patrick.net

tatupu70 says

gameisrigged says

and wages are falling

No they’re not.

Yes they are.

Troy says

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.

I made the point that rents have fallen and vacancies are up, so how is the market going to absorb a sudden influx of new rental properties? You didn't really address the point; you just made some vague reference to "cash-flow". How about it?

gameisrigged says

tatupu70 says

gameisrigged says

and wages are falling

No they’re not.

Yes they are.

Well, OK. Here's a link to a site that is very pessimistic about the future, but even they show that wages have grown and continue to grow.
http://www.thecomingdepression.net/main-street/poverty/wages-growth-lowest-in-27-years-minimum-wages-are-bad/
You didn't say real wages...

gameisrigged says

I made the point that rents have fallen and vacancies are up, so how is the market going to absorb a sudden influx of new rental properties? You didn’t really address the point; you just made some vague reference to “cash-flow”. How about it?

All those people that are getting foreclosed on have to live somewhere, right?

I don't know about your area - but in the Monterey/Seaside/Marina, CA area, rents are falling.

1-2 years ago you couldn't touch a three bedroom for under $2,000-2,200/mo. The average is now around $1700-1850/mo.

My wife and I move into our new (rental) in about two weeks - we scored a nice sized 3 bed 2.5 bath, in a gated community for $1550/mo. Every rental in the 1700-1800/mo bracket we called about, and they were almost all underwater homeowners, who were just trying to make the mortgage. We decided not to rent from any of them because a risk of default...Most of the owners had moved into the Salinas area for cheaper housing so that they could at least break even without damaging their credit. I would say that over 1/2 of the underwater landlords were willing to negotiate.

You'll always see a few around here priced in the $2200-2600 range, and usually are newer construction... but they sit, and sit vacant for long periods of time, some of which never rent.

You could say that every market is local.... or that rents don't go down - but from what I've seen, rents are falling.

tatupu70 says

gameisrigged says

I made the point that rents have fallen and vacancies are up, so how is the market going to absorb a sudden influx of new rental properties? You didn’t really address the point; you just made some vague reference to “cash-flow”. How about it?

All those people that are getting foreclosed on have to live somewhere, right?

Um, that's a zero sum game. If someone moves out of a house and into an apartment, then that house becomes vacant. How would that add to the demand for rental properties?

Iwong, #5 needs one of these "*". That big 'ol pipeline that starts with a T brings most of the water to SanFanny.

tatupu70 says

gameisrigged says

tatupu70 says

gameisrigged says

and wages are falling

No they’re not.

Yes they are.

Well, OK. Here’s a link to a site that is very pessimistic about the future, but even they show that wages have grown and continue to grow.

http://www.thecomingdepression.net/main-street/poverty/wages-growth-lowest-in-27-years-minimum-wages-are-bad/

You didn’t say real wages…

O.K., real wages then. What's your point, anyway? You just linked to an article that is pessimistic about the future of wages. Isn't that exactly what I am saying? Who is going to pay increasing prices for homes when their wages aren't increasing?

gameisrigged says

O.K., real wages then. What’s your point, anyway? You just linked to an article that is pessimistic about the future of wages. Isn’t that exactly what I am saying? Who is going to pay increasing prices for homes when their wages aren’t increasing?

My point was twofold:

1. Wages are increasing.

2. Home prices should track actual wages more closely than real wages. That's why they are often cited as an inflation hedge. So, if wages are increasing even now, then it stands to reason that housing prices could increase. Especially if the economic recovery strengthens and more jobs are created.

gameisrigged says

Um, that’s a zero sum game. If someone moves out of a house and into an apartment, then that house becomes vacant. How would that add to the demand for rental properties?

It wouldn't. But it wouldn't add to the supply of vacant properties either. Like you said--it's a zero sum game.

tatupu70 says

Wages are increasing.

Note for the strawberry pickers with the $700K houses . . .

http://www.latimes.com/business/la-fi-ag-overtime-20100729,0,265499.story

tatupu70 says

gameisrigged says

Um, that’s a zero sum game. If someone moves out of a house and into an apartment, then that house becomes vacant. How would that add to the demand for rental properties?

It wouldn’t. But it wouldn’t add to the supply of vacant properties either. Like you said–it’s a zero sum game.

Um, that's nice. I didn't say that it would. Fortunately, my point that vacancies are above normal did not depend on such an argument, but rather on actual statistics for vacancies, which can be seen in the links I posted. So your point is decimated, while mine remains verified.

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.

For me, the real majesty of the Bay Area lies in its natural splendor, coupled with its highly photogenic architecture/infrastructure. You're probably right on at least one or two points, though -- it is shockingly expensive and home to one of the most atomized populations that I have witnessed in America, outside of some really scary parts of Louisiana. What's weird to me is that the the dozen or so times I've stayed there, I've come away with the distinct sense that nobody who lives there really gets to enjoy as much of the landscape as I do as a visitor. I've turned people onto things to do and see in that city that 30+ year residents haven't ever seen or done. These days, I think a Southwest ticket is a helluva lot more sensible than trying to set up shop in SF.

tatupu says:

It wouldn’t. But it wouldn’t add to the supply of vacant properties either. Like you said–it’s a zero sum game.
gameisrigged says
Um, that’s nice. I didn’t say that it would

But he then says:
gameisrigged says

If you have evidence (evidence, not conjecture) that the rental market is suddenly able to absorb a huge increase in available rentals, please post it.

