patrick.net

mthom says

What’s your logic of holding if you are confident that it is going to go down quite a bit more? Personal attachment?

It's long paid off and my property tax is pocket change (it was purchased by my dad in the early 60's).

The idea is that anyone in my family will always have a home available to them. My sister currently lives there, she just pays the tax and insurance, as her and I have very different financial situations.

My family is just more important to me than a little bit of money.

toothfairy says

I doubt we’ll see early 2009 prices again. I was shopping back then nobody and would touch housing. That was the time to buy.
Now it’s different. Everyone on the sidelines just waiting to pounce.

OMG!!! .... nothing more to add. Go buy two then .... it only goes up ... buy now or be priced out for ever .... aint making anymore land ... it's different this time .... it's different here .... (I know I must have missed a few)

Bap33 says

toothfairy says

I doubt we’ll see early 2009 prices again. I was shopping back then nobody and would touch housing. That was the time to buy.

Now it’s different. Everyone on the sidelines just waiting to pounce.

OMG!!! …. nothing more to add. Go buy two then …. it only goes up … buy now or be priced out for ever …. aint making anymore land … it’s different this time …. it’s different here …. (I know I must have missed a few)

LOL - "it's different this time" ... Haven't heard that in a while :)

CrazyMan says

toothfairy says

pkowen I know what you’re saying. Remember when realtors said “buy now or be priced out forever”?

Maybe there was some truth to that. Only “now” was more like 1995.

Do you really believe the rubbish you type? Bottom in 2009? Really? I really can’t see how anyone could honestly believe that.
I own outright and I very much expect the “value” to go down quite a bit more. I’m perfectly fine with that, I guess I’m just not your typical greedy BA homeowner.

itf you're talking about 1m+ Palo Alto houses. I have no idea about that market. I can only speak for my local area. How quickly houses are selling and the lack of foreclosures.
It's hard to see any catalyst that would drive prices much further down from here.

toothfairy says

Remember when realtors said “buy now or be priced out forever”?

Realtards still say that. Today's selling technique involves making them think that these are rare "special" deals.

toothfairy says

It’s hard to see any catalyst that would drive prices much further down from here.

We're still running on the fumes of the 2004-2007 boom. My experience of living in Tokyo 1992-2000 showed me that economies do not necessarily "rebound".

As for catalysts, the argument has to be what's going to push prices up vs. what's going to bring them down.

People who don't understand the massive twin stimuli of 2003-2007 -- the Bush tax cuts and the bubble lending -- naively think that we're going to be heading back to those nice times.

However, since the top 10% took the bulk of the Bush tax cuts, if they are allowed to sunset that is going to be a not insignificant drain on purchasing power for the upper end, and a falling upper end will compress the rest of the market.

But most people really don't understand that the bubble lending was a much bigger stimulus than the Bush tax cuts:

says it was $4 TRILLION in unsustainable debt, which is line with the fact that household debt expanded from $8T in late 2001 to peak at $14T in 2008:

http://research.stlouisfed.org/fred2/series/CMDEBT

while federal debt expanded from $5.8T starting FY02 to $9.0T starting FY08.

And of course state finances are even in a more parlous condition.

Congress is going to be more gridlocked starting next year, so don't look for any more "stimulus", other than perhaps military spending, but precious little of that finds its way to the Bay Area these days.

I don't see any collapse coming, I just see a continued battering as things adjust to the new normal. FWIW, I think the MP -> LG axis is largely immune partially thanks to billions of AAPL and GOOG of employee stock holdings, Prop 13, and the fact that rich people gotta live somewhere.

toothfairy says

It’s hard to see any catalyst that would drive prices much further down from here.

Higher interest rates, fundamental income levels that don't support current prices.... what more do you need?

klarek says

toothfairy says

It’s hard to see any catalyst that would drive prices much further down from here.

Higher interest rates, fundamental income levels that don’t support current prices…. what more do you need?

