patrick.net

The spanish is a bit rough on the "raunchy grande" page; But I am not mexican, so maybe that will pass for mexican spanish...It reads more like english written in spanish, the grammer is bad and the accent marks are missing on at least 50 words.

One of the reasons I got my license as a real estate agent (My full time job is university professor) was intense disgust at the abuses I saw other agents and especially loan officers commit on recent immigrants.

On another note, many many times I advised clients to buy less house and use fixed rate financing, but I have never had a client follow that advise. I think countrywide's advertisement from a couple years ago sums it up best: "Don't let the payment stand between you and the house of your dreams." What the f*&^ kind of advise is that?

Try Marahs on Columbus….

I'll give it a try - thanks for the tip. I'll have to say, the cannoli bar is set very high for me!

Similarly, like Peter P said, the Italian food in all of the Bay Area leaves a lot to be desired.

Skibum - I will take your word for it.

I heard that Millers on Polk imports their Bagels from NYC daily.
They have some other good deli items NYC style.

Similarly, like Peter P said, the Italian food in all of the Bay Area leaves a lot to be desired.

"Fifth and Madison" in Palo Alto gets a thumbsdown from me.

In part for their ridiculous name. It's not even a funny joke.

The only redeeming aspect is they have mortadella - that's hard to find.

From what I have seen almost all the sales in crappy parts of San Mateo, Redwood City and the Bayview/Hunters Point have been to low income minorities who don’t speak English or understand the term “NegAm/IO”…

That reminds me, I need to move to RWC or somewhere more North this summer. Between 92 and 84. Pref closer to 101 for commute purposes.

And, I'll still be a JBR.

Any recommendations?

“Fifth and Madison” in Palo Alto gets a thumbsdown from me.

Other "Italian" places around here that get my thumbsdown:

- Il Fornaio: overrated, bland food
- Bucca de Beppo: chain store quality
- Rose Pistola: overrated, flavorless
- Kuleto's: bland, feels like a "Cheesecake Factory" inside

Much better, but still problematic:
- Olivetto: good food, but it's not really Italian
- Quince: same as above

I've never been to Don Giovanni up in Napa, but I suspect it would be similar to Olivetto or Quince in criticism.

Peter P,

Even though my professional responsibility professor specifically warned giving any kind of advice over the internet, I think this is generic enough to be okay.

You have an annual gift exemption of $12,000. Those theoretical philanthropic organizations would have to be exceptionally generous for this to ever be a problem.

That reminds me, I need to move to RWC or somewhere more North this summer. Between 92 and 84. Pref closer to 101 for commute purposes.

If you want commute convenience, that particular location, and you don't care about ambience or culture, I'd go for Foster City or Redwood Shores. They'd be fine for renting, but I'd never buy there (built on landfill). For more stuff to do, San Mateo is not bad. Lot's of decent restaurants in downtown.

Oh wait, bad advice. Substitute "philanthropic organization" with "mom dad"

SFBubble says
"I think Prop 13 should be interpereted to make the 2006 buyers’ property taxes grow at 2% a year. See how long until they pay the same as people who buy in a few years. "

It will drop with the current values. It can only go up a maximum of 2% a year if the value goes above an overall 2% per year.

I will never understand Olive Garden, why wait in line for food you can prepare in less time and 1/2 the money (or 1/5th the money if you use their ingredients)?

Wouldn't it have been smarter for him and his friends to buy a farm instead?

Hobby farming is expensive and very tiring.

Whereas career farming will buy you a $720,000 house!

The Housing Bubble Correction be Napoleon's Russian campaign + Hitler's Russian campaign.

Skibum,

My wife really likes Pezzella's in Sunnyvale. It's a bit pricey for the style of food (dishes her grandma would make at home). We're not Italian food connoisseurs though.

Malcolm,

I know they'll go down. Laws like that are never 'fair' or 'balanced' in any way, shape or form.

I'd support prop 13 if it had a means and age qualification.

"So the housing premium required in CA in the 50s and 60s was not as high as the premium required today in an economy dominated by Microsoft, Google, Cisco, Intel and so many companies based in CA."

