bueno though.”

@GNL,

The same thing happens here. Some cities priced out even the professionals. I can only gather knowledge from history and Bay Area retirees/veteran real estate investors, and make me bets accordingly, rightly or wrongly.

Just want to make my stay on this earth as enjoyable as possible. Can’t take anything with me when I’m gone. However, I’m willing to put in the hard work for 10 years so I can enjoy 40 years rather than the other way around. It’s a personal choice.

NuttBoxer says

A bunch of business's have to shutter due to economic downturn(reasons don't matter). Further people are leaving cities(again reasons don't matter). Further more people are working from home. CRE should have blown up at least a year ago.

If it should have blown up at least a year ago, why hasn’t it blown up, or could it be that the blow up is not as big as people anticipate?

Ok, so what's going to happen...

1) Rates come down and save the economy by making housing valuations shoot the moon.

2) Home values come down and save the economy by RE transactions shooting the moon.

3) RE transactions keep going lower until incomes double and everyone can afford a home and we are saved.

4) RE valuations and rates stay where they are and transactions founder. This cause the economy to fall off a cliff because so much of our economy depends of household formation.

History suggests real estate prices go up, then rates go up to cool it down. The Fed will overdo with the rate hikes. Then real estate prices will go down, and will likely drive the economy into a recession. Then the Fed will cut rates to stimulate the economy.

As ironically as it sounds, we’ll have a combination of lower real estate prices and lower rates for those who can buy and finance in time of turmoil. This is why there’s a saying “Fortunes are made during recessions.”

Except that the central bank has no control over interest rates. They certainly attempt to manipulate through printing money, but that farce has not long to live.

Interest rates will continue to rise, which means housing prices will continue to fall. Contrary to all the bullshit people peddled before '08, and some still peddle now, basic economics dictates you cannot charge more than what someone is willing to pay. But housing is collateral damage. The real bloodbath will be the US dollar, bonds, and everyone who's net worth is tied entirely to paper.

Eman says

we’ll have a combination of lower real estate prices and lower rates for those who can buy and finance in time of turmoil.

Which is exactly what you did, correct?

NuttBoxer says

Except that the central bank has no control over interest rates. They certainly attempt to manipulate through printing money, but that farce has not long to live.

Interest rates will continue to rise, which means housing prices will continue to fall. Contrary to all the bullshit people peddled before '08, and some still peddle now, basic economics dictates you cannot charge more than what someone is willing to pay. But housing is collateral damage. The real bloodbath will be the US dollar, bonds, and everyone who's net worth is tied entirely to paper.

I would actually like to see this happen. For reasons that are just to in depth for me take the time to write out. But the short version is...paper wealth is like magic beans. Not only that but, think about this...accumulated fiat is a claim on resources. YOUR labor is a resource. It is an enslaving mechanism. You want wealth, REAL wealth? Produce something. But, I could be wrong.

Sounds like Adam Smith you are talking about GNL. Karl Marx ironically espoused Smith's ideas in his writings.

NuttBoxer says

Interest rates will continue to rise, which means housing prices will continue to fall. Contrary to all the bullshit people peddled before '08, and some still peddle now, basic economics dictates you cannot charge more than what someone is willing to pay. But housing is collateral damage. The real bloodbath will be the US dollar, bonds, and everyone who's net worth is tied entirely to paper.

I see one more rate rise of 0.25% and the Fed Funds rate will peak at 5.5%.

I don't see them rising it again as long as 12 month CPI remains below 4%.

Let's see how CPI (and PCE) does in next few months as far as monthly changes.

I am seeing here in the Florida panhandle how vacation rental prices are dropping for beach condos.

Also more people shopping food at Walmart and eating out less.

Look at Disney ticket sales. They are down a lot. They coming to Florida panhandle for better value vacation. Roll Tide.

And all that tells me less inflationary conditions.

.

@ad,

Well said. Shelter is about 40% of the CPI.

Housing/rent goes up = higher inflation
Higher inflation = higher rates to tame inflation

Housing/rent goes down = lower inflation
Lower inflation = lower rates

Housing goes down is deflationary.
Deflationary = lower rates

Why housing goes down? Excess supply. Excess supply = either due to overbuilding, or recession where people lose their house to foreclosure. More distress sales = lower prices. Lower prices = deflationary. Deflationary = lower rates.

This was why I said lower housing prices tend to go with lower rates while higher housing prices tend to go with higher rates. The Fed fund rate is a lagging indicator. Wall Street also predicts one more 0.25% rate hike, and that’s it. It’s just a matter of time before housing cools off, then drops. Then the Fed will cut rates. Housing drops some more. The Fed will cut rates some more. That’s how economic works. The Fed is reactive, not proactive.