patrick.net

"After that, we opened up the Sunday paper and saw PAGES AND PAGES of open houses - it was crazy."

And this is still supposed to be the "slow" time of year LOL!! Hold your breath when you open the paper come April and May!

With the CFA you can move into a wide variety of operational finance roles in corporations. And these jobs pay quite well and are in heavy demand.

One needs a fews years of experience in finance to be granted the CFA charter though. Since I am in Tech, should I set myself up as a independent broker? Does that count? I may need that to take some series X exams anyway.

One more thing Linda:

Neighboring San Ramon, as of this last Sunday, now has 4 large complexes being converted to condos on top of all the new construction - the point being that the open houses and MLS are very much undercounting the inventory that exists right now.

@ Linda: congrats and admire your concern for your canine loved ones.

Now for some RE humor....

It was so cold out today that I saw a Realtorâ„¢ with his hands in his own pockets.

@Linda,

Given your circumstances, I think you've made a wise decision and have a healthy attitude. Best of luck to you.

Bottom line is, people should not feel pressured to gamble on their primary residences one way or the other. I hope someday RE speculators & condo flippers will be regarded by the public in the same light as pond scum and corrupt lobbyists.

Presumably the happless asset inflators will seek to keep their kids in the same school district

Why not rent a 3BR apartment in Cupertino. Do they HAVE to own?

HARM, Randy, SF Renter what do you guys think? or do you not fully support the crash thesis of Mr. Renter himself Patrick K.?

To me, the rent vs. buy equation and the cap-rate to treasury yield ratio are sufficient justification for the bubble case. Note that I consider affordability as merely a tipping point.

No. We are staying put in our little house. We are going to sit back, pay our mortgage every month, and watch the fireworks. Whatever happens, happens. Que sera, sera. It’s not enough to try and chase money your whole life. We didn’t buy the house to make a killing. We bought it to live in it.

I would do the same.

"I’m not even sure the 10-yr yield will break 4.75% this year since we know the end of the interest rate cycle is this year."

Well, there's some argument that the 10 year will soar once the fed stops raising rates.

"Either way, people on 1-3 year ARMs are simply refinancing into 5-10yr or 30yr fixed b/c the rates are LOWER now, given the kink in the yield curve. The US consumer lives."

No not really - they couldn't qualify for a 30 year fixed 2 years ago when they bought so what makes you think they can refinance into one now?

What happens to rents in your crash scenario?

I think rent should more or less track inflation.

IMO, rent increase will account for 10% - 30% of the price/rent mean reversion while price decline will account for 70% - 90%.

barnum:

You obviously weren't around in 1982 - very high unemployment, very high interest rates, big recession - you can't generalize that high interest rates automatically equals a strong economy. 1982 was the pits.

barnum,

If I'm interpreting what you're implying correctly, then you might expect rents to trend upward as the housing market cools/deflates, due to increased demand for rentals, as marginal buyers shift away from purchasing with NAAVLPs. This makes some sense, and we may well see some upward aggregate movement in rents above inflation in years to come.

However, for rents to rise high enough --assuming home prices don't fall-- to make purchasing a reasonable idea in Bubble-heavy markets (so Rent vs. Buy calculations at least break even) would require a 200-300% nominal rent increase in those markets. Where is this going to come from --sharply rising incomes? Unlike homeowners, renters have to come up with real money every month, not NAAVLP "monopoly money". This is one of the reasons why rents are historically a much more reliable indicator of fundamental housing demand than sale prices.

Added to this is the large amount of unoccupied investor-owned housing stock in said Bubble-heavy markets. When investors cannot sell (or refuse to sell) in a down market, guess what they are likely to do? Rent it out. This should increase the local supply of rental stock available and at least partly offset new demand. Also keep your eye on recent apartment-to-condo conversions. In a down market, there will be little reason NOT to convert them right back to apartments.

My money's on sale prices coming down a lot more than rents going up (assuming Heli-Ben doesn't hyperinflate, that is ;-) ).

Looks like the Google dot-bomb finally exploded!

Looks like the Google dot-bomb finally exploded!

Let's see what happens tomorrow morning.

Short-sellers: beware of a rally that may take it back to 430.

NOT INVESTMENT ADVICE

vacancy rates and rents in the bay area…HARM, Randy, SF Renter what do you guys think?

I'm not willing to hazard a prediction on rents, although I generally agree that they *should* tend upwards as the bubble deflates for the reasons stated. What I do predict is that the rent-to-mortgage ratio will narrow. This doesn't imply direction, just that mortgage/ownership comes down faster than rents. (It's all in the first order derivatives).

