patrick.net

california is nothing like new york.

new york has the second most equity.
caifornia has the fifth most negative equity. only nevada, arizona, florida, michigan is worse.

"I don’t deny there are interesting themes in Atlas Shrugged, but as a study of economics it’s a complete failure."

You read it?

I am almost 93.14% certain that the new monetary standard will be houses. Those who hold the deeds will be the only ones able to trade in the new economy. A loaf of beard will trade for about 2.75 homes. So yes the value of housing will continue clime but bread will still be more expense than two houses.

Enjoy your overpriced homes, but please still rent to them us or we will just sleep in a van down by the river.

Paralithodes says

Have you read it (the full version)?

Actually, the writing style left more than a bit to be desired and I couldn't get into it. Maybe it's because I was sober?

To some, it's a work of great importance. To me, it's replacing a couch leg in my basement. I couldn't find a sales person at Home Depot, and when my friend asked me what to do next, I shrugged. Then I used it in the same way so many other people uses atlases these days.

SF ace says

sybrib says

dunnross says

Exactly, but does that really justify more than 3x times the ratio in house prices between the 2 cities?

dunnross, if you live in San Jose and work in tech, you may have noticed there’s a heckuva lot of tech workers, many with PhD’s, who come from a part of the world where paying such a high portion of household income for housing is normal compared to our point of view. For whatever reasons, they seem to Cling to the Coast. They have brought their normalcy of what is reasonable housing cost with them. Maybe this is part of What Makes the Bay Area Special.

When you see The Fortress approach the crowdedness of places like Mumbai and Shanghai, or see folks renting sleeping places in cages like in Hong Kong, then I agree with you that it won’t be sustainable. But for the time being this is the Wide Open Spaces of the Prairie for those folks, and like SFAce says, at Bargain Prices.

People vote with their money, especially now. I do believe strongly that in the face of crisis, as we have the past few years with the great recession, price discovery is very efficient. In which case, if San Francisco is valued twice or 3X as much as Chicago, it is very legitimate. In an up-market, pricing is more obscure. In every case, prime property are the first to recover no matter the price level. Just look at what is happening in commercial real estate market.
The other cities you mentioned have other problems, great income disparity is causing people either to buy $1K square foot homes or live in public housing, there is little in between. A rich city/state of Singapore have about 60% of its resident on the government housing roll. Hong Kong is about 55%. Only a small fraction of the people owns a private house. I would say San Francisco and New York Manhattan has the greatest income disparity between its citizens in the US and lo and behold, a smallest percentage of people owns a private house.

Now you are the one taking data out of your ass. Show me any evidence that there is more difference in income disparity between San Francisco and Chicago. The only difference between San Francisco and Chicago is in the zoning restrictions. That has always been the case. So, housing pricing are more volatile in San Francisco than they are in Chicago. When we are in a housing bust, like now, prices will fall much more in SF than they will in Chicago, and that's exactly what's going on now - the harder they rise, the harder they will fall.

SF ace says

dunnross says

SF ace says

You didn’t reconcile your own fact. Name me one condo in San Jose that rents for 2K and sells for 600K - 800K. Just one.

I didn’t say that there were any for 2K that sell for 600K - 800K. That was your idea. I can find you plenty of ones which sell for $430K or more, but wouldn’t rent for more than $1600/mo. As I also stated before, I live in a place which costs over $850K, but only rents for $3K/mo.

You are playing word games. Anyone that reads the plain language that:
“But, as recently as 1995 a condo in the best area of San Jose which cost no more than $200K would easily rent for $1800 or more. That translates to a rent/price ratio of 10% which is a far cry from 3-4% today.”
Is the same as saying that something that rents for 2000 now sells for about (600K to 800K now) which is price to rent ratio of 3-4% as you claimed.
In any case, since you lowered the bar and revised your claim, show me one Condo in San Jose that currently rents for 1,600 and currently sells for 430K or more as per your revised claimed.

