patrick.net

I remember talking to someone in 2007 who had bought property in Vegas as an investment. I told them they should think about selling it since there was likely to be a downturn in prices. But they informed me that no, the downturn had already happened and was over with.

bubblesitter says

What amuses me as that correction started in 2006-2007 and people(existing homeowners) were calling bottom already in 2009. Like 10 years of crazy appreciation was okay but 2 years into down turn and we are fine….it is going to start recover now…

Why do you think it's going to a symmetrical rise and fall? Better to look at price/rent or price/income ratios. If those are OK, it doesn't matter if it's been 1 year or 15 years...

I think prices are correct in my area.

Let's look at a typical lower end home in San Francisco.

You should be able to get one for $450k or so in the south eastern neighborhoods.

Put 20% down ($90k). You will need a loan of $360k. The mortgage for that is around $1800/month. Income requirement for a safe mortgage is $5400/month, or $65k/year. That's couple earning $32500/year. San Francisco minimum wage is nearly $10/hour. A couple earning minimum wage has a household income of $41k. If prices go any lower, you will soon be competing with minimum wage earners. Do you guys realistically think market conditions will allow minimum wage earners to be able to afford a home?

Vain says

I think prices are correct in my area.
Let’s look at a typical lower end home in San Francisco.
You should be able to get one for $450k or so in the south eastern neighborhoods.
Put 20% down ($90k). You will need a loan of $360k. The mortgage for that is around $1800/month. Income requirement for a safe mortgage is $5400/month, or $65k/year. That’s couple earning $32500/year. San Francisco minimum wage is nearly $10/hour. A couple earning minimum wage has a household income of $41k. If prices go any lower, you will soon be competing with minimum wage earners. Do you guys realistically think market conditions will allow minimum wage earners to be able to afford a home?

Your fuzzy math is what got us into this problem in the first place. You act as if taxes don't exist!

Vain - 1) coming up with $90k - that's the hard part.
You also need to include taxes & insurance into your mortgage payment (unless you pay them separately, but from all that I have read, most don't, at lest not initially)

If rates hold (or go lower due to QE2) then yes, we are close to a forced bottom in most areas.

Vain, I think current DTI is 0.31 and 0.43 front and back. So, do your math again with that ratio, and see if bank will give 65Kers 360K loan at 30yrs/4.3%. I can hardly think so. If I were one of those 65K'er, I wouldn't take 360K loan even if I could. 5400 gross, 3500 or so net/mo, and take 1800/mo for mortgage gives you 1700/mo in your hands. 1700/mo for prop tax, HOA if any, util, auto loan, credit card payments, food, cloth, health care, expenses for the kids, transportation, maintenance and other fees in place like SF? You gotta think twice about it before taking it.

ECCB, your notion about QE2 is interesting point. Burnake implied it several times before. Not sure he will pull the string soon or not. But the effect of stimulus is wearing out, and the Fed is feeling the need of another massive scale monetary injection. With tax payers money or by crying out loud in front of chinese? Anyway, that I think, will force the RE market shake even in those resilent places like SF, DFW and DC if happens. One of the reason why inflation is not kicking in regardless of all those money government spent is those banks and manufacturers keeping themselves in low profile, holding money for the balancing purpose. I think they should fire Burnanke and Geithner, and the start squeeze those banks instead though, who am I to say the government what to do?

EastCoastBubbleBoy says

Vain - 1) coming up with $90k - that’s the hard part.

ECBB, seaside,
I agree coming up with the down payment may be tough. Having a loan a bank says is "safe" does not mean it is safe for me to get. But there are lots of suckers out there so you may have to wait all of them out. I personally am tired of waiting. I am constantly putting offers on what we think the home is worth. If we get it we get it. If we don't we don't. We've backed out of 2 short sales to date since the bank was dragging it on and only accepting the offer once the prices appear to be declining.

http://money.cnn.com/video/news/2010/10/05/n_whitney_banks_housing.cnnmoney/

There's some mention at the end about possibility of double dip in housing sector.
Some of you don't like whitney, I know, I know. I am posting this because of the other lady. :P

This one didnt get the memo either...for a 3000 sq ft home its worth $600K.