What about the other side of this logic why not factor in the employers that went under... like hundreds of Computer, Semi, Semi-Equipment Maker, Networking, Software and others..... Bay Networks, Ask Computers, Ungerman Bass, Tandem, Amdahl, Norton, AltaVista, Atari, Excite, "old" Borland, Fairchilds and so many names we lost count. Seibel, Maxtor, Hyperion added to the list recently. .... THEY ALL WENT BUST... you know failed to survive. Many didnt survive because their employees were too expensive.. Their mortgages were far more than the employer can bear and be globally competitive. And that was in the 80 and 90's...

What is this PREMIUM people talk about?

FYI, Microsoft was never in CA. They were in New Mexico and then moved to Washington.

I forgot to add the other Google darling in its day "Netscape"

Hey ever recall that one???

Why fly planes into the WTC? Al Quaeda could have done way more damage to the economy if they had just had the foresight to put their resources into the subprime market.

I forgot to add the other Google darling in its day “Netscape”

I always refer to it as "Nutscrape" in my head.

Actually I don't know of any extreme cases like that in real life. The more extreme cases I know of is like $250K household taking on a $750K to $850K mortgage, which is manageable if you know these people in person, because they live a really really frugal lifestyle, driving an entry-level car, having no vacations, buying clothes only on half-off sale etc., and doing everything possible to minimize tax.

There is only one couple that borrowed way over their head, over $1.5M in debt on a household income of less than $250K, but the guy joined GOOG right after it went public, so I figured he'd be ok.

I don't think a typical professional couple household in BA are that crazy. They usually max out at a debt load of 3x income.

"So the housing premium required in CA in the 50s and 60s"

Damn me ... I forgot to add the whole aeropace industry that went belly up. I sure hate to be the fool who purchased a home in San Diego in 1989 (peak year) when the Berlin Wall went down. Yea that turned out well, prices crashed 40%"

Re Prop 13.

With all due respect, I must say I find it curious why people (who I perceive lean slightly left) keep hammering this prop 13 thing. It in essence is a regressive tax benefit, which turns into a regressive tax if you take it away. (Regressive meaning it penalizes the lower brackets more than the higher ones.)

The other thing is that talking about it is a waste of time. It was passed by initiative. If it is not a good law it can be removed the same way. It can only be undone by a general vote with a super majority.

"I always refer to it as “Nutscrape” in my head."

I pitty the FOOL that paid $90 a share for that PIG!

Speaking of Strawberry Fields...

I went to the REO up near the college today. Listed at 188K about ten days ago. The place was built in 1915, probably leased out to students for the last twenty or thirty years. It was a DUMP. Porch slanting into the front yard, all the grass dead as a doornail, cracks in the walls and foundation, the hardwood floor warped so badly that it looked like water damage. None of it looked like spiteful pre-REO vengance, it was really just that badly beaten up. There is no way in hell I would live there. In fact, I would even feel slimy renting it to college students, who were obviously slobs enough to destroy it in the first place.

My agent called me before I got there. 19 offers so far. Highest was well over $200K, all cash, fast closing. While we were there, I got to see some competition. A college kid and his realtor. Couldn't have been more than 21, shaggy haircut, loose jeans and a perky new ballcap. The guy flat out screamed college student.

Maybe I'm misjudging the kid, but I'd like to see this entire demographic of competition just vanish. Subprime can't dry up fast enough to get all the Gen Y "real estate is totally a path to easy riches" speculators out of the market*. I want to see the market require 20% downpayments for the coming 10 years. The next demographic I'd like to leave is the people who have no idea how to do their own comps, employing rookie realtors who have no idea how to do their own comps. You can always compare the property to something in its price range, ignore all the details and come up with the exact asking price.

Bitter? Check. Jaded? Check. Renter? Check.

An engineer at lunch said to me, "Even if prices fall 20%, if credit goes up then you'll still pay more per month." I went off on that. How could a goddamned engineer say that?!? AUGH!!! If college educated engineers can suck that badly at math, what hope is there for the normal people in society? If a $250K house lost -20% to $200K, and I had considered a 20% downpayment, let's examine:

1. $250K pre-drop price, $50K downpayment, I pay 6% on a $200K loan. $1000/month IO, I have lost all of my $50,000 downpayment. The market vaporizes the equity.