I can show you better:

Here is a condo in the 95129 zip code which is selling for $439K. This condo has 1050 sq ft & $381 in association fees:

http://www.redfin.com/CA/San-Jose/7100-Rainbow-Dr-95129/unit-33/home/1418365

A much bigger condo in the same area (1300 sq ft) is renting for $1658/mo.

http://sfbay.craigslist.org/sby/apa/2223362498.html

SF ace says

sybrib says

dunnross says

Exactly, but does that really justify more than 3x times the ratio in house prices between the 2 cities?

dunnross, if you live in San Jose and work in tech, you may have noticed there’s a heckuva lot of tech workers, many with PhD’s, who come from a part of the world where paying such a high portion of household income for housing is normal compared to our point of view. For whatever reasons, they seem to Cling to the Coast. They have brought their normalcy of what is reasonable housing cost with them. Maybe this is part of What Makes the Bay Area Special.

When you see The Fortress approach the crowdedness of places like Mumbai and Shanghai, or see folks renting sleeping places in cages like in Hong Kong, then I agree with you that it won’t be sustainable. But for the time being this is the Wide Open Spaces of the Prairie for those folks, and like SFAce says, at Bargain Prices.

People vote with their money, especially now. I do believe strongly that in the face of crisis, as we have the past few years with the great recession, price discovery is very efficient. In which case, if San Francisco is valued twice or 3X as much as Chicago, it is very legitimate. In an up-market, pricing is more obscure. In every case, prime property are the first to recover no matter the price level. Just look at what is happening in commercial real estate market.
The other cities you mentioned have other problems, great income disparity is causing people either to buy $1K square foot homes or live in public housing, there is little in between. A rich city/state of Singapore have about 60% of its resident on the government housing roll. Hong Kong is about 55%. Only a small fraction of the people owns a private house. I would say San Francisco and New York Manhattan has the greatest income disparity between its citizens in the US and lo and behold, a smallest percentage of people owns a private house.

Efficient price discovery - my foot!!! What kind of efficient price discovery can one speak of, when FED is manipulating interest rates, FHA is still giving 3% down loans, big banks are hiding losses on their balance sheets and holding on to massive amounts of shadow inventory? This entire market is only being held up by the mighty shoulders of the tax payer, but there is only so much the tax payer can stand.

SF ace says

dunnross says

SF ace says

dunnross says

SF ace says

You didn’t reconcile your own fact. Name me one condo in San Jose that rents for 2K and sells for 600K - 800K. Just one.

I didn’t say that there were any for 2K that sell for 600K - 800K. That was your idea. I can find you plenty of ones which sell for $430K or more, but wouldn’t rent for more than $1600/mo. As I also stated before, I live in a place which costs over $850K, but only rents for $3K/mo.

You are playing word games. Anyone that reads the plain language that:
“But, as recently as 1995 a condo in the best area of San Jose which cost no more than $200K would easily rent for $1800 or more. That translates to a rent/price ratio of 10% which is a far cry from 3-4% today.”
Is the same as saying that something that rents for 2000 now sells for about (600K to 800K now) which is price to rent ratio of 3-4% as you claimed.
In any case, since you lowered the bar and revised your claim, show me one Condo in San Jose that currently rents for 1,600 and currently sells for 430K or more as per your revised claimed.

I can show you better:

Here is a condo in the 95129 zip code which is selling for $439K. This condo has 1050 sq ft & $381 in association fees:

http://www.redfin.com/CA/San-Jose/7100-Rainbow-Dr-95129/unit-33/home/1418365

A much bigger condo in the same area (1300 sq ft) is renting for $1658/mo.

http://sfbay.craigslist.org/sby/apa/2223362498.html

NIce try, but the condo is within the boundary of the Cupertino school district while the rental is not. Only you would think that is comparable.