http://www.redfin.com/CA/San-Jose/6528-Leyland-Park-Dr-95120/home/1311146

Property History for 6528 LEYLAND PARK Dr
Date Event Price Appreciation Source
Oct 01, 2010 Price Changed $900,000 -- MLSListings #81019940
Sep 19, 2010 Price Changed $925,000 -- MLSListings #81019940
Sep 09, 2010 Price Changed $950,000 -- MLSListings #81019940
Sep 03, 2010 Price Changed $975,000 -- MLSListings #81019940
Aug 20, 2010 Relisted -- --
May 27, 2010 Delisted -- --
May 21, 2010 Price Changed $995,000 -- MLSListings #81019940
Apr 23, 2010 Listed $1,025,000 -- MLSListings #81019940
Apr 23, 2010 Delisted -- --
Jan 21, 2010 Price Changed -- --
Jan 11, 2010 Listed -- --
Mar 15, 2007 Sold (Public Records) $1,311,500 10.4%/yr Public Records
Mar 02, 2007 Delisted -- --
Feb 22, 2007 Listed ** --
Sep 03, 1997 Sold (Public Records) $509,000 -- Public Records

Still think the double dip is coming?

http://finance.yahoo.com/news/Home-loans-for-purchases-rise-apf-775022902.html?x=0

thomas.wong1986 says

This one didnt get the memo either…for a 3000 sq ft home its worth $600K.
http://www.redfin.com/CA/San-Jose/6528-Leyland-Park-Dr-95120/home/1311146
Property History for 6528 LEYLAND PARK Dr
Date Event Price Appreciation Source
Oct 01, 2010 Price Changed $900,000 — MLSListings #81019940
Sep 19, 2010 Price Changed $925,000 — MLSListings #81019940
Sep 09, 2010 Price Changed $950,000 — MLSListings #81019940
Sep 03, 2010 Price Changed $975,000 — MLSListings #81019940
Aug 20, 2010 Relisted — —
May 27, 2010 Delisted — —
May 21, 2010 Price Changed $995,000 — MLSListings #81019940
Apr 23, 2010 Listed $1,025,000 — MLSListings #81019940
Apr 23, 2010 Delisted — —
Jan 21, 2010 Price Changed — —
Jan 11, 2010 Listed — —
Mar 15, 2007 Sold (Public Records) $1,311,500 10.4%/yr Public Records
Mar 02, 2007 Delisted — —
Feb 22, 2007 Listed ** —
Sep 03, 1997 Sold (Public Records) $509,000 — Public Records

You disprove your own point with these posts Thomas. Yes, in your mind it is worth $600k, but it's listed at $900k. Fine, they've been dropping their price, but you don't know where it will end up selling. It's not gonna be $600k though. And it certainly doesn't seem to be crashing down to the 97 price of $509k.

bubblesitter says

Look at Thomas’s posting. Home price correction in CA and BA is still on going. Look at all the MLS history of a home prices on redfin. Just because banks can’t clear the backlog of inventory doesn’t mean house prices have bottomed. There was no bottom in 2009.

Thomas' posting prove nothing. If I buy a house for $500k and then list it for $1M and it doesn't sell, then drop the price to $900k or even to $800k and it sells, the price still went up. Just because they are lowering their list price doesn't mean prices are dropping overall. The same house could have been listed at $600k and then sold for $700k - that wouldn't necessarily mean prices are going up. You can't tell anything from the listing histories other than some people are pricing things higher than they should.

mthom says

You disprove your own point with these posts Thomas. Yes, in your mind it is worth $600k, but it’s listed at $900k. Fine, they’ve been dropping their price, but you don’t know where it will end up selling. It’s not gonna be $600k though. And it certainly doesn’t seem to be crashing down to the 97 price of $509k.

Your in for a shocker if you think prices will not head down to 97+inflation.
Fact is we may even go down further to nominal 97 prices. Yes! $509K and less...

There were many home like this 3000 sq ft $1-1.5M which sold at peak years and will
be underwater for many years. Many will sell at a loss, and that will push lower tier homes
even lower for years to come.

PS. Dont tell the owner of the home in the link prices are going higher!

'The greater bay area' includes a lot of places that have crashed hugely - but also areas that have only begun. "Asking prices" only indicates what sellers are hoping to sell for, sale to list % is trending down again.

Also -
There were 811 NoDs in San Mateo County in September, 2010.
There were 911 in August.
There were 610 in July.
807 in June.
813 in May.
840 in April.
1021 in March.

That's a lot of defaults in "rich" San Mateo County. What do you think all these defaults (on top of existing foreclosures and bank owned) will do to the market??

Hey this topic has nothing to do with Ice Cream, I feel so cheated.

EastCoastBubbleBoy says

Vain - 1) coming up with $90k - that’s the hard part.

