patrick.net

HiThere,

I have two friends plus my little brother who immediately make money with 10% down on investment properties in upstate NY. No bubble there. They aren't betting on appreciation, they just invest in properties (one has lots of section 8 properties and makes a very good income from them after expenses) that provide them with an income after all expenses/taxes/maintenance, etc.. I would consider those investment, rather than speculative, properties. They own apartment complexes, not one off houses or condos here and there, because there is also an efficiency with economies of scale.

Pheonix, Scottsdale, Las Vegas and other bubble areas will have such a glut of rentals in about, oh, 10 minutes, that I wouldn't be sure of being able to keep a place rented. An empty rental unit is even more of a money pit and decays faster than having good tenants. Perhaps the people who are forclosed upon will fill these spec houses?

What is resale like on a new unit that has been rented for several years? Does it seriously diminish the value of a property at resale (seriously, I suspect it does but have no clue)?

SFWoman, you are right about Upstate New York but I wouldn't invest there as I don't believe in the long term prospects of those areas.

In terms of future of Vegas and Phoenix we have to agree to disagree.....time will tell....one thing I can tell that I never had vacancy in last 3 years....I bought in good areas.....we can talk about food now :)

Holy crap, look at the inventory numbers in Phoenix and Las Vegas!

http://www.housingtracker.net/

Of course, you can't easily time any market, including real estate. On the other hand, you CAN say that buying now or anytime in the last few years was perhaps the WORST time in recorded history to buy RE investment properties, especially for buy and hold.

SFWoman, et. al.

Can we wait a couple of weeks until Hell Week (city charity fundraisers) and school re-entry coffees are over? September is the month from hell in the city (but has great weather at least).

Yes. I was thinking the end of September. I'd like to wait until we can get a good turnout. The gang on the Peninsula will need some warning so they can plan to get through the amazing highwayless city at rush hour.

Pulled from the Zillow boards (where I'm currently stirring up some action, along with a couple other Patrick regulars, I assume since there is a sudden influx of really smart people):

I work at Countrywide headquarters and have access to LOTS of data...it's all bad and its gonna get a lot worse before it gets better. Seeing private money coming in with 65%-75% (weighted avg) bids on large blocks ($1b +) based on TODAY's appraisal/BPO values...which means they are pricing in a retail decline of at least 15% - 25% over the next 1-2 yrs. My advice: start to watch sales/closings closely starting in 9-12 months for bottoming out around 20% - 30% off highs from 2006. If the FED and Gov't intervention doesn't stem a deep recessionary/depressionary period in the next 12 mons, look for further declines in home prices before buying. Good luck.

RANDY, I never asked you before where you live in Marin? Have you ever been to Perrys at Francis Drake?

I suspect leverage played a bigger role for Stockton and Modesto. Most of the Bay Area people trading commute time for affordability tended to buy in Tracy/Manteca or Los Banos.

Yeah, I know people who did the commute from Tracy. Heck, I know people who commute all the way from Roseville. Crazy!

I just think people who couldn't afford to live in the BA ended up in Stockton, Modesto, Tracy etc. with the income level determining where they ended up. Which probably fueled the beginning of the market run-up, but I doubt it really got going until the speculators jumped in. That's what happened here (Roseville). I can't believe all the foreclosures I'm seeing around here.

I can discuss food anytime. But I don't really like Indian Food Buffets. When I want to eat Indian food in BA, I go to Pakistani restaurants.

One of the heads of Countrywide lives here part of the time. He's very nice. I wonder if that's him.

Speaking of CFC, over at CR there are rumors of impending massive layoffs at Countrwide, likely 6K-10K of their 60K workforce.

Skibum,

That would make sense, by what percentage have the number of mortgages given out declined? You wouldn't pay people just to process 'no way on earth' applications.

Randy H,

I took a gander at your thread and a couple others over on zillow. You're on a roll, man. Keep up the good work.

It's a bit funny seeing you debating a Realtor (Sandy) who writes as though she barely got her GED.

The periphery is definitely in trouble. It has also spread to the deeper reaches of East Bay.

In Palo Alto itself, I see an interesting dichotomy. Stuff is not moving above the $2 million range in the hills (the 1 acre+ lot houses). But the "middle-class" range of $1.2-1.5 million still is moving. The difference is stark enough that I have often wondered why someone would pay $1.2 million for an ugly house in a relatively tree-less seedy looking (for Palo Alto anyway) neighborhood, when the houses on the hills with nice views and big lots aren't moving.