Only stupid home buyers like you still believe in the Cupertino school district hype. Renters don't buy into this BS. Here is a 3bdrm one in actual Cupertino for $1680.

http://sfbay.craigslist.org/sby/apa/2226439601.html

SF ace says

VC is a lucrative business, why else does a VC like Sequoia Capital don’t even allow anyone with 5M contributed capital a chance to play? These are not your golf community investor who doesn’t even know who audits their funds, these are guys like Jerry Yang, Meg Whitman and rich business leaders, trust funds of the rich that makes up the fund investors.

I am not being negative. It is what it is. Being a VC is a difficult business to be in. Many start ups dont make it and accumulate only losses. So there are no profits to be made. Only a few make it. The rest die out or are sold. Someone putting $5M has to be willing to lose all it. It is the higest level of risk out there. It was only easy when capital flowed during the 80s-90s. But its a very differernt game today. It certainly isnt glamor or fun. But all you have today is hype and exaggerations.

There now 4 people who I worked with in the past currently working in VC firms today. These people dont have tons of money falling out of their pockets as you state. Its also a heavily political business enviroment to be involved in. They will tell you the same thing.

SF ace says

Value of Cupertino school district is besides the point. But if you want to compare a condo in SJ with Cupertino school and an apartment complex in San Jose with San Jose school, that is not a genuine coomparable.
and the = price for the above? I don’t believe this apartment within the fourplex is comparable to the Condo as linked above? Why don’t you try again and find one condo in San Jose that is currently selling for 430K and stop looping in confusion.
One would suggest that all that is needed is check what is on the market currently for 1,600 on Craigslist and cross check with sales price on zillow, trulia etc.

I can sit here and show you houses all day, but you will nit-pick them all. Houses are not like stocks, because they are all different, and no matter how similar they were, you can always say that they are not the same. So, it's useless to argue with you. The house I showed you in the 4-plex is a comparative value to the one for $439K, because it's a better and bigger place, but you will still argue with me over it. That fact is, and it's not a major secret that properties in the Fortress areas are still selling for 2x of the rent (and this is what you can find on the front page of patrick.net), because there are still many people, in those areas, which are still drinking the Cool-Aid.

dunnross says

Cupertino School district has now turned into a cult, rather than a true symbol of comparative value for home purchasers.

Oh how true. Its just laughable when you ask the past grads what the hype is all about.
Same answer from many. We certainly didnt have this back in my day. These people have lost their minds.

High end benefits the most from the low interest rates (8.0% in 2000), higher conforming limits ($250,000 in 2000), lower down payments.

None of which are set in stone ATM.

dunnross says

I live in a place which ... rents for $3K/mo.

Renters don’t buy into this BS. Here is a 3bdrm one in actual Cupertino for $1680.

Hmm, these remarks in the same post.

I think that unless it's walking distance to a high paying job, or has some other value-added proposition involved, $3k per month for rent is too much. Some people cannot even afford to put that much away per year for retirement account.

Now, nobody here is calling you stupid, but you even proved yourself that a multi-kid admission ticket to a coveted Fortress school district can be had for $1680.

3K per month just sounds like way to much. Especially, for someone who (like me too) is so down on the high cost of housing around here.

sybrib says

dunnross says

I live in a place which … rents for $3K/mo.
Renters don’t buy into this BS. Here is a 3bdrm one in actual Cupertino for $1680.

Hmm, these remarks in the same post.
I think that unless it’s walking distance to a high paying job, or has some other value-added proposition involved, $3k per month for rent is too much. Some people cannot even afford to put that much away per year for retirement account.
Now, nobody here is calling you stupid, but you even proved yourself that a multi-kid admission ticket to a coveted Fortress school district can be had for $1680.
3K per month just sounds like way to much. Especially, for someone who (like me too) is so down on the high cost of housing around here.

You didn't prove anything. This is a 3 bdrm appt at 1200 sq. ft for $1680. I have a 3000 sq. ft, 6 bdrm house with a pool & a gardener for $3000.

dunnross says

“The entire state is a fortress” is completely meaningless.

