patrick.net

The funny thing is, sometimes we meet these new immigrants or out-of-state migrants who just came to the Bay Area just a few years ago explaining to my wife why BA is so special and the housing price well justified.

Although clearly current house prices are not justified, natives of the BA and other "prime" areas often take their environs for granted. Having grown up in the Midwest I will argue with anyone that there is, and should be a premium for the BA and other great areas of the world.

...I await the requisite "teh bay area suxorz" replies, keeping in mind that 99% of those folks wouldn't survive 2 months living where I grew up.

I await the requisite “teh bay area suxorz” replies, keeping in mind that 99% of those folks wouldn’t survive 2 months living where I grew up.

teh wolrd sux.

Dorcas

So I don’t mean to seem rude just posting out of nowhere, but I hardly ever post anything on any blog I read

If only that were the extent of "rudeness" that sometimes passes around here. Seriously, everyone is welcome to post. No need to be shy, it's just a blog after all :)

I await the requisite “teh bay area suxorz” replies, keeping in mind that 99% of those folks wouldn’t survive 2 months living where I grew up.

The Bay Area really does do a good job of producing people who can't live anywhere else.

A few years ago I met a guy who had just returned from a 4 month stint in Houston (consultant). He said he couldn't wait to get back here because it wasn't diverse there.

(But what he really meant was "It isn't 30.2% Asian there".)

I also met someone who did a stint in Boston. She couldn't wait to move back because it was too cold and gloomy there.

Go fig, maybe this is the most perfect place in the world. :(

I also met someone who did a stint in Boston. She couldn’t wait to move back because it was too cold and gloomy there.

What about Chowdah and raw littleneck clams?

I just came from an auction where a 1 million dollar home which needed some serious work just sold for 1.155 million. There are still some suckers out there.

Auction is a form of psychological manipulation. You need to be very detached to be successful. If any participant has any "passion" about the object, game is over.

Randy H Says:

> Question for experts:
> What does it mean when a homes sells and
> is recorded twice in the same day.

This is a situation where a speculator put a deposit down on a lot and found a buyer before the project was even finished. This is a classic flip.

Randy -

"I will argue with anyone that there is, and should be a premium for the BA and other great areas of the world."

And who do you expect will to pay you a salary so you can in turn pay premium $$ for housing. We are not like other great areas of the world, our economy is pegged to deflationary products we make. We are in short more Walmart in many ways.

Eburb writes'

"The Bay Area really does do a good job of producing people who can’t live anywhere else."

Well now as you may know, only 1/3 of Natives still live in California. Many are actually living in Utah, Or, Wash, Tx and Nevada.

I know many who I grew up started to move outofstate starting in the 80s and into 90's.... Did BA fail them?

On a BWOnline artifcle, they wrote about rent:

"In general, price trends in the apartment sector are inversely related to those in the housing market. When home prices increase, as they did between 2001 and 2005, rental rates decrease. After the price runup, which made homeownership unaffordable to many, renting became a better option and rates skyrocketed."

http://www.businessweek.com/bwdaily/dnflash/content/jan2007/db20070110_511187.htm?chan=rss_topStories_ssi_5

Does this make any sense? Wouldn't an increase in house prices increase underlying rent as it is the way owners extract value from their asset?

Peter You said

"Auction is a form of psychological manipulation"

Do you prefer your realtor to tell you...
"There are other bidders, Can you go 10% above asking?
And you ask "What are the other bids and who are the bidders?"
To which they reply... "I dont know, look do you want this or not"
..Trust but verify...Nice Jedi Mind Trick... I hope you really trust your realtor and really believe he isnt ripping you off. Trust me its happening every day.

Does this make any sense? Wouldn’t an increase in house prices increase underlying rent as it is the way owners extract value from their asset?

Renting and purchasing are alternatives to each other. On the other hand, asset pricing is driven primarily by expectations of future pricing. Here we have an interesting interaction between the two.

Do you prefer your realtor to tell you…
“There are other bidders, Can you go 10% above asking?

People can tell me anything. I listen to my inner voice. (And my astrologers.)

Trust me, auctions can be brutal. This is why I will only use Buy It Now at eBay.

You can't force rents higher because your mortgage is high. With a bunch of new houses going up and people buying houses, the number of people renting decreased, lowering demand, thus lowering prices. You'll see the occasional FB trying to rent a 3/2 for enough to cover his PITI, but they won't be able to rent them out for that, and quickly drop down to close to 'market' rate. It slows the hemmoraging of cash.

