patrick.net

Some of us are wed to the tech economy... so moving away is tempting but not a total slam dunk.

It is a third world out there …. India is better than sunnyvale

Terminal C of SJC reminds me of the movie Raid on Entebbe. It looks like an African airport 30 years ago.

Some of us are wed to the tech economy… so moving away is tempting but not a total slam dunk.

The most important asset of the Bay Area is its restaurants. Other things can easily be duplicated elsewhere. (e.g. good weather can be created using broad-spectrum light sources)

Speaking of 3rd world appearances in the Bay Area, it wasn't until we moved to Boston that I realized how crummy most of the public schools, particularly the elementary schools look. It's only gotten worse. Even in the supposedly fantastic Palo Alto district, for example, most of the schools look like they haven't been updated since 1981. That's unless you count all the trailers put on their grounds for "temporary" classrooms.

And this is what all the masses are clammoring to send their kids to?

theotherside Says:

> I disagree that we will see a floods of NODs/
> foreclosures in Alt-A and prime loans in good
> locations were people have decent jobs prospects
> because the lenders will rework the loan terms

In the last down cycle banks (who held most loans) “couldn’t” rework the loan terms since the government will only let an FDIC insured bank hold a small number of real estate loans with a loan balance more than the home is worth…

In this down cycle MBS servicers (who hold most loans) “can’t” rework the terms (or do anything not allowed under the terms of the loan docs). The first loss bondholders will work with the special servicers to foreclose as fast as possible as soon as anyone goes in to default…

In the past decade anyone in the Bay Area that couldn’t afford the payments after a teaser rate adjusted could just sell their home at a profit. I know a lot of people with great jobs and great credit (so far) that will be in big trouble when they can’t afford the new payment and can’t sell…

"most of the schools look like they haven’t been updated since 1981"

Oh how right your are !! This is true in Santa Clara County. All the Lotto money didnt
make much of a dent.... Does anyone recall the whole idea behind the California Lotto
was to fund schools.. So much for that... LOL

Every time I eat out (every day) I am shocked by the 8.25% sales tax.

Why is the tax so high (the optimal rate is around 0%) yet the schools are so bad? We need to think long and think hard.

otherside, NODs are already starting to pile up.

http://flickr.com/photos/7409273@N03/453465468/

This is not seasonal fluctuation, like housing inventory for sale. Is this prime? subprime? alt a? I don't know. But the shear growth rates are staggering.

Fort Collins and Denver are unbearably too white and Christian for my taste. Other than steakhouses, not many good restaurants out there either. One exception is Sushi Den. Unbelievably good (and expensive) sushi for a location so far from any ocean.

It snowed on Easter Sunday in Fort Collins and the streets were very icy. One of my co-workers lives there and travels about 3 hours roundtrip each day to his job site in the Denver Tech Center.

Keep in mind, one can still be flush with cash in the Bay Area. It's called renting an apartment instead of renting money.

All comes down to what you're looking for in terms of lifestyle and culture.

Are you in the Denver area Brand? Let me know....I'm out there quite a lot, and visit the Den quite a bit too.

"Has anybody seen Sunnyvale downtown mall "

Sunnyvale is overrated. I can say that since I been here since 70s.
Needless to say not much has changed. Downtown was alot worst.

LowlySmartRenter says: It snowed on Easter Sunday in Fort Collins...

Yeah, and I went for a walk today (Monday) in only my T-shirt and jeans. It was probably high 50's or low 60's. More days of sun here per year than Miami. The snow rarely sticks on the road for more than a day or two, even in the dead of winter.

I keep hearing that Brand, but this last winter was a b*tch. That snow stuck real good, for several weeks in December and January. I have enjoyed the sun though. No fog in Denver. The sun is much more intense at that altitude too.

Yeah, hence the much higher incidence of skin cancer. Less atmosphere, more UV.

Anyway, I drive a rear-wheel drive sports car, and I didn't think this winter was anything challenging, even with a 30 minute commute. There were maybe 3 days when I just knocked off work because I didn't want to drive. But possibly that also had something to do with strapping two fiberglass sticks to my feet on two of those days... :o

Yes! I notice far more 'sick' days of my colleagues in Denver when the powder is particularly sweet. Beats driving 2+ hours to Tahoe in the same conditions.

My perception of Denver weather is skewed by the long drive from DIA and their horrific problems this last winter. All and all, Denver is a great place to call home. Just gotta get the right gear.

2 quick thoughts. Peter, I don't see any boundaries on subprime. I think those borrowers are just as likely to be the poser Hummer owning high rollers, as they are to be some low income minority 1st time starter home buyer.

2nd thought regarding this last TOS rebuttal. I tend to agree with TOS to a point about prime borrowers. I believe the majority of prime borrowers:
A. Didn't overextend, and probably have enough cushion to ride it out.
B. Being prime have the integrity to do anything to preserve a great credit rating.

That being said, tough times, job loss, and horrific price drops will lead to higher than normal prime defaults, but not in droves like the subprime guys. They are two very different animals.

That CNN blame game article that Patrick just sent out is pretty good. I still think appraisers are getting more blame than they deserve. Their job is only to put a current value on a house. When you have three people frantically bidding against each other that is a legitimate current value.

What I found most interesting is the last one, the borrowers. They referenced the outpouring of disagreement from readers from prior articles demanding that borrowers be responsible for their actions.

Obviously some bubbleheads have been paying attention.

Peter, I don’t see any boundaries on subprime.

Yep. Many professionals may get foreclosed upon.

Didn’t overextend, and probably have enough cushion to ride it out.

