patrick.net

Syracuse, N.Y., was the most affordable major housing market in the country, edging out Indianapolis-Carmel, Ind., which had held the top ranking for nearly five years. In Syracuse, 97.2 percent of all homes sold were affordable to households earning the area’s median family income of $64,300.

San Luis Obispo-Paso Robles, Calif., was the least affordable of the smaller metro housing markets in the country during the second quarter. Others near the bottom included Santa Cruz-Watsonville, Calif.; Ocean City, N.J; Santa Barbara-Santa Maria-Goleta, Calif.; and Napa, Calif.

gameisrigged says

It makes no sense to just utterly disregard the principal payment, as though you weren’t even paying it, when making a rent vs. buy calculation

It's really tough to know what's going to happen in the next 15-40 years. I'll likely be dead at the end of this.

If you pay down the principal on that $700,000 property -- which is a fucking park btw -- in 2025 the carrying cost will be $900/mo, about what the usual shitty house rents for today, or close to it.

The value on an acre of "prime" Fresno real estate isn't going to go to $0. Plus they don't build houses like that anymore.

The value of this property will be driven by area after-tax incomes. They may go down due to deflation and increased taxation. They may go up due to Weimar money-printing.

Dunno, but I'd rather hedge against the latter and suffer the former than expect the former and get hit with the latter.

nevermind

gameisrigged says

I’ve never heard of the principal payment being disregarded when considering how much a mortgage is going to cost you. That’s just silly. If you’re gambling on increasing equity

In my $700,000 analysis above, I was not "gambling" on appreciation, just prices remaining where they are.

Equity may or may not increase in the short term, but after the 15 year note is paid there will be some equity -- valuation less money owed -- in the property unless the Valley turns into a Mad Max wasteland.

Prices have NEVER stayed depressed for 15 years in this country, at least not since the Fed was created to manage inflation.

EVERY decade has seen substantial price inflation. This house was probably sold for $50,000 in 1950. Maybe worth $100,000 in 1970. By 1980 maybe $175,000 (its Prop 13 value of $217,380 bears this out). 1990, $250,000. 2000, $400,000. 2010, $600,000.

When will it stop?

thomas.wong1986 says

Grew up in Sunnyvale, and never had any desire to buy there

I live in Sunnyvale now and don't think it's any better than (the good part of) Fresno. Worse, actually.

Los Altos *might* be good enough, but for the money I'd rather live on my own acre in Fresno. I actually like the Valley heat, it's the winter fog that sucks.

Tory, regarding your $700K home analysis, I think you should ditch whatever calculator you're using right now, because it does not give you correct numbers. 700K, down 280K, principle 420K, interest 3.4%, 15 years. The interset cost over the term is more like 117K than 75K.

I did question about your math before and you corrected a problem by checking your spreadsheet. I really do appreciate that attitude, and i guess I am asking the same again because you don't want to see things based on wrong numbers given by broken calculator. As a side note, your math is usually based on best case scenario. It's all good when that works, but you may want to have a little margin of safty, maybe not for the sake of argument, but for yourself when you want to buy home and things turn out to be tougher than you thought. So try that too.

BTW, the bad boy in Fresno is nice. I hate wooden pannels though, I can take it when the house is like that. Thanks for sharing.

There are a number of excel spread sheets on Microsoft website that can provide such numbers your seeking.

http://office.microsoft.com/en-us/templates/CT010223096.aspx?tl=2#

seaside says

The interset cost over the term is more like 117K than 75K.

I'm factoring in the interest deduction, 35.2% off.

Troy says

I’m factoring in the interest deduction, 35.2% off.

Got it.
California tax thingy. Things won't work that way outside CA though, the home is in CA. So, I can't give a damn.
But factoring in that way will work as intended when you're going to pay more upfront regardless of 15yr average number you got there?
Calculation is calculation. Reality is not the same.

thomas.wong1986 says

There are a number of excel spread sheets on Microsoft website that can provide such numbers your seeking.

Thanks thomas. I got my own spreadsheet though, I always can use other resources.

I'd just go to the local schools and observe. Look and see the students and parents. This will tell you if those are the neighborhoods that are coveted by wealthy immigrants. As we send more and more of our money out of the country, those neighborhoods will be even more coveted and affordable (for them) in the future.