$10 gasoline, Arizona-style Latino-hunting, mass state & local government layoffs, middle-class tax increases via higher FICA and Medicare take-outs, 99-week unemployment finally ending, military scale-backs.

Nothing but blue skies ahead!

toothfairy says

It’s hard to see any catalyst that would drive prices much further down from here.

Higher interest rates, end of a tax credit that fueled bidding wars, fundamental income levels that don't support current prices.... what more do you need?

It's like asking at the peak of the market what could drive prices lowes.

toothfairy says

It’s hard to see any catalyst that would drive prices much further down from here.

If you are talking about Santa Clara, just a few more rounds of outsourcing will do the job.

yep same Santa Clara as this too
http://sanjose.bizjournals.com/sanjose/stories/2010/07/19/daily82.html?surround=lfn

It easy enough to pick one positive story for every negative story (I come here for negative the spin). It's getting easier as the economic recovery strengthens.
unless of course you dont believe we're in an economic recovery (which some people dont).

toothfairy says

Most of those same conditions were even worse right after the .com crash yet housing prices went up.

Are you comparing 2004 with 2010? Couple of differences.
- Unlike 2004, banking not giving many funny loans in 2010.
- After dot com bust, people in Silicon Valley thought real estate is safer investment. I don't think people have that much faith on real estate today.

toothfairy says

yep same Santa Clara as this too
http://sanjose.bizjournals.com/sanjose/stories/2010/07/19/daily82.html?surround=lfn

It easy enough to pick one positive story for every negative story (I come here for negative the spin).

The article says:

In the third quarter of 2010, 31 percent of companies say they will conduct hiring, up from 21 percent in the third quarter of 2009.

My employer had hiring freeze for one and half years. Recently they are trying to fill up a few positions which were open for more than two years. Hiring freeze cannot go forever. Someday they need to hire, if they want to run their projects. That's not a sign of economic recovery.

toothfairy says

It’s getting easier as the economic recovery strengthens.

Define recovery.
As for Silicon Valley, even local analysis group can't paint a rosy picture. Too bad!

Like the worst bubble areas, prices went from $600K to $300K in Concord. It's kinda unfair to assert that the doomsters here were wrong in 2007 about 2009-2010 when prices are half of the bubble still.

Here's a nice house:

http://www.redfin.com/CA/Concord/1612-Lindbergh-Dr-94521/home/588872

listed for $370,000. A 30 year fixed is 4.625% now apparently, for a monthly expense of ~$2200.

Areas like Concord that have already collapsed, I don't see falling more until bad things happen, which may or may not be in the cards.

As for an actual recovery, talk to me after the 99-week extensions are over.

CrazyMan says

mthom says

What’s your logic of holding if you are confident that it is going to go down quite a bit more? Personal attachment?

It’s long paid off and my property tax is pocket change (it was purchased by my dad in the early 60’s).
The idea is that anyone in my family will always have a home available to them. My sister currently lives there, she just pays the tax and insurance, as her and I have very different financial situations.
My family is just more important to me than a little bit of money.

Makes sense - both financially and personally.

How does the momentum from a just recently expired tax cut continue? If the laws of physics were reflective of your view on economics, I could jump and let the momentum bring me all the way to the moon.

I don't get it, I heard that this morning, then I latter saw him on Fox Business saying housing prices are falling and will only fall further, that the governments interference is prolonging the decline and making it worse. He said prices are more than 30% off peak prices and had the government not intervened he said there would be a 40% price decline.

That Dick Cheney Feller that posts around here, would have been proud of him.

From a vested self interest source.
It is the S&P and it's not like there's not Consumer index to spin.

No ALL Data is reliable Data.

Broward County is showing prices are down in every neighborhood.
Go to the public records and include all of the homes sold, not the young Yuppie couple that over bought to impress their friends.

BTW, I where I saw Shiller was not the relevance, what he said was, being it's his index they spouting off, and Robert himself thinks its rubbish.