Hard to say. Many "prime" borrowers thought stretching to avoid getting priced-out was the right thing to do. If they had a warped picture of risk, they could very well be overextended.

Being prime have the integrity to do anything to preserve a great credit rating.

One needs a great credit rating to get into a reasonable mortgage. Once the dream of homeownership turns into a nightmare, the perception may change. They will do everything possible to keep the house though.

I have to reiterate that asset pricing has little to do with desire and affordability. It is everything to do with price projection.

The fact that a primary residence should not be seen as an investment does not change the reality that most people see it as such. It is all about emotion.

Time will tell, both are logical arguments. The nice thing here is that we all build consensus on the fact that no one disagrees both areas will increase. The matter of debate is how severe the increase in the larger population group will be. IMO it won't be that relevant to the price drops because enough subprimers with the flipper primes going into default will be enough to push house prices down to the absolute minimum.

The ideal situation for the up and coming JBRs is for the job market to remain reasonably strong, while house prices crash. Unfortunately I don't see both happening because the economy HAS to slow with a painful housing contraction.

The boys bathroom at my public elementary school was in decent shape when I started school in the late 60’s but I watched it decline (with no real maintenance) to the point where it was in worse shape than the bathroom at a scummy dive bar in the late 90’s

Bathrooms in public schools are just that: public bathrooms. That's another way of saying "The People's Bathroom" - and that's just communism.

Support Prop 13. End government waste. Why let THEM spend the money you could be using to clean YOUR OWN bathroom.

That's one of those fun things to disagree with because building equity in your primary residence should be an investment. If you don't look at owning at house as an investment, then what's the point of buying it?

Likewise, if someone is buying a house for the long term it should be with the goal of paying it off and having a comfortable retirement. If the deal has someone paying payments indefinitely that is just as bad as renting forever.

The ideal situation for the up and coming JBRs is for the job market to remain reasonably strong, while house prices crash. Unfortunately I don’t see both happening because the economy HAS to slow with a painful housing contraction.

The ideal situation is for one to buy a 2 million dollar house outright with less than 1% of his net worth. :-P

I kid. I kid.

The best case scenario for everybody is a flat housing market and a steady job market.

And this is what all the masses are clammoring to send their kids to?

My favorite is when local parents tell me that Monta Vista/Gunn is "the best high school".

Unfortunately they forget to qualify it with "Bay Area" or "California".

I went to a Top 25 ranked high school in the East Coast. I'm simply shocked and appalled at what they consider to be schools here.

Of course, as Allah points out, in places that have good schools, like Long Island, the property tax tends to be $12k on a $800k house. Youch.

Or I guess one can say the stability of a fixed rate mortgage has a break even point of increasing rent outlays. I still would assert that the goal is to own the house outright even if it is not the economically optimum use of the equity. Emotional security has an intangible value in my opinion.

Support Prop 13. End government waste. Why let THEM spend the money you could be using to clean YOUR OWN bathroom.

No. Scrapping property tax is a better way to end government waste. Much of the government should be privatized anyway.

But it is past the point of being able to remain flat. Even flat for the fundamentals to catch up is a catastrophe that can't be sustained. It has to fall to the fundamental valuation.

My favorite is when local parents tell me that Monta Vista/Gunn is “the best high school”.

And the best high school will certainly propel every of its graduates into the US Senate. We are going to have so many senators.

Just let the delusional parents live in their pipe dreams. Though someone should tell them they can have cartoon kids in the virtual world for a fraction of the cost.

It is possible that the ‘majority’ are like that. However, there are a large number of recent (2004-2007) buyers in the prime areas who are skating on very thin ice. They need
1. two high payin jobs
2. two bonuses
3. low interest rates and
4. continued appreciation
in order to keep them from going underwater.

I absolutely agree with this. I elaborated this a little in the very last part of that post. I think most of us are really on the same page. We have some very good unemotional macro-economists here.

Those prime guys will default at a rate that approximates changes in those factors that SP lays out.

What it boils down to is still the job market. Almost all the professional couples I know who got into a home in the last few years locked in fixed rates, so higher rates won't affect them. However, since they are so stretched financially, they are living from paycheck to paycheck with little cushion saved up. Most of their savings from previous years went straight to the dp.

If one of them get laid off and can't find a comparable job within 3-4 months, these prime areas will really start to crumble. But as long as the job market is holding up, no worries so far.

OMG SP, they would have ridiculed anyone who dared throw that number out there last year.

The housing market downturn WILL eventually affect the job market.

Michelle Mangione knows. She and her husband, Jeff Haag, are living in a home in Fallbrook, Calif., that she bought from the owner about three years ago, just before it went into foreclosure. Having paid about $680,000, she estimates she saved about $200,000

ARE THEY ON CRACK? Have any of you been to Fallbrook? $680 is not a bargain there. You can get very good homes in prime N Co San Diego for that much.

No Co coastal homes like Carlsbad, Encinitas, La Costa.

I'm telling you, what I am seeing in NM is a preview of what is coming. Entire towns boarded up, $900/acre signs and flyers. This is an area that should have been insulated.

$900/acre signs

Condos in SF are still being sold for that much per square foot. :(

$900/acre, hmmm, sounds like my dream price.

I will be perfectly happy with $90K a flat acre in the western foothills. I just don't think the market will crash this much.

years locked in fixed rates, so higher rates won’t affect them.

There is a danger when the owners think this way. In the big picture, it's not the rate you are paying that matters, it's the rate a future buyer will pay that matters to the seller. I would much rather buy a house at a low price and extremely high rate than buy at a very expensive price with the guise that the rate is low and my payment is the same. Those realtors who actually tell people that should put in blocks in the town square and made a spectacle.