Troy says

gameisrigged says

I’ve never heard of the principal payment being disregarded when considering how much a mortgage is going to cost you. That’s just silly. If you’re gambling on increasing equity

In my $700,000 analysis above, I was not “gambling” on appreciation, just prices remaining where they are.
Equity may or may not increase in the short term, but after the 15 year note is paid there will be some equity — valuation less money owed — in the property unless the Valley turns into a Mad Max wasteland.
Prices have NEVER stayed depressed for 15 years in this country, at least not since the Fed was created to manage inflation.
EVERY decade has seen substantial price inflation. This house was probably sold for $50,000 in 1950. Maybe worth $100,000 in 1970. By 1980 maybe $175,000 (its Prop 13 value of $217,380 bears this out). 1990, $250,000. 2000, $400,000. 2010, $600,000.
When will it stop?

It's still the same bubble argument: "Housing is a good long term investment, so it's always a good time to buy". Sorry, but we now know that this is bullshit. Ask someone who bought in 2006 and lost 45% of the value of his house. People are defaulting on their loans, because they know it will be a long, long time before they could ever possibly come out ahead. So spare us your 15 year projections, because they were saying EXACTLY the same thing in 2005. EXACTLY.

And so what if you do finally break even in 15-20 years? Let's say that instead of buying for $900,000 right now, you wait until next year and get it for even just 15% less. Then you saved $135,000 AND you still have everything you WOULD have had. That's not chump change.

I guess where we differ is that you think the Fed's meddling in the market is going to quickly cure all the problems, and I just don't see that happening.

SF ace says

gameisrigged says

SF ace says

All you seem to do is highlight the downside and ignore the upside. One bout of housing inflation and the buying case is exponetially better than the renting case. Little risk but huge rewards in the long term.

I think I have that on my “Greatest Hits of 2005″ record.

The affordability index was somewhere around the all time low in 2005, now it is around the all time high. Huge difference. Buying now is hardly a mistake and a reasonable risk.
http://www.nahb.org/reference_list.aspx?sectionID=135

Yes, I trust the Nat'l Association of Home Builders and Wells Fargo to inform me when it's the best time to buy in a given city. HA HA HA HA HA.

Sunnyvale 94087 in September 2005: $792,500

Sunnyvale 94087 in September 2010: $880,000

Yes, slightly more affordable than the PEAK of the bubble, due to somewhat lower interest rates. Affordability at an "all time high"? You have GOT to be kidding. If you think Sunnyvale is a great deal at HIGHER THAN 2005 prices, then be my guest. Buy a house there. Have fun with that.

Troy says

The value of this property will be driven by area after-tax incomes. They may go down due to deflation and increased taxation. They may go up due to Weimar money-printing.
Dunno, but I’d rather hedge against the latter and suffer the former than expect the former and get hit with the latter.

Don't you already OWN a house?

Troy says

fwiw I fully believe the status quo in California is unsustainable

This is certainly true, but the Fortress Neighborhood enclaves are priced mainly by the purchasing power of wealthy foreigners /immigrants who covet those enclaves.

Not really related to the overall well being of the overall California economy.

>Don’t you already OWN a house?

Technically, no (mom does and I should inherit that unless Medicare liens the hell out of it).

Proud renter since 1986, LOL. Going to Japan straight out of college kinda took me out of the game, alas.

Coming back in 2000 right into the teeth of the dotcom bubble I wasn't prepared financially or knowledgematically to buy.

Shoulda bought in 2001 in retrospect, right when interest rates were still over 7%. You could get a very nice 2/2 condo in the good part of Mountain View for $350K back then, right when AAPL was down and GOOG hadn't made their move yet.

Part of the problem was I had a pretty good deal with a friend renting for $700/mo, didn't want my housing expense to jump from that to half my pay.

sybrib says

Fortress Neighborhood enclaves are priced mainly by the purchasing power of wealthy foreigners /immigrants

While they are one source, I think the enclaves will also preserve their value by keeping their shit together while the borderline areas become much worse living spaces. This unravelling will serve to reduce the supply of competing offerings.

But all bets are off if they actually start boosting taxes back to Clinton levels or worse.

Ah, who am I kidding. We're going for the Brasil model of 5% enclave class and 30% middle and 65% favela.

Troy, you're a renter renting SFH or condo w/ roommate who is paying $700/mo? Is that right?

And a question for you. When will you buy your own? When certain conditions met your expectation? or do you have certain things in mind or have your eyes on?

Troy says

>Don’t you already OWN a house?
Technically, no (mom does and I should inherit that unless Medicare liens the hell out of it).
Proud renter since 1986, LOL. Going to Japan straight out of college kinda took me out of the game, alas.
Coming back in 2000 right into the teeth of the dotcom bubble I wasn’t prepared financially or knowledgematically to buy.
Shoulda bought in 2001 in retrospect, right when interest rates were still over 7%. You could get a very nice 2/2 condo in the good part of Mountain View for $350K back then, right when AAPL was down and GOOG hadn’t made their move yet.
Part of the problem was I had a pretty good deal with a friend renting for $700/mo, didn’t want my housing expense to jump from that to half my pay.

Guess that raises the question, then: If it's such a great time to buy, and such a great hedge against inflation, why haven't you bought?

seaside says

who is paying $700/mo?

That was 2000-2004. Pretty sweet deal.

I haven't bought for several reasons.

Foremost, being semi-retired / self-employed I can't commit to a hefty mortgage payment now.

Also not entirely committed to staying here in the states much longer. Going back to Japan or trying my luck in Canada or some other socialist hellhole like Germany is kinda attractive.

I think the fix is in & there's going to be increasing pressures towards outright economic collapse here; the 2012 election going the wrong way wouldn't surprise me, bringing us another 4-8 years of creative destruction to round out the decade.

But if I could afford to commit to a mortgage, I wouldn't mind getting a nice place that I wouldn't mind getting "stucco" in -- a doomstead in Bellingham, Santa Cruz mountains, Sierras, or the nice part of Fresno.

Chances are we'll bumble through the next 20 years with prices doubled like what happened in the 70s. Prices TRIPLED between 1974 and 1994. If the PTB can get that amount of inflation going, and if this inflation pushes up wages or just pushes down homeprices, dunno, but betting against the Fed -- probably the most powerful single entity on the planet -- is generally a losing bet.

In those zips as soon as prices go down you'll be outbid by someone with more money than you.

xenogear3 says

while (1)
{
x = monthly payment if buy the house;
y = monthly pay check;
if (y > x)
{
buy the house;
smile;
break;
}

Poor error handling in that one: what if y is only 1 dollar greater than x? What if y suddenly goes to zero? What if x increases?

I prefer x = total monthly cost of owning assuming 7 years, the average actual length of ownership; y = cost of renting the same thing. It still may be too high for your salary, but at least you'll save money each month compared to the alternative.

Troy says

seaside says

who is paying $700/mo?

That was 2000-2004. Pretty sweet deal.
I haven’t bought for several reasons.
Foremost, being semi-retired / self-employed I can’t commit to a hefty mortgage payment now.
Also not entirely committed to staying here in the states much longer. Going back to Japan or trying my luck in Canada or some other socialist hellhole like Germany is kinda attractive.
I think the fix is in & there’s going to be increasing pressures towards outright economic collapse here; the 2012 election going the wrong way wouldn’t surprise me, bringing us another 4-8 years of creative destruction to round out the decade.
But if I could afford to commit to a mortgage, I wouldn’t mind getting a nice place that I wouldn’t mind getting “stucco” in — a doomstead in Bellingham, Santa Cruz mountains, Sierras, or the nice part of Fresno.
Chances are we’ll bumble through the next 20 years with prices doubled like what happened in the 70s. Prices TRIPLED between 1974 and 1994. If the PTB can get that amount of inflation going, and if this inflation pushes up wages or just pushes down homeprices, dunno, but betting against the Fed — probably the most powerful single entity on the planet — is generally a losing bet.

So there will be an economic collapse, but home prices will triple? Interesting theory.

A local radio station plays clips from comedians every hour; the other day's was a guy bitching about being approached by a man with a sign that said, "I'm broke. Need $$." The comedian said, "he's not broke. He's EVEN. He should man up and get about $20,000 into debt, then we'll talk."

funny stuff.

Nomograph says

I didn’t know there was a nice part of Fresno.

: )

As a low-cost base to do my work it wouldn't be bad.

I kinda regret not being able to buy this place:

last year before it sold for $375,000.

http://www.zillow.com/homedetails/2117-W-San-Jose-Ave-Fresno-CA-93711/18707515_zpid/

While it zillows for $350,000 now (its pre-bubble valuation) the difference between $350,000 and $375,000 is about $100/mo starting out and over the life of the loan the TCO difference works out to ~$2/day.

E-man says

It’s right by Japan Town in Downtown San Jose. Sounds like a good fit for you

Trying to stay away from that side of town . . . not the best place for the Doomstead . . .

Wow. Love the old BBC clips they are awesome.

http://www.zillow.com/homedetails/2117-W-San-Jose-Ave-Fresno-CA-93711/18707515_zpid/

That is a nice house.
I thought everything in San Jose costs $800k+.

Is this a safe location?

Edit: It is San Jose Ave. but not in San Jose :)
This explains why it is so cheap.