The entire state was a fortress back in 2006, because people in places like Stockton & Modesto were buying in at more than 10x their income, and saying that prices can only go up. Today, the only places where this clueless talk is still alive and well, are the Fortress areas of the Peninsula, and some concentrated areas of the South Bay (ex. Cupertino).

tarkin says

I am almost 93.14% certain that the new monetary standard will be houses.

http://en.wikipedia.org/wiki/German_Rentenmark

dunnross says

I have a 3000 sq. ft, 6 bdrm house with a pool & a gardener for $3000.

I think you mean you're living in / renting it (as opposed to "having it"), right?

It's OK, even the sh*tbox that I live in, in my blue collar neighborhood where you might worry my homies might hurt you, I don't even feel like I "have", I just live there and pay the owners' rent equivalent.

Whatever.

Could be one of my neighbors cleans "your" pool and trims "your" garden. Could also be they have a stronger overall balance sheet than some "owners" in The Fortress. Of little means, but even of less expenses. And more flexible and opened minded about what kind of work they'll do to cover their expenses.

Since we don't have "real" summers here like they do in places like Austin and Chicago, I'd question the value of paying more for a swimming pool in the backyard where I live.

dunnross says

there are some schools which are perceived as good

Talk to those parents, and get them to drill down to why they pay so dearly for their kids to go to Fortress K-12. Most of them (at least the dads who I talk to) are honest and when they drill down past all the crap, it's all about buying the peer group for their kids, not the school themselves.

A sad irony about this is that the teachers and administrators will (in public "face") take full credit for all the High Standardized Test Scores, for which they have little to deserve credit for.

sybrib says

dunnross says

there are some schools which are perceived as good

Talk to those parents, and get them to drill down to why they pay so dearly for their kids to go to Fortress K-12. Most of them (at least the dads who I talk to) are honest and when they drill down past all the crap, it’s all about buying the peer group for their kids, not the school themselves.
A sad irony about this is that the teachers and administrators will (in public “face”) take full credit for all the High Standardized Test Scores, for which they have little to deserve credit for.

+1. The teachers are generally high caliber, but I think you're right, most of the quality of the schools come from the students and their parents that take education a whole lot more seriously.

The fortress school districts of the Bay Area have been highly sought after since at least when I was in one in the 70's and 80's. Not likely that's going to change any time soon.

MarkInSF says

sybrib says

dunnross says

there are some schools which are perceived as good

Talk to those parents, and get them to drill down to why they pay so dearly for their kids to go to Fortress K-12. Most of them (at least the dads who I talk to) are honest and when they drill down past all the crap, it’s all about buying the peer group for their kids, not the school themselves.

A sad irony about this is that the teachers and administrators will (in public “face”) take full credit for all the High Standardized Test Scores, for which they have little to deserve credit for.

+1. The teachers are generally high caliber, but I think you’re right, most of the quality of the school come from the students and their parents that take education a whole lot more seriously.
The fortress school districts of the Bay Area have been highly sought after since at least when I was in one in the 70’s and 80’s. Not likely that’s going to change any time soon.

Cupertino is spending $6K/student, while most schools in San Jose are spending $8K-$10K/student (I got this data out of the San Jose Magazine). Cupertino class sizes are also, in general, higher than the class sizes in San Jose and other cities. So, how can Cupertino have better teachers, again?

dunnross says

So, how can Cupertino have better teachers, again?

I didn't say that. In fact I was agreeing with sybrib that most of what you're "buying" into is the peer group.

MarkInSF says

dunnross says

So, how can Cupertino have better teachers, again?

I didn’t say that. In fact I was agreeing with sybrib that most of what you’re “buying” into is the peer group.

Yes, but that doesn't mean that your son or daughter will actually do better there, because they will just perform at their own "level". I would even argue, that, if your child is not already a "superstar" performer, they might feel insecure going to one of those schools.

tarkin says

I am almost 93.14% certain that the new monetary standard will be houses.