So, which is it?
So, trying to understand you--your point appears to be that there is an oversupply of housing right now. Fair enough--I would tend to agree. The problem is that the extra houses tend to be in areas where people don't want to live so they don't affect the prices/rents of housing where people do want to live.
Further--US population is growing and that will most definitely erase that oversupply of houses at some point. It's just a matter of time...

I think phrases like "more than retarded", are.

I heard a good quote once: “Prop 13 would be ended overnight if everyone could just see on a map how little their neighbors were paying.” Since it takes a little work to see what people around you are paying, most people don’t bother to look. Not to mention that exempting corporations and trusts is exactly opposite to the supposed reason Prop 13 was passed (protecting the elderly poor).

The more important question that should have been asked of buyers over the past 10 years,
why buyers have been ignoring historical price trends. The first new neighbor paid $200-300K for a house in 1996, while 2nd new buyer in 2000 overpay for similar home to the tune of $500K. Next buyer down the street in 2005 paid $800K. Now they 3rd buyer is going into defualt and putting the Y2K buyer at risk.

Higher property tax is the consequences of overpaying to begin with.

I thought C-S index was a 3 month average with a one or two month lag... So would May numbers actually reflect March and April - or for previous months .. ?

You can probably get a government grant or get some special interest group to fund it.

Although trying to get the grant may take more effort than building up the website

Although people that go on zillow don't specifically look for that. (I check out Zillow often and I wasn't even aware that the info was there) If there was a website specifically made for that purpose (maybe simply by taking Zillow's data?) there may be more reaction to it.

It is ironic, when I see some of the posts here about some great buys of houses like that "Willow Glen" house they're asking 850K for even though it's not in downtown Willow Glen,

What is the property tax on that one? Per year? Per 6-month billing cycle? Per month? How much money do I need to earn to pay that property tax bill? Then ptiemann or someone like that will Post the Platitudes that "property taxes can be ignored."

Oh yeah?

Thomas Wong is right. Prop-13 can be your friend or your enemy but it is certainly you're enemy if you pay too much.

And exactly what is going to support higher house prices? Big American companies have found ways to hoard wads of cash without hiring any Americans. The current unemployment rate could be here to stay. The easy money from crooked bankers is gone.

I have a confession to make: I don't know who "Snooki" is. Neither does our Dear Leader, or so he claims. Just another funny lie he was caught in. Check it out:

http://gawker.com/5599717/obama-flip+flops-does-he-know-who-snooki-is-or-not?skyline=true&s=i

Well, then 99% of the country (at least those who pay attention to housing), defend the same position. I'm not so pompous that I think I'm smarter than everyone else - particularly those who spent years working on this. I guess you are.
Just let us know when you're going to be on TV discrediting the C-S index. I'll be sure to watch. Thanks!

Even something with as much data/evidence as climate change/global warming has many, many doubters. Why doesn't the C-S index have any respected economists/experts criticizing it? I'm not saying popular opinion is always right, but when something is so widely accepted, it's going to take a lot to prove to me that it is "crap."

mthom writes: "Even something with as much data/evidence as climate change/global warming has many, many doubters. Why doesn’t the C-S index have any respected economists/experts criticizing it? I’m not saying popular opinion is always right, but when something is so widely accepted, it’s going to take a lot to prove to me that it is “crap.”"

Even with something with as much data/evidence as the existance of Jesus Christ as your Lord and Savior, there are still many doubters and unbelievers. I'm not saying that the congregration of believers in the Holy Truth of the Church of Christ are always right, but when something is so widely accepted, it's going to take a lot to prove to me that it is not Holy Absolute Truth.

In the meantime, let's all jump off bridges if everyone else goes. Oh, try smoking because it's cool....

PolishKnight says

Even with something with as much data/evidence as the existance of Jesus Christ as your Lord and Savior, there are still many doubters and unbelievers. I’m not saying that the congregration of believers in the Holy Truth of the Church of Christ are always right, but when something is so widely accepted, it’s going to take a lot to prove to me that it is not Holy Absolute Truth.
In the meantime, let’s all jump off bridges if everyone else goes. Oh, try smoking because it’s cool….

If that made sense in your mind, I'm happy for you.

Nomograph says

elliemae says

rayray would find it hard to swallow.

I’m guessing he has no problem swallowing.

Nomograph says

Besides fluffing his own posts...

Y'all made me spit water all over my keyboard and screen with these comments! LOL!

Now it seems he's engaging in interwebs posting masturbation. It's sad and sick to see, really. When you begin talking to yourself, Rayray, that's when you should bother Nurse Ratchett for your pills.

