patrick.net

Who said the move-up market is dead or
When people with good credit do bad things.
According to Fiona Santos of Coldwell Banker Peninsula, neighborhoods like Ingleside and Ocean View have dipped as much as 15 percent, or the equivalent of $100,000 per property. "It's definitely a buyer's market," she told me, "And sellers are pretty desperate." She said that the desperation is not only emanating from those moving out of town or those who can't afford their mortgage, but those buyers who have already bought a more expensive home in San Francisco. "Some of my clients have already moved up. Now they can't sell their first home. These homeowners can't afford to carry two mortgages," she says. "So they are foreclosing on their first home."
Can't believe Ms. Llyod got a used home salesperson to actually say this on record. The end is near...

I have a feeling that many finer-defined sector short ETFs will come on market pretty soon.

You can always count on Wall Street's efficiency when they smell blood.

OO :

The PPT has been able to do Zilch till now. I fear the Fed coming to rescue at the worst possible moment when I am on the short side. They do not fear moral hazard and have shown that in their actions.

I also fear manipulation on the individual company level - like deliberately spreading rumor of a buyout by Buffet. It can start a nice short squeeze.

The broader indexes have been behaving quite predictably on the news. NOT all the time, but most of the time for last few weeks. Even the "Bad Report Bulls" - economy is bad, so Fed will cut, so buy-buy-buy - crowd has gone in hiding now.

But anytime - ANYTIME - now some bullish trigger would start another covering rally. That's what I remain mindful about.

* If anyone takes that as an advice of any kind, they deserve what happens to them.

EBGuy,
That link is amusing. I especially like that doofus Realtors pontification, "I predict the demand for this property offering is going to be legendary."

I for one agree with ptiemann, it's sad to see all the rathole motels going away. SLT was never a place for ski-town ambience, but it had its sketchy charm. Now it's slowing turning into every other over-developed plastic area.

The saving grace for me personally is that I usually avoid staying right in town - taking the gondola up bites - it takes too long to get to a crappy part of the mountain anyway.

THis was in moderation, so try again...

I was up at Tahoe during Christmas. I think I saw the ad that EBGuy is talking about. I remembered couple years back at Northstar some RW was trying to sell 1/7 share of NorthStar village condo for $200K, I wondered how much that had gone down.

When I was playing craps the stickman was saying how Horizon is hurting, wouldn’t be surprised that they tear that place down and build even more condos. The Asian gamblers now all go to Indian casino near Sacto to avoid going up the mountains so I don’t think south Tahoe can support all the casinos.

It’s funny to see now how the resorts now have young visa workers from all over the world, I remembered reading about how they are more courteous than local seasonal workers (another way to get more cheap and more reliable labor).

The condition at heavenly was pretty bad when I was there, I got a $66 bad weather discount for one day of skiing ($81 regular). Lots of trails were closed or not groomed and the Nevada side was closed.

Stuck,
I'd take that as a compliment. I'm a big fan of Howard Roark.

I was up in Tahoe last week, I tried to take my kids to the snow park, the Gondola agent told me everyting was opened except tubing, after we paid $80 to get to the snow park, the guy up there told me everything was closed. To add insult to injury, 2 gondolas were stuck together and nobody could get down, the line to get down was over an hour.

The day earlier I forked out $165 for one day of kids ski lessons, at the end the girl told me my kid can now enrolled in level 3, yeah right, like I would spend $1000 before she even get on a lift.

ptiemann,

I was in South Lake Tohoe 2 months ago at one of the Marriott Lodges, and while just waiting in the lobby, I wandered to the time-share sale office to check it out.

I was told that that 2-bedders were completely sold out, and studio starts from $480K, with 3-month allocation each year (why do I need to stay there for 3 months out of a year??). On top of that, I need to pay 1/4 of the property tax ($480K x 1%), 1/4 of the annual maintenance and hotel management (about $300 a month).

I was like, that means my annual outlay even if I only get to use my place for 2 weeks is at least $5K, ignoring the $480K I need to shell out and the interest expense. $5K over 2 weeks is $357 a night, I think I have plenty of choices with that price range especially if I use Luxurylink auctions if I want to splurge. Why do I have to confine myself to a Marriott studio??