2. No money down after the fall, I pay 8% on a $200K loan. $1333/month IO, and I still have $50K in the bank.

3. $200K price, $50K downpayment, after the fall, I pay 8% on a $150K loan. $1000/month IO, and I still have my $50K downpayment in equity.

Hmm. #3 vs. #1--I still have my hard-earned equity, my payment is the same, and I get an even bigger interest deduction for my taxes.

People piss me off. This is like the mockery I got from all the new hires in 2001. People were off buying a Lexus or a house, goading me into getting something nice because we were all newly minted engineers. I looked like an over-conservative nerd (which, to be fair, is probably an accurate description). Six months later, three-quarters of them were fired. Happy trails!

* However, there is no way a college kid made a $200K+ cash only offer on that dump. It had to be an investor, who knew quite correctly that they could lease out the house for far more than the loan amount each month.

I also think people here are a bit too conservative, I bought my home on 2x household income debt load, or else I would have to buy on the east bay, plus we were both out of grad school back then, so we figured there would be a much higher chance of our pay doubling than going down in the next decade, and things did progress the way we expected, and better.

BA's housing problem, apart from the housing bubble, is also a manifestation of rat race at its best. Almost every professional couple households make $200K+, and if you distribute these households evenly across the nation, they will all be living happily in the best local neighborhood. Unfortunately, you have a high concentration of these people in a limited geography with all of them thinking that they are entitled to live in Portola Valley, Monte Sereno, etc. So most of them are just miserable.

A $250K household is considered high income household in every single first world country, even in places like Tokyo, my director (a real director with a team of people reporting to him, not just a "director") friend in a large Japanese corporation makes only $160K and his wife doesn't work. Somehow he is happy with where he is, and considers himself lucky. A $160K household on this blog will consider themselves losers and wonder how they get by for the rest of their lives.

TOS,

I am looking for long term rate. I am aware of appreciation rates since 77, but trough to peak measurements are not very useful and I want to figure in the value over many cycles. If you don't have the data, just say so, no part in being deliberately difficult about it.

I know you have not been reading for long, but I am one of the SF homeowners who posts here. I don't have any particular dog in this fight, though I might like to buy a bigger house someday.

I beg to differ. SF doesn’t have real Italian cannoli.

Try Stella's on Columbus. I have never heard of Marahs Space Ace, are you sure you have the name right?. My Queen's born and raised g/f liked Stella's, if that counts for anything.

OO,

Me and my wife had a combined income of $140k, took on a $640k mortgage on a $710k duplex and are doing just fine. I really had to push her into it, but it has worked out great. We also had the income stream from the unit downstairs, which even in the beginning paid almost half of the mortgage.

I agree that people who post here are too conservative investors. I am pretty sure that I am the most aggressive investor of them all, or at least amongst those who talk about the financial risks they take. You should take more risk when you are young, when you have more time to catch up to recover from your mistakes. I lost half my net worth in the dot com crash, but I recovered it all in a couple of years.

Jimbo

The long-term rate over the past century for housing, nationally averaged, is just a tiny fraction above 0%. That's right, after adjusting for inflation, housing has not appreciated even 1% faster.

CA has appreciated more, but not much more being the substantial gains only came in the past 3 decades. I think it's about 1.0-1.5% above inflation, but I'll find the reference later (again; we've linked all this before in the past 2 years).

If you take the 70s until present then you get under 3% appreciation after inflation. Under 5% in CA. But, as many will point out, the dataset for this shorter period CLEARLY shows the past 3 years as extraordinary outliers. So much so that were this any other kind of statistical data set we'd apply some kind of smoothing function, or eliminate the values from the set altogether (which we cannot do until after we revert to mean, of course).

I'll bet the 70s - 2015 end up showing about 1% nationally and 3-3.5% in CA, after inflation -- and that is a very generous estimate.

Jimbo,

just lock down your rate. If you have locked down a low rate for 30 years, then I think you have greatly minimized your downside. Everyone's situation is different, so one should play his card according to his advantage. What you are doing is actually borrowing only $320K, because the other half of the mortgage is self-sustainable through rental income, so that gives you only a 2.3x HH income debt load, which is so much better than many newly-minted FBs.