Those were classic BBC clips, thanks for sharing!

xenogear3 says

http://www.zillow.com/homedetails/2117-W-San-Jose-Ave-Fresno-CA-93711/18707515_zpid/

That is a nice house.
I thought everything in San Jose costs $800k+.
Is this a safe location?
Edit: It is San Jose Ave. but not in San Jose
This explains why it is so cheap.

LOL! somehow peoples view that higher prices secure a safer neighborhood is dreadfully been skewed post 9/11.

Anyway, a couple homes from your above address a +3600 sq ft home is sold for $300K..a very good deal. And certainly $300K is more inline with incomes even for SV.

http://www.zillow.com/homedetails/2145-W-San-Jose-Ave-Fresno-CA-93711/18707517_zpid/

Price History
Date Description Price % Chg $/sqft Source
11/19/2009 Sold $300,000 -14.3% $80 Public Record .
10/11/2009 Listing removed * $349,900 -- $93 foreclosure.com
09/17/2009 Price change * $349,900 -5.2% $93 foreclosure.com
09/04/2009 Listed for sale * $369,000 -- $98 foreclosure.com
04/10/2009 Listing removed * $369,000 -- $98 foreclosure.com
04/07/2009 Price change * $369,000 -7.5% $98 foreclosure.com
03/06/2009 Price change * $398,900 -5.0% $106 foreclosure.com
02/07/2009 Price change * $419,900 -4.4% $112 foreclosure.com
01/10/2009 Price change * $439,000 -2.4% $117 foreclosure.com
12/13/2008 Price change * $449,900 -6.3% $120 foreclosure.com
11/05/2008 Price change * $479,900 -4.0% $128 foreclosure.com
09/27/2008 Listed for sale * $499,900 -33.3% $133 foreclosure.com
04/28/2006 Sold $750,000 42.9% $200
06/30/2004 Sold $525,000 90.9% $140 Public Record
01/09/2002 Sold $275,000 -- $73 Public Record

I looked into this. They wanted to put $150k repairs into a $450k house that my builder friend said should be torn down (it would be better and cheaper). When speaking to the proposed contractor, I asked if I could make changes, like "I don't want to put $20k into a kitchen that I plan on ripping out to expand the house". No dice.

He said the most important thing is to say what you do, do what you say. So if the bid says "install 20x20 linoleum", they will check for that. He also mentioned that repairs have to be done in a set timeframe, which makes any changes to the project almost impossible.

In the end we walked on this house - just wasn't worth the price.

It depends on where and what segment of the market.

Lower end housing certainly may continue to increase in certain areas, though the thought of mid-high end homes going up in pretty much any area is downright laughable.

Mid-high will continue to slide.

RayAmerica says

higher interest rates always lead to an increase in real estate prices. LOL

And apparently, lower ones do as well!!!!

These 3 plots clearly show a delayed correlation between the asking and selling prices,
and the prediction that ongoing increase of asking prices strongly predicts higher selling prices few months down the road appears well-established.
The question remains, though, to what extent BOTH these trends show the price of SAME properties (aka Case-Shiller) rather than an effect of changing mix of offered or sold properties, such as the shift of deals to better neighborhoods (e.g., due to foreclosure and short sale activity going upmarket).

Asking prices here in the Inland Empire are dropping, on average 5% from 6 months ago. The list of homes for sale is growing and homes are staying on the market much longer than they were 6 months ago.

justme says

Here’s the deal: The housing market is and has been on Government+Fed life support ever since 2007. Any price increase is dependent on still further “heroics” from Government+Fed in concert.

Does government interference somehow create a strong correlation between asking prices and selling prices 3 months later? That wouldn't have been there? Because I don't see what the point is otherwise...

Uh, sorry, Mr. Lawrence Quackenyun, but your data is noisy. We're all proud of you that you discovered Redfin, but those are charts of the individual CITIES, not the regions. A much better source is Housing Tracker, which tracks asking prices for REGIONS. And if you had bothered to look there, you would have seen that asking prices are in fact going DOWN for all the areas you referenced.

http://www.housingtracker.net/asking-prices/los-angeles-california/

http://www.housingtracker.net/asking-prices/san-diego-california/

http://www.housingtracker.net/asking-prices/san-francisco-california/

http://www.housingtracker.net/asking-prices/san-jose-california/

So now that we've established that you're dead wrong, I don't suppose you'll admit that the CONVERSE is true, that falling asking prices precede falling sales prices? No, I didn't think so.

all i see are red lines (sold $/sqft) heading down or flat; and we're not even in the softest months for sales.

prices will continue to crater this christmas/january.

yay.

robertoaribas says

Sales are down, prices are down, who cares if listing prices on average are going up for a couple of months?

But they AREN'T even going up. See my previous post.