This may be too personal of a question, but since we only know by your Alias there's no harm in asking. You been a member of this website since before I joined in 2006. How much have you saved towards a down payment to buy a house.

seaside says

Vain, I think current DTI is 0.31 and 0.43 front and back. So, do your math again with that ratio, and see if bank will give 65Kers 360K loan at 30yrs/4.3%. I can hardly think so. If I were one of those 65K’er, I wouldn’t take 360K loan even if I could. 5400 gross, 3500 or so net/mo, and take 1800/mo for mortgage gives you 1700/mo in your hands. 1700/mo for prop tax, HOA if any, util, auto loan, credit card payments, food, cloth, health care, expenses for the kids, transportation, maintenance and other fees in place like SF? You gotta think twice about it before taking it.

Last year me and my wife's combined pre-tax income was 112k and money is tight with paying our 340k 5% mortgage. (and no HOA). I don't think it's possible for someone to pay a 360k loan at 4.3% earning only 65k.

Your graph proves my point! The market remained stagnant for the most part and did not recover its value until the mid 1950s. Note the Sucker's Rally of '33 .... just as I stated. By the way, where's your Beanie Baby graph?

RayAmerica says

Do you have any data as to when the beanie baby market bottomed out?

The Beanie babies product line stated in 1994, and the market peaked in 1998. The company noticed that when product lines were retired and new product lines introduced, sales spiked. So they continually retired and introduced new product lines. So they decided that if they stated if they announced that they would stop making Beanie Babies on December 31, 1999, (no reason was given) it would spark a feeding frenzy, but it had the opposite effect. People began to lose interest and the market started to slide. They later "changed" there mind about ending production, but once the slide began it just accelerated.

Tech .... are you sure you aren't describing the housing market? LOL

RayAmerica says

Tech …. are you sure you aren’t describing the housing market? LOL

Of course, sort like they stopped making Eichler homes.

E-man says

However, he didn’t acknowledge the fact that if you bought in 1932, you’d been handsomely rewarded.

Some people don't have 25 years to be rewarded for their investment efforts. My point is that the stock market took that much time to recover from the crash of '29.

thomas.wong1986 says

Of course, sort like they stopped making Eichler homes.

..... or McMansions with zero down and interest only?

RayAmerica says

E-man says

However, he didn’t acknowledge the fact that if you bought in 1932, you’d been handsomely rewarded.

Some people don’t have 25 years to be rewarded for their investment efforts. My point is that the stock market took that much time to recover from the crash of ‘29.

Looks to me like you'd be pretty happy after 5 years. 400% if I'm reading that correctly. I'd take that return...

tatupu70 says

Looks to me like you’d be pretty happy after 5 years. 400% if I’m reading that correctly. I’d take that return…

Don't forget you're looking at the DOW .... 30 stocks. There are an abundance of losers even in bull markets, so buying in '32 depends on an awful lot of variables.

After 1929, no one had money to invest in the stock market and the
publics irrational exhuberance with get rich in stock quick faded.

So the talk about people rushing back is all talk.
The volume in 1929-30 highs at 4m shares dropped to a fraction
for decades.

It wasnt until the passage of the 1933/34 SEC Act did it make sense to
even put a penny into the market. People before 1934 were "investing" into
companies tht many didnt disclose earnings results and we didnt have a standard
financial reporting quidelines to compare company results. Everything was based
on rumors and shady stories.

thomas.wong1986 says

mthom says

You disprove your own point with these posts Thomas. Yes, in your mind it is worth $600k, but it’s listed at $900k. Fine, they’ve been dropping their price, but you don’t know where it will end up selling. It’s not gonna be $600k though. And it certainly doesn’t seem to be crashing down to the 97 price of $509k.

Your in for a shocker if you think prices will not head down to 97+inflation.
Fact is we may even go down further to nominal 97 prices. Yes! $509K and less…
There were many home like this 3000 sq ft $1-1.5M which sold at peak years and will
be underwater for many years. Many will sell at a loss, and that will push lower tier homes
even lower for years to come.
PS. Dont tell the owner of the home in the link prices are going higher!

In the past 3 months, 9 houses over 3000 sq ft sold in 95120 according to redfin. The lowest price: $1,135,000. Currently listed, there are 2 (including the one you posted) near $900k and everything else is above $1M. You are delusional if you think prices are somehow going to get down to the $500k area. If you want to be realistic and say some may get down to $800k - ok, fine, maybe, at least it's reasonable. But to say $500k, come on.