A friend explained it as: there are still people who can put down $300-400K (usually from bubble gain on a previous home sale in San Jose etc). They may have family incomes of $200K, and borrow $700-800K. But they can't afford to go beyond the $1.2 million, so houses in the hills sit.

renter_paloalto,

Background: Most of these "middle-class" PA houses are in South PA. Most are either crappy ranch boxes or Eichlers.

You're friend's theory is probably one factor. Another major factor is that those wanting to buy into the low mil price range are reaching to get into a Palo Alto (TM) home, with the privelege of having their kids attend Gunn High School to compete with all the other kids Gunn-ing for a Harvard acceptance letter.

For the life of me I can't understand why else anyone would pay that money for South Palo Alto. It's generally ugly, treeless, and the house you buy could at any time all of a sudden be surrounded by newly built McMansion from all sides blocking any sunlight you had before.

All this so your kid can get an ulcer by age 20.

In Palo Alto itself, I see an interesting dichotomy.

There is another dichotomy in the entire Fortress but in another direction. A lot of houses are available for lot less but don't sell and the houses in Fortress are (or were) going over asking.

http://www.zillow.com/HomeDetails.htm?zprop=19619210

I remember visiting the open house for this one earlier in this Spring. The asking was 999888 or something like that. Say 1M.

This was sold for 1.2M, 200K over asking. And all this for a 1500sqft typical Cupertino sh1tbox.

You have to wonder how bad the school fetish must be. Even with some IPO money, why would you overbid 200K and pay a cool 1.2M for this shack ? Why this desperation to own in Cupertino ? Unless you have something like 10 kids, buying a much nicer home anywhere else and sending kids to a private school will be much cheaper. Even before the sh1t hit the fan in August, there were cheaper and better homes available in good areas of Sunnyvale.

If you are not from BA it's near impossible to understand this behavior. Not that people in BA actually understand it, but they are not shocked by this common pattern. This is Cupertino, they say. The Holy Land where The Never Ending Fountain of Equity Appreciation runs in the backyard of every home.

We will see.

I see other's obsession on their kids' education as my competitive advantage. More sushi for me. :)

I don't like sushi at all :(

Why?

My best friend doesn't like sushi. I got him to try it about three times saying "Maybe you just haven't had GOOD sushi", even though I knew he'd had good sushi each time. The man has defective genes, as far as I'm concerned. It's so sad.

Hmm... Toro... flavor bursting in my mouth... Yum...

Good sushi must be eaten with eyes closed.

I firmly believe that good food can bring world piece. Once those Iraqi insurgents just try a nice 9-course dinner, they will start to question what they have been fighting for.

Yum. Pork belly. Deep fried. Then stewed.

A very-good friend of ours finally abandoned vegetarianism. Rejoice!

peace...

Food IS erotic, isn't it? ;)

Depends on how... and on what... you serve it.

I'm betting that Peter eats a lot of donuts and bananas to go with that sexy sushi. ;)

RANDY, I never asked you before where you live in Marin? Have you ever been to Perrys at Francis Drake?

No, not yet. I've heard great things about the burgers, though. I don't make it out that far unless we're heading up to Lagunitas to hike with the little one, which is more often of late.

I'm in Mill Valley, Tam Valley, right in the McCrapsion Fog Belt. I really really really hate the tourist season climax with all the Stintson and Muir traffic.

A friend explained it as: there are still people who can put down $300-400K (usually from bubble gain on a previous home sale in San Jose etc). They may have family incomes of $200K, and borrow $700-800K. But they can’t afford to go beyond the $1.2 million, so houses in the hills sit.

This is *exactly* what is happening all over southern Marin. For a while the $2mm+ were still selling in dribbles. Now they're all sitting, or yanked. Only the $1.2's and below move. Magically, that's about just what a dual income family could afford with about $250K down.

Randy :

That Zillow post was outstanding.

Relying on two incomes to buy a house at the top of an economic cycle peak is questionable.