This was in moderation, so try again...

When I was playing craps in Tahoe last week the stickman was saying how Horizon is hurting, wouldn’t be surprised that they tear that place down and build even more condos. The Asian gamblers now all go to Indian casino near Sacto to avoid going up the mountains so I don’t think south Tahoe can support all the casinos. So there will be more land...

Because the price will go up.

Btw, it is a steal to go to Lake Tahoe in summer, it's much quieter, pretty in a different way, and you get to stay at the same posh condos or lodges for 1/3 of the peak price. We used to go there only in summer because we are not big skiers.

Well, the true reason is we are just cheap deal seekers.

I wish more people will buy aptera and other EVs so that the prices for the gas and good cars (BMW) won't go up that fast. I'm looking to replace my current one (already 6 years old) in 3-5 years.

OO,
Thanks for some new data points. So it looks like a studio quarter share at the Marriott Grand Residence is going for $120k from the developer. This site shows resale studios at the same place priced starting at $65k. Again, an almost 50% discount! Not to defend this product, but a per night charge amortizing ~$5k (maintenance + prop. taxes) over 13 weeks is a reasonable $55 per night. I know there are numerous SpecUvestors who bought these places and rent them out (~$150 per night compared to ~$200 per night charged by Marriott) when they are not being used. Unfortunately for them, I think they were banking on price appreciation (its a fractional!) instead of a near 50% decline.

RE: the time shares at the Marriott and other similar entities, keep in mind that there are a couple of other issues that come into play. First, there is the "cost amelioration" of subletting. Most of these types of things allow the "owners" to rent out units, which usually is managed by the site management. This can, as you might imagine, significantly cut into the overall costs, while on the other hand, times people want to rent units are usually the same times of year that you yourself as an owner want to use it. Second, I wonder what the time allocation of these 4 month blocks are. Is it contiguous? If so, the guy stuck with the summer block, or worse yet, the fall block is hosed. Why bother in that case?

EBGuy,

yep, that was exactly where I stayed. I paid $120 a night for Oct rate, and got $50 gift certificate for wines as part of the promo.

Well, the thing is, where do I find 13 weeks of holiday to stay there? It is not like I am retired and have nothing else to do. A more reasonable expectation would be 2 full weeks as the base case scenario, 3 full weeks as the optimum scenario. At base scenario, $357 is just too much to pay if I have to confine myself to a Marriott branded resort.

When I was there in summer and fall, the place was DEAD. I stayed over the Oct weekend, and based on the lights at the complex at night, it was probably 15% full. I don't think the fractional owner can get much rental revenue to justify the "investment".

skibum,

The rule for this Marriott thingy is, you get 3 months with 2 contiguous weeks in the peak season every 4 years so as to fair with all the other owners. Marriott assigns you a home base for time share, in this case, the Marriott Grand Residence, so the peak season is obviously the ski season. If your home base is in a summer retreat, the peak season will be summer.

Now what do you do with the other 9 weeks that are off the peak season? Or you want to stay there during peak season? Marriott will let you negotiate with the other owners on an "exchange system", so that you can give the other owner, say 5 weeks of your share for 2 weeks of peak season for your own enjoyment etc. You are just guaranteed the slot of 9 weeks, and it is allocated randomly.

My problem is, I definitely have no use of 13 weeks (I wish I did), and even if I do, I need to negotiate with Marriott owners around the world to see who want to take my weeks and what weeks I want to give for their properties. This is too much of a hassle for me, I would rather just pay the $357 rate and be done with it, plus I open myself up to a much wider array of choice.

Candidate for quote-of-the-week:

“If you’re riding a unicycle and you lose a wheel, you’re in trouble."
--John Kriz, head of Moody’s Investors Service’s real-estate finance arm, on subprime-mortgage lending.