@HITMAN

It's hard to describe what I do for a living, besides serial-entrepreneur and independent entrepreneurial analyst. When I'm not starting a company of my own I'm helping some VC and/or entrepreneur do hyper-analysis on their market. This is how I got pulled into the whole "competing against the NAR/CAR" thing.

Everyone gets an MBA to change their career on some level. To give an honest answer, I was a very successful entrepreneur/CTO/software architect who got fed up with getting screwed by VCs and IBs, so I got myself into one of the top schools to crack their code. I happily discovered an extensive network of incredible folks along the way.

Note, for a 20% drop from *peak* Patrick “I want to swap your house for my apartment” Keliea needs sub $600K in SF and $500K in Bay Area. I guess if it is going to be a crash, the Patrickists would believe that these values are perhaps on the high end - more like sub $500K in SF and sub $400K in Bay Area?

The "crash" will take years, but IMO much decline will occur within 2 years.

I believe Bay Area SFH prices will be down 15% - 40% while condo prices will be down 25% - 65%.

We do not care much about the median because it depends too much on what is being transacted.

I guess if it is going to be a crash, the Patrickists would believe that these values are perhaps on the high end - more like sub $500K in SF and sub $400K in Bay Area?

Why are these number unbelievable? They were even lower a few years back when there were more jobs in the area?

"I’m glad you admitted your mistake that you were off. I know a lot of people who confuse 10 basis points to mean .01, instead of .1 of 1%." --HITMAN

What are you saying? A basis point is NOT 1/10 of 1%, it IS 1/100 of 1%. That would be 0.01. Because 0.01 X 100 = 1.0. That's why a basis point is 1/100 of 1%. Documentation:

http://www.investopedia.com/terms/b/basispoint.asp

That's why I said this before:

"The yield on the 10-year bond was 4.39% last week, and closed at 4.52% yesterday:
http://finance.yahoo.com/bonds/composite_bond_rates
That’s 13 basis points in a week. If I am wrong as to the exact day of the move, oh well."

And I'm not admitting a mistake, because that is a correct statement. So what are you saying again?

"One needs a fews years of experience in finance to be granted the CFA charter though. Since I am in Tech, should I set myself up as a independent broker? Does that count? I may need that to take some series X exams anyway." --Peter P

Peter, what I currently do is work for a software company that creates and supports financial management software. A Lot of back-office management type stuff, portfolio reporting, allocation modeling, billing, etc. Finance and tech are industry sectors that are co-dependant these days. I would recommend that you leverage your tech knowledge along with your CFA studies and first make the move over to a tech company that specialized in financial software, perhaps a 401K plan administrator or some such, they all have web portals nowadays. This will begin to fulfill the finance experience you need for your Charter. If your designing or supporting financial applications, that counts.

1. Natural supply restrictions - I know that theoretically the space market has no bounds

Think Japan. Any supply restriction would have been discounted by the market long time ago. It does not explain price actions.

2. Willingness of people to (continue to) pay a disporportionately high percentage of their income toward deeded property (not renting) - call ‘the pride of homeownership’

Willingness? People base their decision only on price action. When the market stops shooting up (like now), this willingness will be gone. The sheeple effect can easily reverse. When the market is heading down, we will be talking about people's unwillingness to hold a depreciating asset despite mortgages being cheaper than rent.

3. The income is not going away here and it does trickle down. Talk to commercial realtors - it is net office absorption - these are jobs. We are long passed bottom in SF.

We are past bottom. But housing prices never adjusted back to the fundamentals after the bust because Greenspam delayed the inevitable.

Do you even understand concepts like bubbles, trends, and reflexivity?

…and it is no doubt fanciful to think about being able to buy real estate in northern California at such levels

No it is NOT fanciful. LESS people will qualify for mortgages and EVEN LESS will want to buy that those prices.

Imagine what the economy will be like.

Honestly, I much rather have income and rent catch up to those prices.

The problem (for those praying for a 30%-40% correction) is that you are in the heart of America’s economic engine.

Everybody says that.

If you say that Texas in the engine, I would probably agree. Silly Valley in the People's Republic of California !? No way.

"2. Willingness of people to (continue to) pay a disporportionately high percentage of their income toward deeded property (not renting) - call ‘the pride of homeownership’ a psychological error or model for its value..."