TechGromit says

EastCoastBubbleBoy says

Vain - 1) coming up with $90k - that’s the hard part.

This may be too personal of a question, but since we only know by your Alias there’s no harm in asking. You been a member of this website since before I joined in 2006. How much have you saved towards a down payment to buy a house.

I'm not at 90k yet, that's for sure. In all reality, I probably would be close too it, if not for a few bumps along the way. (unexpected car repairs / replacement / tax man coming for his share, stuff like that). If nothing else, I've been able to pay off a good chunk of my student loan debt. (engineering school didn't come cheap, and the non-federal loans couldn't be consolidated.)

Based on what I have now, I can theoretically come up with 20% down (plus closing costs) but that would drain my savings to almost zero. Given that I want some cushion to cover the unexpected, if I buy in the next six months, I'll probably end up putting down 10% when all is said and done.

Of course, its robbing Peter to pay Paul. My retirement isn't funded nearly as much as I would want.

Tech your numbers point to the crux of the problem. You and your wife make a good salary, but its still tight. If those that are fortunate enough to have good jobs can barley make it how is the other half doing it?

ECCB, you're still doing way better than most people. People I knew dreamt of getting FHA 3.5%, and the truth is, I don't think they have that 3.5% downpayment in hands. It looks like you've been saving for years, and I am sure you're gonna reach the point where you want to be in near future. So, chin up.

TechG, that's what I thought. Yours is 460K or something like that, right? That does not look like a big mansion, and you're at top 15%. 85% of people in US earns less than you. But you still feel squeezed after you purchased the home. Something is not right. Either you gotta earn more or the price gotta be bit cheaper. But ultimately, the buyer should know what to buy or what to pass. Home buyers thinking like investors buying home based on future market forecast is a recipe for trouble. People had no clue about that for years.

seaside says

TechG, that’s what I thought. Yours is 460K or something like that, right? That does not look like a big mansion, and you’re at top 15%. 85% of people in US earns less than you. But you still feel squeezed after you purchased the home. Something is not right. Either you gotta earn more or the price gotta be bit cheaper.

TechG,

Do you mind giving a rough estimate of your budget? I find it hard to believe that money is tight. There must be something quite heavy weighing you down. Student loans? Credit cards? But I guess it is dangerous to rely on two incomes to pay the mortgage it is a smart idea to save some money for a rainy day.

Vain, sorry if I made you feel discouraged.

I think TechG talked little bit about it in the other thread, I just can't find it.
There's time shift b/w there and here in the east, so you're gonna wait till TechG wakes up in the morning, that is, if he is not a night owl like me. My idea is, if I may, it's tax and utility cost. You may ends up paying at least twice as much as what you would've paid for similarly priced home in CA. The real disposable income after those is relatively small.

And you got that right. Relying on two income is dangerous. But again, home price is little too high for ordinary workers to afford only w/ one income. That's my goal though.

mthom says

In the past 3 months, 9 houses over 3000 sq ft sold in 95120 according to redfin. The lowest price: $1,135,000. Currently listed, there are 2 (including the one you posted) near $900k and everything else is above $1M. You are delusional if you think prices are somehow going to get down to the $500k area. If you want to be realistic and say some may get down to $800k - ok, fine, maybe, at least it’s reasonable. But to say $500k, come on.

And what were prices of these mega mansion before the bubble ?
And who will be left buying these mega mansions down the road.
Not hard to see whats happening around with the local economy.

--------------------------------------------------------------------------------

That’s not just less than the dot-com era, that’s well below the 315 public companies the valley had in 1994 when the Mercury News started keeping track.

seaside says

ECCB, you’re still doing way better than most people. People I knew dreamt of getting FHA 3.5%, and the truth is, I don’t think they have that 3.5% downpayment in hands. It looks like you’ve been saving for years, and I am sure you’re gonna reach the point where you want to be in near future. So, chin up.

Believe me, I'm thankful, and keenly cognizant of how fortunate I have been. I'm not complaining by any stretch.

thomas.wong1986 says

mthom says

In the past 3 months, 9 houses over 3000 sq ft sold in 95120 according to redfin. The lowest price: $1,135,000. Currently listed, there are 2 (including the one you posted) near $900k and everything else is above $1M. You are delusional if you think prices are somehow going to get down to the $500k area. If you want to be realistic and say some may get down to $800k - ok, fine, maybe, at least it’s reasonable. But to say $500k, come on.

And what were prices of these mega mansion before the bubble ?
And who will be left buying these mega mansions down the road.
Not hard to see whats happening around with the local economy.