You’re comparing month of month for seasonally-driven phenomenon.
I just posted this elsewhere. June and July will be the months to watch (if we were to go negative then, hold on to your hats). A couple of (very selective) historical data points:
April-May Gain
1991 0.96%
1994 0.97%
1997 1.55%
To emphasize klarek's point, a negative April-May has only happened a couple of times (2001 -0.22%[dotcom bust]. May 2007, May 2008).
Personally, I think we're still in the 1990-96 range...

Edit: numbers are from SF C/S Index

I think most economists agree that it made a big difference and that those gains will be lost when it's gone. People that dove in for it and used it as their DP would probably not have bought for a long time. Think about it, how long does it take most people that would be buying in the lower tier to save $8000, or the 3.5% DP they'd need. A long time.

But there are some who disagree. A Citi analyst was quoted recently saying pretty much what you're thinking. I just look at my neighborhood and see these young couples suddenly gobbling up the houses, pushing prices much higher than they were a year and a half ago, and I think they were fence-sitters until Uncle Sam started bribing them into the market.

> Home credit expires but home sales up 23.6%
sales are up 23.6%

But that's from last month which was the lowest sales number ever recorded.
This month's number (which was 23.6% better than last month) is the second lowest number ever recorded.

I do not think it is the banks that care about home prices, since they have been paid for their losses (80%), I think it is all of the NAR cash that the banks and politicos enjoy that is holding the REO's off the MLS.

Heh, in Patrick's news section there's this:

"Are Bay Area Home Prices Really Up 18 Percent?"

This dude also noticed that C-S's numbers don't even add up. . .

"By my calculations, the lower third has appreciated by 14.9%, the middle third by 12.8% and the top third by just 8.3%.

These numbers certainly seem more believable (at the lower tier anyway).

But, if no segment of homes even appreciated by 15%, how can the index say that the MSA appreciated by 18.3%?"

Troy says

LOL, $900K median areas should be doing well in this rich man’s economy with 15 year FHA money at 3.875% today.
But if the current gridlock on HR 4213 continues you’re going to see the state economy totally blow up.
Medicaid is going to get slaughtered. We’re talking billions lost to the state of California. Plus millions of unemployed being prematurely ejected from the 99-week extended dole.
You have NO IDEA the extent of the fiscal crisis that is barreling down on us, and that’s at the Federal level.
I can’t even wrap my head around the state’s problems. While my location says Bellingham that’s just one of my bug out options. Probably not far enough.

I hope your predictions for the state of California do not come true. However, I have to say, I'm fearful myself and will consider leaving the state if all of our government resources (schools, libraries, police force, social welfare, etc) fail, due to the budget crisis.

Yet again, I recommend looking to Calculated Risk for the real deal, this time on what the Case-Shiller data for "June" (really a moving average of March-April-May) mean:

http://www.calculatedriskblog.com/2010/07/survey-shows-house-prices-falling-in.html

I don't know why you people are so preoccupied with the Bay Area. Basically, the Bay Area is the future Detroit. It no longer has anything going for it. All the easy money made in the 80's & 90's are now gone. Bay Area is basically a wanna-be New York or Chicago or even LA (which is a pretty poor excuse for a city, but still much better than the Bay Area). The state is bankrupt, the city (if you can even call it that) is way overcrowded. Everywhere you go, you see nothing but rude people. You can't get any good service anymore. There are no good theaters or museums or even public transportation. RE prices in the Bay Area should be about 1/2 of Chicago's, just like they were back in the 50's and 60's, not 3 times higher.

Another link, this time to Denninger, who argues that the March-April-May price increases are *more than accounted for* by the inflationary effect of the $8000 tax credit.

http://market-ticker.denninger.net/archives/2526-Home-Prices-In-May-Were-Higher!.html

Oh yes, I forgot to mention all the lousy schools around here. That should knock the house prices down another 20-30% relative to any other self-respecting city.

bob2356 says

By what miracle of mathematics does a 23% increase wipe out a 36% decrease? Let’s do this slowly. A 36% decrease from 100 is 74. A 23% increase of 74 is 17 (ok so I rounded down the .2%). In no known numbering system does 17=36 or is even considered close.

