patrick.net

dunnross says

This bubble began all the way back in the 1975.

Enough said. I don't think I even need to respond to that.

IMO there definitely will be a second dip. For one thing markets out here are still ballooned and above afford-ability by a lot. The fact that houses that were in low 200's are now in high 300's to mid 500's tells me we got ways to go.

In business it is almost impossible to sell a product when no buyer wants it (or especially cannot afford) at the asking price, and knows it is overpriced while having access to cheaper alternatives. At the end of the day people need money, jobs and food. Pipe dreams don't work out. Which is why there will be another dip in CA.

tatupu70 says

dunnross

Well, I asked people on this blog already where they thought we were according to these graphs, and I got no response. I assumed, that most people can see the uncanny resemblance.

Like I said in the other thread where you posted that--I believe the stealth phase started in 1890.

Saying the bubble started in 1975 is dumb. Houses weren't overpriced by any measure until ~1999 or 2000. Why you would pick 1975 is beyond me...

Nomograph says

I’m curious how you consider the fact that most people are willing and able to pay their mortgage as “proof” that the market is crashing. Your own facts indicate exactly the opposite.

"Most" people didnt buy during bubble years.

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?

Vain, I have a hard time with this math. I make about 110K a year. I put about 11K in my 401K. I really think I should max that out and hope to get myself to do that this year. I have a child for whom childcare runs about 1400 a month. I don't have a car payment or cc debt. I have a little bit of student loan debt that costs me about 200 a month. I put about 1200 in investment accounts each month. I find myself running close to spending all of my cash that isn't going to savings or retirement every month. This month it was 1400 in car maintenance (tires, brakes, 100k service). Next month my car insurance and registration is due. I can't imagine managing a life where I earned near minimum wage, bought a house (with all of the expenses) and kept up with the expenses of running a family life. I can't imagine being that buyer. I do live on the peninsula, so maybe I am located in a very different place than what you are talking about. I also had some health problems in my family that meant a couple of unexpected trips that depleted some cash. So, take it with a grain of salt, but I think that buying with low income would be very difficult.

thomas.wong1986 says

Nomograph says

I’m curious how you consider the fact that most people are willing and able to pay their mortgage as “proof” that the market is crashing. Your own facts indicate exactly the opposite.

“Most” people didnt buy during bubble years.

No but an awful lot of them heloc'd the equity out.

thomas.wong1986 says

Nomograph says

I’m curious how you consider the fact that most people are willing and able to pay their mortgage as “proof” that the market is crashing. Your own facts indicate exactly the opposite.

“Most” people didnt buy during bubble years.

APOCALYPSEFUCK says

Anyone buying a house instead of seed potatoes, water purification systems and advanced armaments is insane. A house you can’t defend will be clearly worthless when cannibal anarchy overtakes America.

When I first started reading this site, I was a little confused and disconcerted by your posts. Now they are kind of pleasing and funny.

“Most” people didnt buy during bubble years.

I think this is a really good point that seems to get lost sometimes.

dunnross says

tatupu70 says

dunnross

Well, I asked people on this blog already where they thought we were according to these graphs, and I got no response. I assumed, that most people can see the uncanny resemblance.

I would comment but I feel like pointing out an error in your logic
you would just dismiss it as meaning we're still in the denial stage.

So there's really no point in arguing with you.

Yeah, Japanese are smart a$$ people and they couldn't correct their bubble. Economics of nature. I don't see any reason why US could quickly buy their way out so fast without producing goods and service to counter the bubble money.

bg says

I am often amazed by the things that people do that make little financial sense.

Hi bg. Maybe you misunderstood me. I agree with you too. Most people do do things which makes little financial sense. That's why 75% of underwater mortgage holders are not defaulting now, thinking there is some kind of a return to normalcy. That makes very little financial sense. However, as the bubble transitions from "return to normalcy" phase to "fear" and "capitulation", you will see more and more of these 75%'ers defaulting. The majority of them will be defaulting at the trough of the housing market, which, again will make absolutely no financial sense at all.

dunnross says

bg says

I am often amazed by the things that people do that make little financial sense.

Hi bg. Maybe you misunderstood me. I agree with you too. Most people do do things which makes little financial sense. That’s why 75% of underwater mortgage holders are not defaulting now, thinking there is some kind of a return to normalcy. That makes very little financial sense. However, as the bubble transitions from “return to normalcy” phase to “fear” and “capitulation”, you will see more and more of these 75%’ers defaulting. The majority of them will be defaulting at the trough of the housing market, which, again will make absolutely no financial sense at all.

That is why this 75%'ers will never see the money they want, because they simply does not exist. Bear euphoria! Inflation will fetch me that money. Yeah right! Buyers salaries are hardly able to catch up with existing prices so forget about increase in home prices,may be 10 years from now.

E-man says

bubblesitter says

Yeah, Japanese are smart a$$ people and they couldn’t correct their bubble. Economics of nature. I don’t see any reason why US could quickly buy their way out so fast without producing goods and service to counter the bubble money.

Bubblesitter,
Your chart is missing the last 5.5 years of housing data. How can we continue the debate when you’re presenting only 1/2 of the info??????

Come on haven't you learnt pattern in your primary school? You know where it is heading. If it shot back to your imaginary line of 200 then post your chart and we will discuss further.

E-man says

Real estate is local people.

Hmm. Interesting, San Francisco had the biggest "Bull Trap" rebound. That's probably where most of the Bulls are going to be trapped, then.