Rents dropped because a lot of people left the BA after the dot com crash, and there was much more rental space than was necessary. With people buying all the new housing going up, even fewer rentals were required. With the speculators now trying to rent out their properties, I doubt we'll see much of an increase in rent even as the foreclosures start the shove FBs back into the rental market.

If a lot of speculators and FBs manage to hang on to their homes through the next ten years, we may see the 'golden' era of renting here in the BA... Housing stagnant, but rents not rising either.

Home prices from 1998 to today have been artifically inflated by number of factors. Rentals were inflated in 1997-2000 due to shortage of housing,
hwoever once demand for workers declined so did rental prices.

I quick note... Back in 1991-93
Home prices fell,
Rental cost fell,
Interest Rates fell.
In 1990 the workforce of SV was around 850K, todays its the same number if not less. So demand for housing has been flat for 15+ years.

Today home prices however have gone up 400% in 10 years...
never has this happened before in history.

"Here we have an interesting interaction between the two."

Peter, I would say we have an interesting "Divergence" of the two...
Just like the Divergence of NASD new economy and Dow old economy.
One went to the moon while the other did so so... we are no where near 10,000 on the NASD Y2K peak... we may never see that in our life time again.

Does a first TD $amount mean the amount owed to lender or the amount owned by buyer? Should I read this that the guy took a $1.3m loan?

Yes---buyer put $600K down and took out a $1.3M loan.

SFBubbleBuyer, what was interesting was back in 2000-2001, with all that vacancy for Commercial space the landlords (based in LA) didnt want to lower the rent from 3/sq ft... They often said, the BA will snap back... well we may be back... but in no way could a local company afford $3 per sq ft. The norm today is around 1-1.33/sq ft. thats 2/3 down since 2000.

Peter, I would say we have an interesting “Divergence” of the two…

But the two compete for occupants (and specuvestors). When everybody runs for purchases, the demand for rentals drops. This is how they interact.

"I listen to my inner voice. (And my astrologers.)"

Yes im shure the Realtors help out with that too...
It only takes a few to pepper the area with fake bidders a
and force others in the market to the new paradigm.

You wonder if the realtors ever took their ques from OPEC...
Nice monoply they have on setting prices... Not an shed of light
on true values to the public. I just cant wait for the RE industry to get slamed with what Accountants have to deal with --- SOX legislation.
they are already talking about it in Congress...

Peter P Says:
March 22nd, 2007 at 4:36 pm
Does this make any sense? Wouldn’t an increase in house prices increase underlying rent as it is the way owners extract value from their asset?
Renting and purchasing are alternatives to each other. On the other hand, asset pricing is driven primarily by expectations of future pricing. Here we have an interesting interaction between the two.

The disconnect between the two is the bubble. IMO it is actually reversed, increasing rents should mean the home's value has increased. A bunch of FBs though are going to disagree.

Thanks CB,
Some of my coworkers sold their home ... in each case it was the same... one offer only (which was accepted) and the only offer was 5-10% above asking. What gives!!! 10% above asking and only one offer? The sellers didnt care! Which is understandable! If I was the buyer, well now....

"At the same time, open house activities appear to be picking up. Could this be the start of a considerable spring bounce?"

Corporate accountants/FPA may look at this and say, Maybe backend loaded... borrowing from March sales. That may no look rosey when March numbers are reported...

Yea so many similarities like the software-internet equity bubble of 2000-2001. (what many call the dot.com)

"The disconnect between the two is the bubble. IMO it is actually reversed, increasing rents should mean the home’s value has increased."

You could add to that "wage inflation" as we saw in the 1970s. Some on CNBC are talking about stagflation returning.

The disconnect between the two is the bubble.

Yes. In fact, the disconnect happens because asset pricing depends primarily on expectations but rent pricing is all about now.

OK, I saw the weirdest foreclosure on propertyshark.com.

269 271 Collins St, SF

bought on 8/17/1990 for $3000
bought on 5/21/1990 for $170,000

in foreclosure now with $2,312,831.14 unpaid.

What is this?

@Space_Acer,

Perhaps the people who bought your co-worker's house readthis article before making their offer.

Perhaps people are just too serious about competitions.

The one thing better than winning competitions is winning without competitions.

If you have to compete, you are doing the wrong thing at the wrong time.

Space_Acer Says:

> Today home prices however have gone up 400%
> in 10 years…never has this happened before in history.

An earlier post mentioned that it is due to the fact that they are not making any more land...