Jimbo:

I kinda agree with what you say. While I believe that housing prices in AZ will decline drastically, I am not selling my last 2 homes. ( 3 years ago I had 5) One, I need a place to live, and i know yadda yadda i could sell it and invest the money even at 5% and rent the same house, BUT IT IS NOT THE SAME. I don't want to move, as an owner I can do whatever i please to the home, I have 2 big dogs which makes renting a bit problematic anyways, and since I own the place I put a hottub behind it where I can get drunk on red wine whenever I want... the other property is paid off too, centrally located and the rents seem to be increasing nicely now that gasoline is too expensive for people to drive in from the burbs...

Looking at the development of phoenix, I think that a drastic change in the oil outlook could seriously disrupt our current rent/price structure. Both of my remaining homes are centrally located, near ASU, and within one mile of the long over due light rail stations. So, even if PHX takes a 50% inflation adjusted hit, it may not be evenly distributed, and long term, these 2 may do much better than most. Hell if it really drops alot, I will buy more.
Peace all

Mmmmm, Statricks...sounds like a delicious faux math filled sugary cereal.

(again; we’ve linked all this before in the past 2 years).

Sorry if I am asking something that has been covered before. I have read the blog here on and off for a long time, but not religously and probably missed it. I will try to Google for it, but have not had much luck with finding stuff on Patrick's in the past.

Yes, I am aware that recent events are an outlier, which is why I am asking for data through 2000 specifically to exclude the most recent runup.

Real estate benefits from two factors: discovery factor (which is the biggest driver of real estate appreciation), and inflation.

CA benefits the most from the discovery factor in the last 30 years. Now we are fully discovered and world's #1 in many aspects, there's not much appreciation potential left in that bracket. CA housing will only appreciate in line with inflation for the next 30 years.

SP: Human beings like to convince themselves of clear evidence. Interestingly, this blog is often divided among two circles. The first is the true statisticians who are studying the overall trend from a historical perspective. The second is people trying to divine an opportune moment from an individual perspective.

Like a Venn diagram, these two circles heavily overlap on patrick.net. But I am always interested in the possibility that there is significant personal gain to be had, even though the major trends are against me. Perhaps we should have more threads on how to spot an opportunity, the proverbial needle in a haystack. We've beaten regression to mean into the ground.

:o

Avoiding exposure to an overpriced asset class is not a conservative strategy, but a survival strategy. Especially so when the liquidity that inflated the asset’s price is being withdrawn.

Don't get me wrong, I am not advocating buying real estate right now, I think it is headed for a tumble too, though a slower and slighter one than most posters. I *do* advocate taking appropriate risks overall, in the stock market, bonds, etc.

completely OT, but I went to a speech night by 2 social democrats and a marxist last night, all truly brilliant individuals. this is a page of transcripts and other speeches by one of them, winton higgins, and others, as listed.

reading anything by winton is quite inspirational, and should give any unreflexive 'received wisdom' market fundamentalist food for thought.

Transcripts of Talks

Even more OT, I really liked this Norman Mailer interview and Mailer's interpretation of bureaucratic hell (literally)

http://www.kcrw.com/etc/programs/bw/bw070412norman_mailer_part_i

If you go to the OFHEO web site you can get the rise in prices for California and for other big cities in California. However most of this data starts around 1976.

We could use logic to guess the price growth in the 1950s and 1960s. During those decades many people from the Midwest moved to California. The prices in California could not have been much higher than in the mid-west otherwise people would not have migrated west. In addition this was before the environmental movement and there were few restrictions on building. Also homes were built at a very high rate so the supply is likely to have kept up with demand keeping prices reasonable.

However since 1976 prices have increased at a faster rate than most other states. At the city level, the fastest growing prices have been in the ay Area with the number one city being San Jose. In fact, San Jose beat both San Francisco and New York City. This is because San Jose was transformed from orange groves to the technology capital of the world.

If you want to buy in the number one growing city over the next thirty years find the wheat field, cattle farm or orchard that will become the nano-tech or bio-tech capital of the world. It is also likely to be near a top university. It is unlikely to be San Jose or New York City as both are priced for perfection. It will be next to impossible for them to maintain their leadership position over thirty years and even if they do prices will not rise as much as the currently small city that will be a leading city.