See the graph below from Robert Shiller. Something just don’t add up.
E-Man, This is, essentially, the same chart I carry around in my wallet, so I know it well. It is an INFLATION ADJUSTED national chart. The one I have has some commentary by RandyH at capitalism2.org; he overlaid a post WWII trend line that shows slight real increases over time. But the take way is the same, in real terms (1956 peak to 1999 trough), you lost money. Housing is an inflationary hedge, but as you can see, your entry point makes a difference. Anyone want to buy a lovely home along a canal in Amsterdam?

O.K., that's not the only problem, though. You seem to be making some rather arbitrary assumptions which aren't warranted. Your 1940s price comparison seems to be completely pulled out of your ass. Where did you get that figure? And why use the 1940s as your comparison? It's an incredibly volatile decade on the index. The index went below 70 at the beginning of the 1940s, yet you are using 90 as your value. Did you just average the decade? That seems a rather imprecise way of doing it. Your statement that the "average" house doesn't sell for $71K is nonsensical. Lots of houses can be bought for that amount and less in many parts of the country; even more so in 2000. Are you talking about median prices? For what area? You don't seem to know or care, yet answering those questions would be crucial to your analysis. If you really want to do an analysis of the C/S index, first you ought to determine what figures they actually used for inflation, not just some website that you arbitrarily picked. Second, you should find the actual prices that homes were selling for, not just a wild guess. If you're going to impugn the entire index, I would expect a bit more rigor in your analysis, math mistakes being just the tip of the iceberg.

This is similar to the sloppy math you used when bragging about your "positive cash flow" on your housing investments.

RE: new roof. A new roof in Monterey will carry value for many more years than a new roof in Fresno. Fresno roofs get the snot knocked out of them with freezing and broiling. Coastal roofs stay at 60 degs 90% of the time. So, a "30 year comp roof" in Fresno is all done at 29 years, 11 months. Where as the exact same roof in Monterey will last a lifetime.

the market in the central valley has started Slide II ... and I am doing The Happy Dance as I watch the specuvestors hunt for stupid renters ... BWAAA HAAA HA HA (evil laugh)

I'm not smart enough to understand all of the macro and microeconomic factors affecting housing - often called our country's growth engine - but I can pass along other interpretations of the case/shiller data:

http://www.ritholtz.com/blog/2010/07/updating-the-case-shiller-100-chart-forecast/

this one appears to use technicals to predict a second leg down.

MarkinSF,

I'm surprised. Why do you expect a NATIONAL index of average land+house values to fit examples from SF bay area?

We both agree that the sf metro index goes back to 1987 only, so we are talking about the national index, clearly.

MarkInSF says

I’m sorry, you cannot tell me that a typical raw acre of land in the Bay Area or any other major metropolitan area in 2010 is worth just 30% more in inflation adjusted terms as it is was in 1950. It’s just ridiculous.

That's not what the index says. It is tracking the entire country, not just the Bay Area or not just any particular metropolitan area. I'm not sure how you can say, "The Bay Area or any other major metropolitan area", as though those are equivalents. If you compare Bay Area prices to, say, Houston, or Detroit, or Cleveland, you will see vast differences in prices. The C/S index isn't tracking the Bay Area; it's tracking the whole country, and the country has a huge middle section that I think you're failing to consider.

Over the past couple of years every weekend I've been using a very unscientific method to reassure myself that prices on the SF peninsula (Redwood City up to San Mateo area) are falling and continue to fall. I simply use redfin and it's filter options to set a price threshold and see what shows up on the map in that area. I generally use 500K. Initially there were NO houses - not even in East Palo Alto but some condos. These days I adjust the filter to exclude all but 'houses' and there are many that show up. In fact, as of this summer I tend to filter further by 'listed in the past 3 days' or some similar method and there are ALWAYS at least 4-5. For fun I sometimes remove that filter and change the prices to 200 or 300K and there are many of those showing up now too. I will admit that most of these, even at the 500K threshold aren't in the most desirable areas - but there are more and more and the data points are moving closer and closer to more desirable locations on the map. I'm 38, have worked in the biotechnology field (genetic analysis) for 13 years in the bay area. I have zero debt. My salary is in the low six digits but I make quite a bit more via company stock, bonuses and other investments. My retirement savings are close to 100K. I have 150K saved for a down payment. I would not touch any of these properties with a 10 foot pole unless prices fall A LOT MORE. Too many friends and acquaintances in many local industries are unemployed or finding spurious low paying temporary work. The state is a disaster and the nation is arguably as well. I'm a renter and enjoying the freedom that comes with renting more and more. I'm not trying to be smug here - I was not smart enough to see the housing crashing coming. There was a time when I thought I'd really missed the boat. I really don't see it coming back though for a long long time. Shiller - Schmiller - that's my two cents!

gameisrigged says

I don’t see where he has explained any of his assumptions. Please re-read; I said the ASSUMPTIONS he makes are pulled out of his ass. I do not doubt that he took some numbers and applied mathematical formulas to them (although he did it incorrectly initially), but I do not see that he has justified the numbers that he selected. I have explained this in great detail, I’m rather baffled as to how you are not understanding my point.

OK--so what ASSUMPTION do you dispute? That a house cost $6000 in 1945? That can be very easily verified.