patrick.net

Exactly, it is about time someone recognized this, everyone at Google is paid in Googlebucks, 10X more valuable that USD. Besides everyone at Google makes at least 1.7HaHa's/yr. I see a 15% this year alone, another great year for real estate.

California Uber Googlis

Well of course I wouldn't be surprised if markets in places like Palo Alto were less affected. Ever been there? The place just oozes with wealth. I went a month ago and felt out of place and uncomfortable there. Homes are in the millions there, so I imagine a house- give or take 500k isn't a big deal to the kinds of people that inhabit these regions. On the other hand, Alameda has a crapload up for sale, with evidence of even more on the way. Oakland? It's insane how many homes are now up for sale.

Austingal,
Things seem to be rather slow in Austin from my outsiders' view.There are almost 450 foreclosures on Craigslist Austin, and none of these homes are even close to being "bubblezone" prices. All in the 75-100k range, and all within 15-30 minutes from the city. My question to you as someone from there is that is the Austin bubble only in the immediate city? otherwise it still seems very affordable.

Not that long back Randy H made mention that he felt we would see more of a price "correction" at or below the median price in working class neighborhoods but that higher end homes would be spared the brunt of the damage. Man am I glad I shut up! I was ready to weigh in by saying that it would be the exact opposite and we're finding out that Randy was right yet again! It's not uncommon for the wealthy to "circle the wagons" and leave most of this mess just outside the confines of their gated community. I suppose if an area is truly defined as exclusive by it's geography and views then it may always be desireable. Perhaps now we will find out that "exclusive" areas who's only attribute is other pricey homes will not be able to weather the downturn as well.

Nobody can really deny that California has some of the most stinkin' rich people in the world, with many of them in the BA. That basic fact is proof enough that indeed, most of these millionaires could give a rat's ass about homely middle income sheeple trying to scrape togther a small house. I'm reading a book called " snobbery in the US", and it is fairly fascinating.According to the book, snobs are those that try to attain a level that they do not posess, but at the same time, those that look down on those that are higher than them financially are equally as much a snob as those who tie themselves to upwards mobility. Guess We're all sort of a little snobbish in that respect.

Well of course I wouldn’t be surprised if markets in places like Palo Alto were less affected. Ever been there? The place just oozes with wealth. I went a month ago and felt out of place and uncomfortable there.

Palo Alto is over rated. It is certainly not oozing with wealth.

It does have pretty good restaurants now. Try Lavanda on University. Not the best, but good enough.

O.T., but I think there's evidence we've reached the ANGER phase of Denial, Anger, Bragaining, Depression & Acceptance (at least in FL):

http://www.news-press.com/apps/pbcs.dll/article?AID=/20060521/NEWS01/605210428/1075

Buyers control home market
Sellers now hope neighbors hold line

"There are no stinking buyers around here and these people are panic-stricken — everyone can smell the fear," Elentrio said. "If you don't have to sell, now is not the time."

"The market got out of whack," he said "Now it's coming back into reality. Your house is only worth what someone will pay for it."

Nobody can really deny that California has some of the most stinkin’ rich people in the world, with many of them in the BA.

World's richest people:

William Gates (Medina)
Warren Buffett (Omaha)
Carlos Slim Helú (Mexico City)
Ingvar Kamprad (Lausanne)
Lakshmi Mittal (London)
Paul Allen (Seattle)
Bernard Arnault (Paris)
Prince Alwaleed (Riyadh)
Kenneth Thomson (Toronto)
Li Ka-shing (Hong Kong)

0% of the world's richest people live in the Bay Area. I hereby deny what you just said.

I concur that the resturaunts there are pretty good, though I will mention that time I went, the fish at Francis Copola’s resturaunt was subpar for the price.

What kind of fish are you looking for. Perhaps I can be of assistance.

La Strada and Lavanda are both superior to Copola's IMO. If you want good fish you may need to go to the City.

SQT,

"but hasn't sold a home in 6 months".

You know I just can't hear enough of that. Regardless of the area. Because my wife and I sold on the last day of 2003 the more evidence I can compile that 2005 really was "last call" the more I like it! The reason I love the "last call" analogy is that even had you the good sense to leave between midnight and just before "last call" you still be in a "world of hurt". Given that the outrageous listing prices from the Summer of 2005 were never actually paid (in most cases) my timing looks even less imperfect. I suppose here shortly none of these "ego issues" are going to matter much either way.

@Robert Coté,

Np - totally understand if you can't make it on such short notice, though of course we'd love to see you. If you think there's a chance you might be able to drop by, contact Mr. X. for directions (just sent you his email).

I am willing to go on record that crash has begun in Bay Area. I see the signs all around me. It is not in all areas yet, nor has it "crashed" a lot yet. The word is also not out yet in force. But the process has started. I am for more confident of the crash than I was a few weeks/months ago.

1. SJMN had a news that reported median price drop !
2. Perfectly fine houses, at market rate don't sell. Some of them have been chasing the market down. I have posted MLS numbers a couple of threads back. Numerous price reductions and relistings.

I say it again - "10 to 15% is in the bag for this year" ;-)

Peter P,
Take a trip to the south, midwest, or any other part of the country for that matter except of course for chunks like the NE and see what I mean. When I visit my folks, seldom do I see fleets of Bimmers, marble countertops, fancy resturaunts that give you olive oil and vinager when you sit down, or any of the other telltale signs of affluence. Simply put, there is a high percentage of people making killer bucks here. They exsist here in higher concentrations. So literally, perhaps the abolsute richest individuals are in random places, but I do believe that the overall population in California is better off than most of the country.

“10 to 15% is in the bag for this year”

I take it you mean 10-15% in RETROGRADE appreciation?

DinOR,

It’s not uncommon for the wealthy to “circle the wagons” and leave most of this mess just outside the confines of their gated community. I suppose if an area is truly defined as exclusive by it’s geography and views then it may always be desireable. Perhaps now we will find out that “exclusive” areas who’s only attribute is other pricey homes will not be able to weather the downturn as well.

I hope I didn't actually "predict" that, unless it was a Thursday night. Actually, I think the phenomenon you mention above really only applies to truly wealthy areas like Atherton, Woodside, Belvedere, Ross, etc. For places like Menlo and Palo, there will still be neighborhoods that drop alot more than others. I write this off to the growing income concentration more than any group-behavior. There are people in certain professions and management designations who have seen almost astronomical income growth over the past 5 years. These people tend to cluster together, and their neighborhoods will probably be spared the brunt. This doesn't mean their prices won't go down, but they'll go down by notably less. I think what I said was that if the nicest areas of Redwood City suffer a 50% nominal drop, then the nicest areas of Palo Alto might be more like 15% off.

Peter P,

A lot of those people don't really "live" any one place. They have numerous estates which they occasionally grace with their presence.

HARM,

Oh I'd say that was ANGER! Definitely.

"there are no stinking buyers"? I don't think we need to check with the 3rd base umpire on that one! I'd read the article over on Ben's and it was seething with anger from start to finish. As far as your neighbors that are trying to bail too, the only thing I can say is that in the end one, both or all of you will be moving somewhere new anyway! How much "seller loyalty" can there be when in the end when they'll be taking seperate trails? They'll be even less loyalty in the "P.J's of the future" high rise condos.

I take it you mean 10-15% in RETROGRADE appreciation?

Will there be a Grand Cross?

Orb of Influence:

I think this is a valid phenomenon. It isn't the same thing as wealth enclaves, though. Wealth enclaves are those places like Atherton or the nicest of Palo Alto that have a bulk of residents with very significant wealth resources. These folks might sell in a down market, but not because they have to. Only because it either fits their wealth management plan or because they have some more important lifestyle need. Supply & Demand play out differently in these areas than in the Googlezone areas.

Those areas are no different than the High Finance envelope around SF, or the Oracle envelope. These are people who work for a living. They may make healthy, even huge amounts of money, but they only live there because of their professions, and their professions supply their ability to live there at those prices. Recessions, sector downturns, consolidation, etc. can all rapidly change home prices in these "orbs".

The "Google millionaires" either (a) move in next door to other real millionaires, or (b) aren't really millionaires but just paper-wannabees. Most of us around here old enough to have ridden out the dot-com in a C-level were paper-millionaires at one point also. LOL. Any of the b-group that are smart are renting, exercising everything they can as soon as they can, and diversifying every $ into profile appropriate portfolios. The rest of them are living in overpriced McMansions that will eventually stiffly correct also.

A lot of those people don’t really “live” any one place. They have numerous estates which they occasionally grace with their presence.

True, but none of them call the Bay Area "home".

Randy H,

I stand corrected. I just thought it was somewhat visionary on your part b/c for the longest time I had labored under the delusion that if you are "under the median" you wouldn't have nearly as much to worry about as someone paying say 1 mil. to 2.5 mil. in 2005. I think going forward with as much as the "median" price has risen in last 5+ years there will be plenty of pain to go around at that level and below as well.

Randy, someone with "paper" wealth is more likely to be confident about the financial future.

Googlians have an hierarchy. But even the lesser ones are able/willing to afford median+ homes within the "orb of influence".

How neighbors react to other neighbors choosing selling prices is an awesome chance to observe real-world game-theory behavior in action.

I love it because the way it will play out is already largely determined. But that doesn't stop a lot of people from wishing it otherwise, and spending futile energy trying to change the rules of the game.

Remember, in such games it only takes one dissenter to ruin any chance of cooperation for everyone else. And, worse yet, the reward for dissent is largest for the first dissenter. Keep this in mind when your neighbor is trying to talk you into keeping your price high. If you were my neighbor, and I wanted to reap the best price on the way down, then I'll convince you to overprice so that I can increase my chances of selling at a price closer to the best price possible, and sticking you with chasing prices down.

The amount of insider stock sold at Google is astounding, no one but the insiders are making money, and they are making a lot of it. Sergy sold over 1.5 billion, with a b, in the past year.

SQT,

"much needed reality check"

Ya think? If your husband is half as frank as you are then he probably dropped several hints over the last few years that were quickly dismissed by this gal. With so many of these RE people you can only talk until you're blue in the face and then you can't talk anymore. When you mentioned earlier "late in the game flippers" I have to wonder if this isn't some kind of 11th hour effort to sort of "double down" where they may already be giving up on some of their other properties in an effort to make up for it with a new lower cost basis?

Peter P,

I agree. But those paper-bucks guys and gals will not be the ones living in real wealth enclaves. They're the ones living in the shadow of Google, and their home prices will suffer as Google shares suffer. I could make an argument that the Googlezone is less stable than the Oraclezone or SF Bankerzone.

Randy,
if indeed what you say is true and these highly paid professionals are only here for the jobs, then what chance exsists that come a recession, these people could just as easily leave the state entirely, taking their influence with them? I've always wondered if parts of California could get "Detroit syndrome". Nonsensical as it may sound, Detroit was once the epicenter of american technology. Tech changes and so do the cities that either facilitate or lose this vital infrastructure.

I could make an argument that the Googlezone is less stable than the Oraclezone or SF Bankerzone.

SF Bankerzone (e.g. Marina) should be safer.

Oraclezone? Why?

ww2,

Detroit syndrome has always been a threat to the BA. What the BA has going for it that is different from Detroit lies in its total "economic ecosystem". The BA's numerous deaths and rebirths owe largely to an infrastructure which is easily transitioned from one high tech purposing to another. It's the virtuous circle economic effect which is so impossible to replicate. Areas like the BA evolve naturally, and will eventually die naturally too. But predicting their death is a sucker's game. London is still ticking right along despite it having been declared dead right around 1984. And how often was NYC going to turn into a prison island?

I honestly don’t know. The market here isn’t like the BA since it’s so obviously coming down, it just doesn’t make sense to me.

SQT, I was in the Natomas area last weekend. It was "flooded" with new developments. (Isn't Natomas in the flood zone?)

Oraclezone? Why?

Merely the reduced emphasis on stock option income.

Merely the reduced emphasis on stock option income.

True. But Google is still hiring while Oracle may have to deal with reorganizations.

Two high-income families have more effect on housing demand than one very-high-income family.

Two high-income families have more effect on housing demand than one very-high-income family.

Their demand is segmented because the "products" they demand are not direct substitutes.

Their demand is segmented because the “products” they demand are not direct substitutes.

"Demand" as in "strong demand for housing as evident in rising median price". :)

“Demand” as in “strong demand for housing as evident in rising median price”.

Take the first order derivative of that "Demand" as defined by your function, and you thus prove that It Only Goes Up

;)

Take the first order derivative of that “Demand” as defined by your function, and you thus prove that It Only Goes Up

If not, keep taking higher order derivatives until the appreciation is not in retrograde. ;)

SQT,

I guess the reason I asked about the 11th hour flippers is that my friend sold his home (near Riverside) that closed in mid-FEB. The flippers couldn't wait to get him out so he had to put some of his things in the garage before they'd even actually closed. Well, for all of their high energy and efforts according to Zillow it hasn't yet sold! Perhaps the fellows in your area are super savvy but I tend to think that they just thought to themselves that "they got a really great deal!" Yeah man, the sellers were really stupid. We're gonna make bank on this. Hey! Jorge! Go out to the van and get me my chalk line, a six foot ladder and my bong! We're gonna make bank on this one man.

Ray W,

I just saw the Megadisasters 1906 episode. When it hits here it will be pretty bad. But I suspect the area will rebuild rather than die. There are examples of large modern cities surviving and rebuilding from mega quakes in Japan. We may need a good whopper to get us to spend the necessary coin to really get serious about it.

Putting on the dark hood of a "soulless economist": mega disasters can be enormous stimulants to the economy over the long term. So long as the rebuilding is handled efficiently, a mega disaster gives an opportunity to wipe clean infrastructure mistakes and engineer a more efficient and productive city. Why do you think Western Europe has a great mass transit system?

I just hope I live through it and I'm not stuck on that stupid 101 bridge over the Bay letting into Mill Valley when it hits.

Ray and Randy,
While I admit that for the time being, the tech, research, and creative infrastructures in the BA are seen by many as impervious, they are by no means diffrent than Detroit. I read a number of books last year, the best being " wheels for the world"- the history of the Ford Motor Co. What Ford and GM did for the automotive, manufactoring, marketing, and the then technology based sectors of the economy were nothing less than the equally phenominal sucess the West Coast has had in microtechnology. Ford virtually invented modern manufactoring and developed a system that was later mimicked by the Japanese- except the Japanese actually continued on with Henry Ford's belief in continually simplifying the manufactoring process. Wages in Detoit were at one time an average of 5 times more than the national average. That would be like you or I making 3-400,000 a year. Employees were given housing, 2 cars, local public facilities, and more. Detroit was at one time the hottest place to me. Scientists, metalurgists, CEO's, working men and women along with a plethora of middle class well to do families flocked there from all regions of the country. Indeed- the entire midwest was the manufactoring mecca of the US at a time when the US was primarily a manufactoring country.
The phenomina that got the BA it's advantage was from military contracts. The government infused billions into national defense, much of the foundation blocks for modern microchips, programming, and modern electronics being laid during the 50's-70's. Once this technology became more publically available after the fall of the USSR, over 30 years of military research was instantly available for the immediate financial development of many of these companies that had previously been under contract. Think about it- having what just a few years ago was top-secret, highly developed technology suddenly to be developed for consumers.
This of course created the golden age of california prosperity and fortune, as employees could be paid in outstanding amounts- all due to the fact that nobody else could do it better. This was the main reason RE in the BA only went down 10% in 1989 because this came at the same time that the tech boom was just starting.
This time around, the BA sits in the same position as Detroit. It can still make some rather innovative products and create things like video games and entertainement.But so can Austin, Nashville, Atlanta, and dozens of other cities and states. The term " tech" is on the same level as we speak as "brake drum" Perhaps the BA will conjur up a new technology. Recently, the talk was about nanotech, and biotech. The city was willing to pay researchers millions to set up shop here. But none of this has been realized, with much of the biotech moving to Ann Arbor, MI, and nanotech being taken up by a myriad of companies nationwide. I suspect that if there were anything that could throw the BA into "Detroit land", the enivitable RE crash will do it.