In a sense, it already is. The base money created by the Fed is already about 1/2 backed by mortgages, and much of commercial bank deposits are backed by mortgages. Not literally "houses", but the fact the loan is collateralized by a home makes it pretty close.

sybrib says

A sad irony about this is that the teachers and administrators will (in public “face”) take full credit for all the High Standardized Test Scores, for which they have little to deserve credit for

This is always the case. It's sometimes a chicken versus egg argument. All the best private schools owe even more of their success to quality of their students. Unlike your Fortress K-12, which I assume is a public school district in an upper middle class area, in private schools they even have admissions tests. But because teaching such children is far easier and much more fun than teaching students who hate school and hate their lives, they do indeed attract good teachers.

By the way (further off topic), the lower pay for teachers at private schools is often used as an argument against salary benefits public school teachers receive. The people making such arguments don't realize that it is a very different job.

dunnross says

MarkInSF says

dunnross says

So, how can Cupertino have better teachers, again?

I didn’t say that. In fact I was agreeing with sybrib that most of what you’re “buying” into is the peer group.

Yes, but that doesn’t mean that your son or daughter will actually do better there, because they will just perform at their own “level”. I would even argue, that, if your child is not already a “superstar” performer, they might feel insecure going to one of those schools.

Oh, but I think you are very wrong about this. A child's peer group very much affects their ability to rise to their potential. Go to a school where your friends don't think learning is cool, and you won't either.

I'm sure you're right that some kids feel insecure there and not do better, but it tends to be pretty self selecting. Most of the kids that go there tend to be pretty high performers to start, simply because their parents raised them to be that way, tend to value education themselves, and were willing to do what it took to get them in those schools.

MarkInSF says

dunnross says

MarkInSF says

dunnross says

So, how can Cupertino have better teachers, again?

I didn’t say that. In fact I was agreeing with sybrib that most of what you’re “buying” into is the peer group.

Yes, but that doesn’t mean that your son or daughter will actually do better there, because they will just perform at their own “level”. I would even argue, that, if your child is not already a “superstar” performer, they might feel insecure going to one of those schools.

Oh, but I think you are very wrong about this. A child’s peer group very much affects their ability to rise to their potential. Go to a school where your friends don’t think learning is cool, and you won’t either.
I’m sure you’re right that some kids feel insecure there and not do better, but it tends to be pretty self selecting. Most of the kids that go there tend to be pretty high performers to start, simply because their parents raised them to be that way, tend to value education themselves, and were willing to do what it took to get them in those schools.

Those kids who are high performers and value education will do just as well in a non-fortress K-12. Especially, since they are, mostly, being taught by their parents, and not their teachers.

dunnross says

Those kids who are high performers and value education will do just as well in a non-fortress K-12. Especially, since they are, mostly, being taught by their parents, and not their teachers.

I don't agree, but even if you are right, that is not the perception of most people. And as I pointed out in a previous post, it has been that way in the Peninsula/South Bay since at least the 70's, and is unlikely to change anytime soon, so many parents will continue to place a high premium the schools that the believe will give their children the best outcome.

MarkInSF says

dunnross says

Those kids who are high performers and value education will do just as well in a non-fortress K-12. Especially, since they are, mostly, being taught by their parents, and not their teachers.

I don’t agree, but even if you are right, that is not the perception of most people. And as I pointed out in a previous post, it has been that way in the Peninsula/South Bay since at least the 70’s, and is unlikely to change anytime soon, so many parents will continue to place a high premium the schools that the believe will give their children the best outcome.

I agree with MarkSF...and dunnross, you are absolutely wrong about that. We also chose to buy a house in a neighborhood with the best schools. It was a big selling point. Most of our friends as well. It is what it is. You can hate it as much as you want to hate it, it won't make a difference.

SubOink says

MarkInSF says

dunnross says

Those kids who are high performers and value education will do just as well in a non-fortress K-12. Especially, since they are, mostly, being taught by their parents, and not their teachers.