Hello Harm -
As many old timers I spoke to would say it has been normal in the past to offer below asking (lowball). Somewhere in between is the actual. This has been true for decades... I researched this out...

I visit open houses today and been told "we expect multiple bids"
I still see those homes on the market 3 months later or pulled.

My favorite bits:

A Tough Fact of Life

...Formulate the final number yourself, with guidance from your broker. "You can't expect your broker to tell you what to bid," she says. "I try to lead buyers to a reasonable conclusion, but I hesitate to put numbers in other people's mouths."

El HARM-O, I can do a "weekend" meeting with the board of HARM-X industries GmbH LLC

ROAD TRIP.

I'm 37% less offensive in person

Yeah, I agree that BA natives have a hard time surviving elsewhere. The biggest reason is the weather, once you get used to this kind of Mediterranean weather, then any deviation from the ideal mix of temperature range and humidity becomes intolerable.

A friend of mine was thinking of going to FL after living here for about a decade. His theory is, you get the same sunshine but pay half the price, since he built up quite a bit of equity in his current home, so that he can cash out and buy a nice place in FL outright. He originally planned a full-month confirmation trip hooking up with realtors and job contacts, after about a week, he cut the trip short and admitted defeat by the Southern humidity.

Another friend moved up to Seattle, at first he was very happy because Seattle has more drastic and stunning mountains than the BA. Three years ago, he called me up and said although he was sick and tired of the overcast and the lack of job options other than Microsoft, he figured that he could never move back, because the delta between his home and equivalent BA home had become so big that the only way he could move back was to win an IPO lotto.

I have a co-worker who is selling a house right now (inherited) and she listed the house low and had two offers on the property within a day or two. She went with the lower one as the person was actually putting cash down, so she figured they MIGHT have a chance in actually closing, unlike the high bidder, who was doing a 3% down piggyback.

Former Apt Broker,
We have plenty of open land. As anyone has seen we had more construction from SF to San Jose in the past 5-7 years than any other decade i can recall. And there is plenty more... what the heck do you do with Moffet Park or the Westinghouse factory in Sunnyvale... Anyone want to take a shot ...

Space_Acer,

I actually don't think we have that much land in the more discovered urban spots, Gilroy is of course is a whole different world with as much land as you desire.

I drove through some vacant lots in Sunnyvale, Cupertino, Saratoga, and what I found out was, the vacant land was either held by a local developer who bought it many years ago, or by the city for preservation, or voted down for development by NIMBY neighbors. If land was really not an issue, we would not have seen so many townhomes, SFHs and condos built on the fringe of the freeway.

If you go down 85, and get off any exit in one of the major cities, you will see a new residential development right off the ramp. I'd like to believe that developers may assign a higher preference to lots NOT so close to the freeway if they have a choice.

Harm quoted the article...

"Learning what to offer is part science, part intuition, say Realtors. “With a market that’s still extremely hot, it’s the only way to be successful,”

Im an accountant by trade I work with numbers. In a audit everything has to be justified and documented. Else you get Enron/WorldCom accounting fraud. Even our corporate sales team works with visiability in contract negotations. I really feel we are going to see lots of fraud first before we see any bottom in price. When you read stuff like this, you really know something is wrong.

Based on the Wall Street Journal's sage advice, the Mrs. and I will be tendering an offer this weekend for a quaint 1 Bdm shack under the Freeway overpass in lovely "South" Los Angeles we've had our eye on for some time.

Since other similar crackhou... er, homes, have been going for north of $500K, we will be bidding at least $600K. We will be waiving any buyer contingencies (as this can only impair us in our goal of "winning" the bidding war), including home inspection. I am sure if there's *anything* wrong with the home, the sellers (a nice Gypsy couple) will tell us about it, right?

Per the WSJ, we will also waive the right to keep appliances, electrical fixtures, plumbing, wiring, windows, doorknobs, etc. Who really wants to keep someone's old doorknobs and plumbing anyway? And if the seller wants to remain rent-free tenants indefinitely at our expense --no problem! We can just continue to rent until the sellers feel "ready" to move on. Anything we can do to make the transition easier for those kind-hearted souls...

Of course, we *will* be writing the sellers a personalized "love letter" with wedding photo, telling them how much we worship them and the ground they walk on, etc. I'm wondering if we shouldn't also offer a free BJ to, you know, set ourselves apart from the other buyers?

Unfortunately, we do not yet have children, so cannot include pictures our kids have drawn of the home. However, we do have a very prolific cat, who has kindly contributed some "found art" to the cause. Here is Mr. Whisker's rendering of the seller's home: