patrick.net

I post in trulia since we look at houses so much. Several agents have bragged that 2009 was their best year in three years and 2010 is set to be even better. I have to wonder what qualifies as best. Most profit? Agents dropping out of the business creating more for everyone?

I wonder if we'll see interest rates impacting price at all. How high will they have to go before things drop? When is the rate too high to be succulent? The recent 4% rates may have otherwise casual buyers thinking twice since 5 to 6% is considered high interest rates for recent memories.

NagaEater says

I wonder if we’ll see interest rates impacting price at all. How high will they have to go before things drop? When is the rate too high to be succulent? The recent 4% rates may have otherwise casual buyers thinking twice since 5 to 6% is considered high interest rates for recent memories.

If interest rates go from 5%-7% that equates to ~20% less borrowing power for the same monthly payment (ie you can afford a $200k house at %5 but only a $160k house at 7%). No way that's good for house prices.

grywlfbg says

NagaEater says

I wonder if we’ll see interest rates impacting price at all. How high will they have to go before things drop? When is the rate too high to be succulent? The recent 4% rates may have otherwise casual buyers thinking twice since 5 to 6% is considered high interest rates for recent memories.

If interest rates go from 5%-7% that equates to ~20% less borrowing power for the same monthly payment (ie you can afford a $200k house at %5 but only a $160k house at 7%). No way that’s good for house prices.

But do you honestly think the gov't is going to let that happen?

grywlfbg says

If interest rates go from 5%-7% that equates to ~20% less borrowing power for the same monthly payment (ie you can afford a $200k house at %5 but only a $160k house at 7%). No way that’s good for house prices.

With prices still in the stratosphere, interest rate changes will not have much of an impact.

BUY BUY BUY
http://www.redfin.com/CA/Concord/1151-Carey-Dr-94520/home/1609878

How long until we are in the lower 200ks?

thomas.wong1986 says

With prices still in the stratosphere, interest rate changes will not have much of an impact.

Where are you referring to with prices still in the stratosphere?

@thomas

You posted an interview which clearly states momentum is the most important factor. That other factors such as the government might come into play, but momentum is still the strongest factor.

Then you ignore momentum completely and only pull out double dip + government interference. He clearly states momentum is the largest factor, we're heading up. That is momentum UP. The largest factor is UP, how did you just remove that and replace it with your own largest factor and declare double dip down... ?

camping says

grywlfbg says

If interest rates go from 5%-7% that equates to ~20% less borrowing power for the same monthly payment (ie you can afford a $200k house at %5 but only a $160k house at 7%). No way that’s good for house prices.

But do you honestly think the gov’t is going to let that happen?

Well, the question is, do they have any choice? The Fed has already bought $1.25T in MBS. Plus TARP and all the other bailouts.... The Fed's balance sheet is a disaster area. The people in govt know that hyperinflation will destroy the govt... will destroy them. It will also destroy the Fed because their "assets" are Treasury bond/notes denominated in USD that would become worthless right along w/ the dollar. If there's one thing you can count on is that the people in power will try to hold onto that which means they will try and avoid hyperinflation. This means keeping up "borrowing" funds instead of "printing" them, keeping mortgage rates tied to T-bills or LIBOR, etc. As total govt debt creeps up investors are going to demand higher rates which will trickle down to mortgages.

"And now that [the market is trending] up, you know, it’s perfectly plausible to think we’ll have three years or more of increases. But I’m not so sure. We don’t know how much of this is transitory because of the government support. We’re in such an unusual economy now that [a double dip] has substantial probability. "

grywlfbg says

camping says

grywlfbg says

If interest rates go from 5%-7% that equates to ~20% less borrowing power for the same monthly payment (ie you can afford a $200k house at %5 but only a $160k house at 7%). No way that’s good for house prices.

But do you honestly think the gov’t is going to let that happen?

Well, the question is, do they have any choice? The Fed has already bought $1.25T in MBS. Plus TARP and all the other bailouts…. The Fed’s balance sheet is a disaster area. The people in govt know that hyperinflation will destroy the govt… will destroy them. It will also destroy the Fed because their “assets” are Treasury bond/notes denominated in USD that would become worthless right along w/ the dollar. If there’s one thing you can count on is that the people in power will try to hold onto that which means they will try and avoid hyperinflation. This means keeping up “borrowing” funds instead of “printing” them, keeping mortgage rates tied to T-bills or LIBOR, etc. As total govt debt creeps up investors are going to demand higher rates which will trickle down to mortgages.

I don't know if they have a choice. I didn't know them buying MBSs was a choice until they started doing it until they did (and $1.25T worth). With the people we've had in charge over the past few years, I don't put anything past them. I just know that I don't know enough to be confident that rates are going to go up significantly in the near term without some knee-jerk reaction by the gov't to get them down again if there are signs of trouble in housing.

Tude says

BUY BUY BUY
http://www.redfin.com/CA/Concord/1151-Carey-Dr-94520/home/1609878
How long until we are in the lower 200ks?

I'll bet you it's "sale pending" within a week - my guess is next Tues.

pkennedy says

@thomas
You posted an interview which clearly states momentum is the most important factor. That other factors such as the government might come into play, but momentum is still the strongest factor.
Then you ignore momentum completely and only pull out double dip + government interference. He clearly states momentum is the largest factor, we’re heading up. That is momentum UP. The largest factor is UP, how did you just remove that and replace it with your own largest factor and declare double dip down… ?

Don't know what thomas think though.

There certainly is a momentum. In fact, it's been there since last fall and that's quite visible now. And I also agree that the momentum is the biggest factor.

Something I cannot be sure is where this momentum is coming from. Is it the result of fantastic works they did so far for last two years, or is it the artificial one driven by trillion dollors of government money that's been poured into.

The question is, Have they've been doing well enough to get this much momentum w/o government money?

If yes, then it's not 50/50 thing. It's 99% all righty and rosy. We're heading to recovery for sure.

If no, it's liquidity injection that pushes stock market up, which is another bubble in stock market waiting to be popped.

I think Mr. Shiller himself is not sure about which is the case at this moment, otherwise he didn't say anything like 50/50.

seaside says

The question is, Have they’ve been doing well enough to get this much momentum w/o government money?

I think that's the point. The government money helped build the momentum until the recovery had enough steam to survive without it. At which point the liquidity is removed. Momentum implies that it will keep going without any force behind it...

seaside says

The question is, Have they’ve been doing well enough to get this much momentum w/o government money?

I think the Federal reserve is giving green light to make risky investments in everything, gold, oil, silver stocks and of course when these things go up it gives a lift to housing. And the government and the Fed are handing trillions straight to the housing market.

As I see it, it is safe to make risky investments even when the Fed starts raising rates as they will have to do. But real estate can't be a good investment now. How does one get out when the fed is forced to defend the buck?

There is momentum from people having a desire to buy again and make a change/move. Many people who normally would have sold, had to hold off, due to a large dip and inventory glut. They want to get out there and buy/sell their homes.

Essentially he says momentum is normally the largest factor, right now he's unsure and points to one of different factors. Essentially it comes down to momentum vs other factors, and how well they can be controlled.

*If* the government is the cause of this momentum, then they will slowly back out, and ensure that natural momentum eventually does take over. They haven't done *ALL* this work, only to drop the ball completely.

My best is that other countries, china included, would rather take a loss on their dollar positions, than allow the dollar to collapse. So they'll keep buying, no matter how much damage the government is doing to the dollar in the world sense.

You need to reread Shillers comments

tatupu70 says

thomas.wong1986 says
With prices still in the stratosphere, interest rate changes will not have much of an impact.
Where are you referring to with prices still in the stratosphere?

Excuse my comments, I didnt realize some still believed a $1M shack in BA is really worth $1M
up from mid $300K in 10 years, never mind it took historically over 15 years for prices to double.
LOL! just comical !!!

I think that’s the point. The government money helped build the momentum until the recovery had enough steam to survive without it. At which point the liquidity is removed. Momentum implies that it will keep going without any force behind it…

And where are the fundementals like incomes to home prices ? Unless the public somehow believes we doubled or even tripled our salaries somehow?

pkennedy says

You posted an interview which clearly states momentum is the most important factor. That other factors such as the government might come into play, but momentum is still the strongest factor.

No, Shiller said he had a model for Wall Street back in the '90s, he did not mention it was the strongest or most important factor. His model from the 90s wouldnt work because of government interfence, that is why he is unsure.

thomas.wong1986 says

And where are the fundementals like incomes to home prices ? Unless the public somehow believes we doubled or even tripled our salaries somehow?

I would agree with this comment if it were 2006, but many, many places have already corrected. Perhaps not where you are looking... That's why I asked to where are you referring with your comments.

thomas.wong1986 says

No, Shiller said he had a model for Wall Street back in the ’90s, he did not mention it was the strongest or most important factor. His model from the 90s wouldnt work because of government interfence, that is why he is unsure.

That's not at all what he said. He said the model emphasizes momentum over everything else. Then he went on to say that the government intervention is somewhat unique to this housing market so he's not sure how that will affect the market when it is removed. He in no way said that the model wouldn't work. He said that the conditions are different this go around--but they always are. No two situations are exactly the same.

Down the street where I purchased my home in Los Gatos went from low 300s to well over $1M by the end of the decade in 2000.

Jim Klinge thinks the spring selling season is all but done, and prices will be heading lower again (San Diego).

http://www.bubbleinfo.com/2010/04/09/random-observations/

tatupu70 says

That’s not at all what he said. He said the model emphasizes momentum over everything else. Then he went on to say that the government intervention is somewhat unique to this housing market so he’s not sure how that will affect the market when it is removed. He in no way said that the model wouldn’t work. He said that the conditions are different this go around–but they always are. No two situations are exactly the same.

Unless you have solid fundementals no government intervention will stop further corrections. What we have from the Government is a political move, based on assistance so people keep their homes, it isnt built on solid grounds of income to prices. If you dont have enough income, we will politically force the banks to forgive part of your mortgages. Are your going to do this for everyone ?