Its a tall order to expect a journalist to comprehend math !

dunnross says

I don’t know why you people are so preoccupied with the Bay Area. Basically, the Bay Area is the future Detroit. It no longer has anything going for it. All the easy money made in the 80’s & 90’s are now gone.

After hearing about the Boom that is why everyone from the East Coast has rushed into the SFBA after the peak in 2000.

Oddly Oracle's Larry Ellison made the same comparision to Detroit as have many other business leaders have. Just not catching on for some folks.

So why dont you just move to Detroit then?

I hear it's much cheaper.

Sure he's wrong sometimes--of course he is. But he puts his predictions out there along with his reasoning--usually backed up with graphs and data.

I don't recall him hyping his previous successes unless someone like you starts attacking him for always being wrong.

And how does he present his ideas unfairly? I disagree completely with that statement.

tatupu70 says

Sure he’s wrong sometimes–of course he is. But he puts his predictions out there along with his reasoning–usually backed up with graphs and data.
I don’t recall him hyping his previous successes unless someone like you starts attacking him for always being wrong.
And how does he present his ideas unfairly? I disagree completely with that statement.

His quote above:
Not sure what you’re talking about with oil. I sold all my options at $134 and posted the sale to the board. Most of my comments since then have been very long term. I do remember saying that anyone buying 2014 oil contracts was guaranteed to make money and I still believe it.
What does ANY of this have to do with real estate or the fact that I was right about the direction of the market?
----------------

I remember him calling for 2010 oil contracts in 2008. Changing it to 2014 would be a revision of history to allow himself to save face. Then his comment about being right about the direction of the market again is selective memory of history and leaves out how he was wrong about the direction of the market before he was right.

“Bull markets are born on pessimism, grow on skepticism, mature on optimism, and die on euphoria.”

–Sir John Templeton

mthom says

I remember him calling for 2010 oil contracts in 2008. Changing it to 2014 would be a revision of history to allow himself to save face. Then his comment about being right about the direction of the market again is selective memory of history and leaves out how he was wrong about the direction of the market before he was right.

It's probably impossible because he posts a lot, but if you could post a link to his 2008 comments then it would be much more convincing. Because just saying you think you remember him saying something in 2008 does not hold much weight in my mind.

In any event--like I said earlier--agree or disagree, he at least presents data to backup why he thinks what he thinks. I maintain that he's not deceptive. Wrong?--sometimes, just like anyone else.

gameisrigged says

and wages are falling

No they're not.

My fear as a renter would be the landlord could be about to get foreclosed on. With 6 months of your rent money, they could disappear leaving you to face eviction when the bank takes over. At least paying month by month basis, you could withhold the rent money and use to toward renting and moving into another rental or you could use the rent money to pay the bank or who every takes over the property so you could stay. No one going to want to hear that you pre-paid the rent for the next 4 or 5 months.

thunderlips11 says

BLS says wages went up .8% versus CPI increases of 1.8%. That’s a drop of 1% after inflation.

Fair enough--I assumed he was talking about actual wages, not inflation adjusted wages.

gameisrigged says

The “investors” aren’t going to keep all those properties; they will eventually have to be sold to people who will actually live in them

Depends if they cash-flow or not. Management companies can handle the headaches, the investors have the tough task of doing nothing for the money.

Now, I do think we are on the Japan course of a non-recovery this decade, and rents and land values coming under fire from all side (taxes, health insurance/costs, energy costs, globalization).

But past history is that a recovery has come from somewhere -- in the 1980s it was Reagan's deficit spending and personal computers, in the 90s it was the internet and the benefits of globalization, in the 00s it was suicide lending and the Bush tax cuts.