$120 was what I paid Marriott for the low season, I believe if the fractional owner were to rent it out, it could go lower, $80-100 perhaps?

oo,
Well, it's becoming clear that (as gc said), the primary motivation for getting sucked into one of these deals is the hope for price appreciation. Otherwise, why not skip the hassle and just rent a nice room from one of these fractional owners when you want to stay there? I've always been under the impression that time shares as an investment vehicle were almost never a good idea. I don't see how that would be different here, even though it's in a (relatively) nice spot.

is this what we've come to, selling time shares?

Oops I can't subtract, it should be 11 weeks instead of 9 weeks of off-peak time.

I hope we get another topic started to have something to work on over the weekend.....

Selling time shares..... mutter mutter mumble...

ptiemann Says:

> And only idiots “buy” timeshares.

Smart people (with no morals) “sell” them…

You can sell a unit by the week for many times more than you can get for selling the entire unit.
Timeshare developers then hit the “owners” with high fees and capital costs so most “owners” will “give” them back and allow them to sell than again (timeshare weeks that owe back fees and capital costs are almost worthless on the secondary market)…

P.S. Last week the snow was not very good, but it should be great after these storms...

Just to clarify, with the pure quarter shares at the Marriott Grand Residence you get one week of time every four weeks. Every year the rotation is staggered by a week so that each owner gets 2 weeks at Xmas&New Years every four years.
A savvy developer staff member pointed out they could probably get more $$ if they changed this scheme so they also sold some units for 5 week intervals at winter peak time, 5 week intervals at summer peak time, and 3 week intervals for the spring/fall period. Indeed, if you check the resale prices your can see that the 5 week periods sell for around $20k/week while the 13 week quarter shares go for around $10k/week.
The quarter shares probably aren't a bad gig (at the resale price) if you like Lake Tahoe, plan to go up once a month for a long weekend, and like the convenience of not having to prep a cabin. I can't imagine there are too many folks who fall into that category. Also, the Grand Residence places you within walking distance of food/shopping/gambling and at the base of the mountain.
BTW, here is a guy who owns three studios and a 1bed/1bath unit. I keep waiting for his site to going down, but he so far seems to have avoided foreclosure. I have used his site to reference orginal developer asking prices as he has noted them on his For Sale page. Also, notice what he is trying to sell a studio for versus the resale price at the site I posted previously.
An interesting footnote to the RE bubble is that it provided a window of opportunity for high end fractionals to be marketed as a product different than timeshares. When the rubber hits the road (and specUvestors got involved), its clear that they may share at least one attribute -- price depreciation. I am curious to see when they bottom out and if they will appreciate from their resale lows.

EBGuy,

I remembered some Northstar condo in the new village was selling for 200K for 1/7 share, any ideas what they are worth now?

OO says,

I have puts in a bunch of retailers

I can see that coming when retailers drop like a rock, too bad Crate and Barrel isn't public...

I must say it was a great week with tech taking a spanking. Also, Standard Pacific homes called me today to say the townhouse my wife and I looked at a month ago in Fremont has been lowered from 625 to 569. I told him I just lost my job becasue I worked for a real estate company. He said I guess it's happening everywhere, because SP just closed their South Bay office and laid off all accounting and administration.
Also, A house built in 1991 in Fremont just closed for 670 after originally being listed for 759, the same price that the house next door closed for in May. Both houses are identical models and lot sizes (with identical kitchen remodels using the same contractor only difference was granite color). Sucks to be the neighbor that listed his house 2 days after his neighbors went pending.

Timeshares are the classic boomer product.

Anyone watch the TV show King Of The HIll? The one where Cotton Hill almost buys a timeshare is a good one.

But yeah, while Cotton's a WWII vet who killed fitty men, timeshares are the classic Boomer product.

FAB said:

>I bet the average guy in the Bay Area that makes $250K has a nicer home >and car than the average guy in the Bay Area that is worth $25mm…

This really, really struck home. I am worth $x million (small profitable private company, no debt) but I never think of the my net worth. I make about 1.4 HaHa in income, and that is the _only_ think I count. I just cannot stomach the thought of buying in the fortress.

That’s an interesting sociological point, but irrelevant to my argument.

So what exactly then is your argument? That it sucks that you can't afford to buy a house large enough for your station in life?