I don’t agree, but even if you are right, that is not the perception of most people. And as I pointed out in a previous post, it has been that way in the Peninsula/South Bay since at least the 70’s, and is unlikely to change anytime soon, so many parents will continue to place a high premium the schools that the believe will give their children the best outcome.

I agree with MarkSF…and dunnross, you are absolutely wrong about that. We also chose to buy a house in a neighborhood with the best schools. It was a big selling point. Most of our friends as well. It is what it is. You can hate it as much as you want to hate it, it won’t make a difference.

It's very good for you to think about your children. I have children too, which I love very much,
and it is natural that we always want the best for them. But, just because you give in to the peer pressure, or to the pressure of your spouse, or, one of those RE agents, and overpay for a property in a so-called "fortress" school district, doesn't mean that somebody who points out the folly of your decision is wrong.

dunnross says

SubOink says

MarkInSF says

dunnross says

Those kids who are high performers and value education will do just as well in a non-fortress K-12. Especially, since they are, mostly, being taught by their parents, and not their teachers.

I don’t agree, but even if you are right, that is not the perception of most people. And as I pointed out in a previous post, it has been that way in the Peninsula/South Bay since at least the 70’s, and is unlikely to change anytime soon, so many parents will continue to place a high premium the schools that the believe will give their children the best outcome.

I agree with MarkSF…and dunnross, you are absolutely wrong about that. We also chose to buy a house in a neighborhood with the best schools. It was a big selling point. Most of our friends as well. It is what it is. You can hate it as much as you want to hate it, it won’t make a difference.

It’s very good for you to think about your children. I have children too, which I love very much,

and it is natural that we always want the best for them. But, just because you give in to the peer pressure, or to the pressure of your spouse, or, one of those RE agents, and overpay for a property in a so-called “fortress” school district, doesn’t mean that somebody who points out the folly of your decision is wrong.

Isn't that a coincidence that the 70's is exactly when this bubble started. So that only proofs that this hype about Fortress schools has been going on since the beginning of the bubble. Another coincidence is that the school hype has been mostly prevalent in bubble cities, but, in non-bubble cities, all schools are perceived as being good.

dunnross says

There is no more money for bad schools or good schools.

Well, what about for elite (Fortress) peer groups?

If that happens, Fortress Parents will be sending their Fortress Children to Fortress Schools with Other Fortress Children from Other Fortress Families, which could be what they were paying for anyway. It's all good, keep it all in The Fortress.

sybrib says

dunnross says

There is no more money for bad schools or good schools.

Well, what about for elite (Fortress) peer groups?
If that happens, Fortress Parents will be sending there Fortress Children to Fortress Schools with Other Fortress Children from Other Fortress Families, which could be what they were for anyway.

In Belgium, a school child can go to any school they want, regardless of where they live. Most people prefer to go to school which is close to their places of residence, because all schools are equally good. In California, we have so-called "School Cops" who go from house to house and check out your daughters bedroom, to make sure that she is the one who she claims to be, and she really lives in that house. In Belgium, and average school child will do twice as well on a basic intelligence test, than an average California child. If this country and this state wants to compete with other countries on education, they will have to adopt a system which is more like the one in Belgium than the one in California, and not succumb to the pressures of the NAR and other housing groups, who, through their lobbying in congress have done a great disservice to both, the economy, and the education of this country.

MarkInSF says

that is not the perception of most people.

Perception of most people? - Or just the perception of most people who rationalize the price they paid to buy in The Fortress?

I was checking out physical silver and gold, but was dismayed to find out I needed something like 50,000 ounces to redeem my SLV certificates. So in other words, I won't be taking delivery!

Exactly what is the risk for them to sell too many of these shares? The only people they'd have to pay off would be people who are rich, so once again there's the common folk and the important folk. Doesn't this keep the real price lower than if it were only a physical posession?

SubOink says

I agree with MarkSF…and dunnross, you are absolutely wrong
We also chose to buy a house in a neighborhood with the best schools. It was a big selling point. Most of our friends as well.