BUY BUY BUY
http://www.redfin.com/CA/Concord/1151-Carey-Dr-94520/home/1609878
How long until we are in the lower 200ks?
Always heartening to see FEDERAL DEPOSIT INS CORP RECVR on the Trustee Deed. The bank took it back for less than $200k, so it could get interesting. That neighborhood is a disaster zone. I noticed 1130 Carey Drive (1380 sq.ft. 4/2) is also headed for the auction block soon; bought in 2000 for $233,500 with a FHA loan -- with perpetual refies from World Savings Bank starting in 2002 through 2006. This is what we're up against folks...

thomas.wong1986 says

Unless you have solid fundementals no government intervention will stop further corrections. What we have from the Government is a political move, based on assistance so people keep their homes, it isnt built on solid grounds of income to prices. If you dont have enough income, we will politically force the banks to forgive part of your mortgages. Are your going to do this for everyone ?

Of course not. The government's assistance really isn't to help people, anyway. It's to help the banks and the broader economy. Stopping the economic freefall was the primary motivation behind the intervention.

Remember also that the 3x income is a broad guideline and doesn't necessarily apply to more expensive houses. Most other expenses don't increase linearly with income, so the 3x rule underestimates what you can afford

Like I said earlier, I would have agreed with you in 2006, but not now.

E-man says

thomas.wong1986 says
Down the street where I purchased my home in Los Gatos went from low 300s to well over $1M by the end of the decade in 2000.
Interesting. Can you give us just one address of any home in the Bay Area that was bought in the low $300k in 2000 and recently sold, 2009 or 2010, for $1mil?

End of the decade, as in the year 2000.

tatupu70 says

Remember also that the 3x income is a broad guideline and doesn’t necessarily apply to more expensive houses.

Its was very broad when it came to safe lending standards. The higher the x the higher the risk. Without real incomes, you get what we just saw happen, people buying homes they otherwise were unable to afford. It may have taken 3 years for home prices in 89-92 to declline, but we are in a much bigger bubble today. Perhaps mediams at 300-400K is too much to ask for?

It still has positive cash flow if you rent it out for $1,500.
That certainly is a safety margin. Just for kicks, though, I found this 3/2 renting for $1500. The landlord's tax basis (according to PS) is $69,024. He's the SOB that determines the market rate if things get ugly. How low can you go...

There may well be a dearth of renters going into the future, if the government has anything to say about it.

I was at a wedding at the ritz there a few months back. I think our party (50 or so) where the only guests staying there, and the price was non ritz and discounted for our wedding

Some of the posters on this thread might as well believe in unicorns...

What moron would build a man made lake in the middle of a desert?

Oh Save Me, Obama

http://www.youtube.com/watch?v=D5Oc-E5ZzZ8

Actor J. Carlton Adair conceived Lake Las Vegas around 1967 for Lake Adair. At the time he purchased the land and water rights. The property was acquired by Transcontinental Properties in 1990 from Ronald Boeddeker who had acquired 2,000 acres (810 ha) in 1987 from the US Government when Adair went bankrupt. http://en.wikipedia.org/wiki/Lake_Las_Vegas http://www.homesparadise.com/homes/nevada/las-vegas/desert-shores/ http://en.wikipedia.org/wiki/The_Lakes,_Las_Vegas http://en.wikipedia.org/wiki/Lake_Dolores_Waterpark#The_beginning And, let's not forget Lakes Mead & Powell

from a front page story on PatNet from the centralvalleytimes link:

""Also in Merced, the mortgage delinquency rate has increased, according to First American CoreLogic’s data for February 2010. It says nearly one out of fine homes --19.46 percent -- were 90 days or more delinquent compared to 16.77 percent for the same period last year, representing an increase of 2.69 percentage points.""

we have a ways to go folks

Some of the posters on this thread might as well believe in unicorns…

Well, they'd certainly possess richer imaginations than some of the small-time charlies on here who fancy themselves land barons. Honestly -- why overextend yourself speculating on houses to play landlord when government policy (not just this administration) is designed to safeguard and aggressively proliferate home ownership? You would be better off taking that HELOC and buying rare baseball cards.

Another sign things are "picking up."

"Method-Ology" rates really high on the B*llsh*t Meter when its used instead of more correctly, "method".

But Method-Ology is more Cool Hip and Beautiful, been used a lot around here in the Bay Area since the dotcommers came, sounds more important, than "method".

This should give you an idea of the job market out there.....

Office vacancy rate rises in San Francisco

An amount of office space equivalent to 13 Bank of America buildings sits vacant in San Francisco today as companies continue to shed more square footage than they rent - a trend that won't change until employers start putting more people behind desks.

The 13 million square feet of available space in the first quarter of 2010 translates to a 17.7 percent office vacancy rate, up from 14.7 percent a year ago and nearly one percentage point from the previous quarter ending in December, according to data released Friday by the real estate firm Jones Lang LaSalle.

Read more: http://www.sfgate.com/cgi-bin/article.cgi?file=/c/a/2010/04/10/BUDV1CSC61.DTL&source=patrick.net#ixzz0ksCsFCnp