This one I would bet against continuing indefinitely. I fully agree that there is currently a deep-seated psychological bias toward owning in this country. But psychology has been proven to shift dramatically in the past; very evident in past historical bubbles. It is quite true that psychology and the desire to own has been fueling the increase in RE values, but this psychology will have a tipping point. It is not possible or probable that people will continue to pay a higher and higher percentage of their disposable income on housing. On the contrary, more and more of them are realizing even now how much money they can save and invest by NOT buying at current prices, as evidenced by national median home price declines and inventory increases over the past three months. A large downpayment on a future home may indeed be their pre-eminent savings goal, but now that prices are dropping it is doubtfull that the majority will be so quick to jump right in to the market. It is simply not possible for a the value of housing to continue to increase indefinitely (even if people continue to psychologically desire it), especially when real wages have been in decline.

Peter, what I currently do is work for a software company that creates and supports financial management software. A Lot of back-office management type stuff, portfolio reporting, allocation modeling, billing, etc. Finance and tech are industry sectors that are co-dependant these days. I would recommend that you leverage your tech knowledge along with your CFA studies and first make the move over to a tech company that specialized in financial software, perhaps a 401K plan administrator or some such, they all have web portals nowadays. This will begin to fulfill the finance experience you need for your Charter. If your designing or supporting financial applications, that counts.

Thanks SFRenter! :)

When did you register for the charter program? I just registered last month.

I thought you can use financial software development as experience only if you had registered before 2005 or so. I will check. Thanks!

(I used to work on some financial reporting tools, not sure if it counts)

Not that I hate the Bay Area, it is just that I am sick of people describing it as _the_ land of honey and bread.

Not that I hate the Bay Area, it is just that I am sick of people describing it as _the_ land of honey and bread.

Compared to where I started out this ride, the BA is the promised land.

Compared to where I started out this ride, the BA is the promised land.

I agree that it is a nice place with good weather (cannot stand humidity) and good opportunities. But heart of America’s economic engine? That is too much.

Also, why is California collecting state income tax AND sales tax?

Also, Bay Area has good food. I agree.

Also, one can enjoy everything the Bay Area can offering being a renter.

San Francisco RENTER Says:

“Remember, most talented individuals who work at the top banks and money management firms finish by 25.” –HITMAN

Keep it coming you motherfucker. I studied for 2 hours last night and I will study for 3 tonight after getting this motivation from you. Keep it coming.

Ha, ha, haa!
Yes! Passion! Fire up the grill!
San Fran Renter knows the American way: use anger as motivation!
Blaze a new trail!
One is never too old!

Hitman is just making San Fran train harder...

I agree that it is a nice place with good weather (cannot stand humidity) and good opportunities. But heart of America’s economic engine? That is too much.

Does America have an economic engine anymore?

seattledude Says:

January 31st, 2006 at 3:25 pm

HITMAN- you said: So now we have, no change in real estates, rising employment, and rising wages. Tell me why you think the market is going to crash again?

Dude employment is not rising and neither are wages. Wages of CEO’s maybe but not the rest of us, so i don’t know what you’re talking about.
Besides people who are already rich or CEOs that are rich, rich people in general don’t have mortgages.

11 permanent employees lost their job in my office today at Honeywell.
I'm a temp, but feel sad for them.

Other jobs have gone to Mexico and India, according to my manager.

Great economy: Honeywell's profits are over a billion and US jobs are being cut or outsourced.

This is reality!

So fuck you, fuck you, fuck you. You’re a jerk and I can swear like a sailor right along with the rest of you.

Huh?

I suffer from catatonic tourette syndrome. Only my manifestation of that disease causes me to obsessivly utter words like "uncorrelated", "in real terms" and "econometric".

Hi All,
Been a while.

I Guess one of the benefits of inventory run up will be that RE agents won't be knocking on my door to see if I want to sell...

Do miss that though as I used to have fun trying to sell the landlords property :)

It will be very hard for the RE crowd to put positive spin on data if there is no data released to the media.

I give up. Can’t anybody here understand I was just trying to inject a little humor earlier? I am getting the point that I don’t belong here, so I’ll leave.

Please visit our "Huh?" thread before you decide. ;)

I’m tired of being the big bad homeowner and getting bashed on this board for nothing. I also apologize to everyone for my uncalled for reaction earlier.

Actually, many on this broad are homeowners. In the last "blog party", I was pretty much the only renter there. :)

We certainly do not bash homeowners.

…. ummmm …… is it wrong that reading the last lines of Linda’s post turned me on a little??

Huh?

The song does not make much sense, but the words go something like ‘Don’t worry, if you were a troll I would delete your comments’ and “we just want comments that respect other commentors’.

I said these words, but...

1) I do not own this current thread, it is up to the threadmaster to decide
2) We determine who is a troll

By the way, the song does not need to make sense at all. Take it or leave it.