Remember 40 years ago, American routinely raised three or four children in 1500 sq ft homes and even today most of the world lives in homes half our size. You aren't the only American that is going to have to learn to readjust their expectations with their shrinking share of the global pie.

There is no particular reason that a middle manager *should* be able to afford a large home in the Los Altos foothills. This might have been true 40 years ago, I honestly don't know, but it isn't true now and probably will not be true ever again. Silicon Valley is now inhabited by far too many financial types, who make much much more than technical manager can ever hope to make.

It’s a tragedy that IN SPITE of earning such high income, people cannot live to that standard.

What standard is that? Either you should leave the Bay Area or stop complaining about your lot in life. Seriously. That people might have to consume a little less and save a little more is hardly a tragedy.

Every few months I come and check things out and it is always the same set of bitter nay-sayers, all claiming that they will finally be able to afford the mansion of their dreams real soon now, after prices drop 50%.

And as an aside, almost everyone I know (who has bought a home) is in a fixed rate 30 year mortgage. But they also think that a 1000 sq foot zero lot line "shitbox" is a perfectly fine home, suitable for raising children in.

I have a few coworkers who are in trouble, but they all bought McMansions in the suburbs, are now sick of their commute and cannot get out now that prices have dropped. As transportation costs continue to soar, the homes near jobs are going to become even more valuable. The global recession that so many of you are wishing for would make things more affordable, but I just don't see that in the cards.

Just for chuckles, I happened to be reading this article at the same time:

http://preview.tinyurl.com/2y7u7k (Fortune Magazine)

What $1M will buy you in various parts of the world.

That Mt. View stucco sh*tbox doesn't really look so overpriced now, does it? The San Francisco home is the only one in the First World that isn't a ~1000 sq foot apartment, in fact.

Jimbo :

What standard is that? Either you should leave the Bay Area or stop complaining about your lot in life. Seriously. That people might have to consume a little less and save a little more is hardly a tragedy.

It might be better if you try to understand the view point before declaring those things !

Dude ... I have nothing to complain. I chose to rent and good or bad, it's my decision and my luck and my life. Let me spell out this for you. I was feeling sad for those who work hard and earn high income only to transfer that to some lender. Let me repeat. I am not complaining about my life. I am simply feeling bad for some one else - the loanowners.

Now, that is their choice, their luck and their life. Maybe they don't see it that way, maybe they are happy to work for a lender, maybe they feel miserable, maybe they feel great. They are not asking for my opinion and all that. But we are discussing financial choices and I feel their choice is TRAGIC.

You may disagree, may disagree strongly with my view point. No problem with that. But if you want to preach me about how I should take my lot in life, better understand how I am taking my life before you do that.

And to repeat. I thank all the people in Cupertino paying property taxes on their 1M+ homes so that my kids get good schools. I consider myself mu smarter in financial matters than them.

And weather you like it or not, I am not leaving BA. I am StuckInBA.

Oh oh ... whether not weather ... I blame the spelling mistakes on the storm (!) :-)

The San Francisco home is the only one in the First World that isn’t a ~1000 sq foot apartment, in fact.

I much rather live in a luxurious 1000 sqft 1-bedroom condo with marble baths than a "starter" house in the bay area.

BTW, a nice apartment in SF costs $1500+/sqft.

http://tinyurl.com/2ex9zo

That people might have to consume a little less and save a little more is hardly a tragedy.

This line of thinking is completely un-American. Why do you hate freedom? :)

This $1M home is in the same first world US. It is hardly an apartment:

http://www.springshomes.com/home.php?listingid=506908

ex-sunnyvale-renter Says:
Anyone watch the TV show King Of The HIll? The one where Cotton Hill almost buys a timeshare is a good one.

what about the South Park timeshare episode?

Busted Says:
Standard Pacific homes called me today to say the townhouse my wife and I looked at a month ago in Fremont has been lowered from 625 to 569.

that's good

I told him I just lost my job becasue I worked for a real estate company.

that's bad

A house built in 1991 in Fremont just closed for 670 after originally being listed for 759, the same price that the house next door closed for in May.

that's good