Yeah, the local economy shows people are still buying these houses for $1M+.

I didn't know "20 cities" make up the entire real estate market in the USA. Furthermore, there is no such thing as a market that goes continually up or down over a long period of time. I noticed too that you didn't mention one word about my point of this market enjoying historically low interest rates compared to the peak that was considerably higher. I guess you must have decided to paddle around the pond on that one.

I frequently read the Sfgate page for my daily news fix. Whenever there are articles about the housing market, you can take a look at the large amounts of comments. You will soon realize that there are LOTS people with 200k+ downpayments (or so they claim) just waiting on the sidelines.

The bears need to wait until the high down payers and high earners are satisfied. The high down payers are very concerned about QE so they are anxious to spend it.

thomas.wong1986 says

RayAmerica says

Tech …. are you sure you aren’t describing the housing market? LOL

Of course, sort like they stopped making Eichler homes.

OMG I looked at an 'Eichler' in San Mateo, kind of on a lark. What a turd! It isn't showing up in sales records on Redfin yet, but it's gone from the listings. Wonder if it sold or what? It was 'all original' down to the 1955 oven and dryer. There was even the original building permit tacked on the wall in the garage - I think it was valued at $12,000.

I have learned, there are 'eichlers' and there are 'Eichlers'. I guess it's the difference between the custom built and the assembly line variety.

seaside says

TechG, that’s what I thought. Yours is 460K or something like that, right? That does not look like a big mansion, and you’re at top 15%. 85% of people in US earns less than you. But you still feel squeezed after you purchased the home. Something is not right. Either you gotta earn more or the price gotta be bit cheaper. But ultimately, the buyer should know what to buy or what to pass. Home buyers thinking like investors buying home based on future market forecast is a recipe for trouble. People had no clue about that for years.

Technically the original list price was 460k, but we ended up getting the house for 395k. We put 10% down, and in a refinance about 18 months ago, we just barely made the 10% equity requirement to get a lower PMI payment. For PMI equity is calculated in 5% increments. So even if you have 19.98% in equity, it's considered 15%, or 9% is considered 5%. I don't think of my house as a big mansion, but when you consider the houses in CA going to 600k plus I guess it would be. It's 3,500 sq feet living space, and almost another 3,000 sq ft in non-living space (unfinished basement, garage, attic room) on a 2 1/2 acre plot of land. To be fair, I felt "squeezed" for the first year or two when I purchased my first house for 85k in 1999, but I was only earning about 35k at the time, as my income increased, the pressure eased up. If I still lived there, it would have been paid off several years ago.

Vain says

TechG,
Do you mind giving a rough estimate of your budget? I find it hard to believe that money is tight. There must be something quite heavy weighing you down. Student loans? Credit cards? But I guess it is dangerous to rely on two incomes to pay the mortgage it is a smart idea to save some money for a rainy day.

Hmm mainly credit cards, but there are other expenses I hadn't counted on that complicate things. I'm estimating the minimum payments on the credit cards, I don't have the exact figure in from of me, but I rarely pay the minimum payment, unless money it tight that month.

Mortgage $2,730.59
Infiniti Lease $410.00
Comcast Cable $65.00
Water Bill $25
Car Insurance $125.00
Verizon Phone $35.80
Verizon Wireless $55.00
Waste management 96.99 every 3 months $31.33

Total Fixed Costs $3,472.47

Electric Bill $250.00
Auto Fuel (2 cars) $350
Credit Cards Balance Min Payment

American Express $9,000.00 $150
Discover $7,000.00 $100
Visa Citi Cards $2,500.00 $40
John Deere $2,200.00 $60
Geothermal loan $11,000.00 $168

Food $200

Total After tax income about 6.4k a month, but fixed cost eat up more than half of that leaving about 2900 to cover credit cards, grocery, gas, dining out, medical, car repairs, xmas/birthday gifts and other unplanned for expenses. I really didn't count on the Geothermal heating system going so soon after buying a house, that added 15k to my overall debt.

It definitely appears that the Credit Cards are taking a toll on you in the mind. Focus on getting rid of the credit card debts and I'm pretty sure money wouldn't "feel" so tight anymore. But you're pulling through. That's still excellent.

I like to keep my fixed costs low. I drive crappier cars which require little insurance ($18/month). I do not even need to purchase comprehensive or collision coverage for it. Instead of using Comcast cable TV, I just subscribe to Netflix and I can watch tons of movies and shows on demand with no commercials.