I gotta admit, I don't get the sushi obsession either. I spent 4 months in Japan eating more sushi than I ever wanted. I feel like I never need to eat another piece of sushi for the rest of my life.

stuckinBA

I don't think you really meant what you said about people from the BA understanding the school phenomenon. People who are actually FROM the BA don't understand it either. That's why, if you read the transactions in the Saturday Merc. News, the sellers in those neighborhoods tend to have names that reflect the overall demography of the USA, but the names of the buyers tend more to reflect places like Bombay and Shanghai.

It seems like there's a value system that one can "buy their way in" to their kids having a successful life.

And if that doesn't work, well, there are alternatives...

You can find the quote about the coveted Saratoga High School, " ..The perpetrators of the cheating scandals, the bomb threat and the death threat were all Asian American students, in a student body that today is split almost evenly between Asians and Caucasians...."

These things did not happen in East San Jose, where the Asian-American kids are more likely from Vietnamese or Filipino families.

THey happened at Saratoga H.S.

here is a link to the article:
http://www.metroactive.com/papers/metro/02.19.04/saratoga-0408.html

Why do realtards always compare the downpayment vs. the leveraged investment to determine return? Don't these clowns realize that you pay for the leverage with REAL money, too?!? You have to add in every single year of interest payments into the final amount.

The real equation for the return of a CD compared to real estate is:

D = downpayment
Y = length of loan in years
I = annual interest rate
M = monthly payment

D*(1+I)^Y + sum(12*M*(1+I)^(Y-n)) where n = 1 to Y-1

As a homeowner in South PA, I can tell you that you are all right - the shacks are selling for 1.2-1.5 million and this just gives you the right to send kids to the PA schools.

One big thing is the right to tear down your shack and build a mcmansion. For this reason, the houses that aren't in Eichler areas sell for more since you can't tear down an Eichler and build a 2 story house (your windows would look right into your Eichler neighbors). Also being outside the flood zone helps since you can build a basement and maximize the square footage you can build. Realtywhores also say that Gunn sells for a premium - I don't know why.

The most crazy example is a newly build mcmansion with a basement on South Court that went for $2.78 million. That money would buy a real house in Los Altos Hills.

Gunn sells for a premium - I don’t know why.

Me neither.

The world is ruled by dropouts.

Brand,

I hafta live somewhere. I hafta pay to live there. Even if the house is paidoff, capital is tied up.

So the yes, the interest payment "is" real money, in normal situation (not a housing bubble), it is real money that would otherwise be real money spent on rent.

So I think that in the approximation (but not the present distortion) the interest being paid is substitution for the rent being paid, rather than investment expense.

What do you think?

Million dollar 1600 sq ft Eichler in Cupertino as shown on CNBC during the peak of the bubble was barf city. It just shoeed how stupid are with money. And to think they were selling for under 200K in 1997. Holy smoke nearly 500 perc. increase.. im getting sick thinking about it...

I have not posted in almost a year because I had a dramatic career change and have had a steep learning curve. However, I have been lurking for the past several months, trying to catch back up. In the interest of keeping my posts short, I will break this up.
First, what brought me out:
1. While I can understand criticism of Mo Town, I have been working here for the last 6mos, (Under contracts with a certain Winery mentioned by SFWoman), and I can honestly state that Bakersfield makes Mo Town look good.
2. I was in the grocery store the other day and caught this snippet of a cell phone call: "No Mom, you don't understand! We have not been able to sell the house yet! The bank still has to approve it and we don't know whether they will or not! It is up to them to accept the offer and if they don't, I don't know what we are going to do!?" This was coming from a very well dressed and attractive 30 something female.
3. Regarding food and world peace: The last time I was staying in Marina del Rey, I went to an Iraqi/Iranian restaurant, (probably was just an Iranian restaurant 5 years ago). If I could only eat that for the rest of my life, I would consider blowing myself up too!
*Not Culinary Advice*

sybrib: HiThere is specifically talking about investment properties. He also stated that he's losing $100-200/month. If you wanted apples to apples, he would have to compare the downpayment + $200/month in safe investments.

Quick question to the regulars, can you please catch me up on the following?
1. Surfer X, (Baby and House?)
2. Robert Cote, (Not Rob Dawg, although both from Ventura?)
3. Linda?
4. Astrids Food Blog?

If I could only eat that for the rest of my life...

I don't know what is worse... having no food or having to eat bad food. :(

Isn't the whole idea of The British Empire built upon the basic human need to have exotic food?

If you look at British colonies that failed, Iraq is one of the glaring failures. Perhaps because they never introduced curry?