E-man says

With the current rate of price declining in the housing market, free house for everyone by the end of this year

Good for ya. You are getting some free investment properties.

dunnross says

bg says

I am often amazed by the things that people do that make little financial sense.

Hi bg. Maybe you misunderstood me. I agree with you too. Most people do do things which makes little financial sense. That’s why 75% of underwater mortgage holders are not defaulting now, thinking there is some kind of a return to normalcy. That makes very little financial sense. However, as the bubble transitions from “return to normalcy” phase to “fear” and “capitulation”, you will see more and more of these 75%’ers defaulting. The majority of them will be defaulting at the trough of the housing market, which, again will make absolutely no financial sense at all.

I may have misunderstood something there.

It will be heart breaking if folks pay for some period of time and then give up to default in a trough. Is that typically how trends work when asset prices drop?

Do you think we are in the "return to normalcy" part of the transition? or maybe some fear?

dunnross says

1st of all, the “Bull Trap” did not last for 3 years. It lasted from Apr, 2009 to July, 2010, that’s not even 1.5 years.

He's in denial that prices have been falling since last summer. He attributed it to winter seasonal variation.

klarek says

dunnross says

1st of all, the “Bull Trap” did not last for 3 years. It lasted from Apr, 2009 to July, 2010, that’s not even 1.5 years.

He’s in denial that prices have been falling since last summer. He attributed it to winter seasonal variation.

That doesn't even make any sense. If he denies that prices have been falling, then why would he he need to attribute the falling prices to anything?

dunnross says

Gold at $250/oz was also not a result of any fundamentals, where it cost $400 just to take it out of the ground.

I recall that a revolution forced a despot out of power in Iran and then shortly afterwards (about two months) was the nuclear accident in Pennsylavania. Next came gold going parabolic and our one-term president lost his job in the following election year.
Somebody I think it was maybe Mark Twain said that history rhymes.

Nomograph says

Do you honestly think some graph on the Internet is going to predict the future?

Why not? Does the graph showing a trajectory of a comet in space, predict where that comet is going to be 6 months from now? Does a graph showing change falling concentration of blood glucose tell doctors that the patient might die soon? Economics is a science just like astronomy or medicine. People who ignore or don't understand these graphs or correlations are simply not learning anything from history.

Wrong, the spike in listing prices we are seeing now is the lag of the huge spike in selling prices we saw last summer. That was followed by a drop in selling prices starting in the fall. The fallout of that will be seen in the drop in asking prices 3 months from now. You are the only infamous "Emperor of Disingenuity" on this board, and if you continue to lie and weasel out of every argument, like you have up to now, while foaming at your mouth, soon most fellow patricker's will realize that your have no clothes.

mthom says

And it certainly doesn’t seem to be crashing down to the 97 price

Peoples incomes dropped to the 1997 ranges. Prices will follow. It will take several years, it always does.
Minimum wage is higher so it looks like average income is higher, but all it did is move the low end ceiling up a bit. from 4.75 to 8something.

There are almost no first time home buyers out there. Out of all the sales, which are not many, only 6% are FTHB. Prices are too high, and I think an average person is not interested in indentured servitude so that some ahole flipper can make his easy retirement at the expense of another citizen.

ChrisLA says

mthom says

And it certainly doesn’t seem to be crashing down to the 97 price

Peoples incomes dropped to the 1997 ranges. Prices will follow. It will take several years, it always does.

Minimum wage is higher so it looks like average income is higher, but all it did is move the low end ceiling up a bit. from 4.75 to 8something.
There are almost no first time home buyers out there. Out of all the sales, which are not many, only 6% are FTHB. Prices are too high, and I think an average person is not interested in indentured servitude so that some ahole flipper can make his easy retirement at the expense of another citizen.

There has never been a genuine bull market carried by speculator-only buying. That's what we are seeing now in housing, and very soon, all these speculators will find out that there will be no people willing to live in their newly acquired investment.

This thread is hilarious, good comic relief entertainment for a rainy weekend.

You guys can probably cherry pick all the data you want to for making the cases for your arguments.

In the broader context one would question the spin from anyone who would claim to pay $3500 per month for a rental with a gardner and a pool in Willow Glen (where we don't have real summers to enjoy the pool like they do in places like Chicago).

But then nor should we take too seriously the spin from who too often refers to some he disagrees with "liar" or "lying" even though he boasted that he and his lawyer spouse fibbed on a legal document about their intention to be owner occupants, except, to consider the source of the argument.

I don't get why asking prices predicting the short term direction of closing prices, or visa versa, is even relevant.

They say nothing about the long term trend.

MarkInSF says

They say nothing about the long term trend.

Here is my prediction for the long term trend: in the aggregate, for the (materialistic) way that many of us think of as standard of living and quality of life, it is in for continuation of a long trend decline.

Your right dunnross, '89 was a trap. Even though prices did go up but so, did jobs, new industries and incomes in BA. That unfortunatly changed and took prices down. It certainly was a bubble looking back. Todays massive bubble saw prices double and triple. Its going to be a long one if it doesnt correct swiftly and deep.

gameisrigged says

Wishful thinking. The bulls all own homes and are frightened of losing equity, so they remain in denial.

I been a homeowner since 92 but even these high prices will impact job creation/growth.

You cant have it both ways.. high prices/equity and expect jobs and careers to stick around.
Anyone who lived and worked in SV high techland 80s-90s, knows high home prices
dont mix well in the long run. It just doesnt work!
I value my career and not more equity/debt.

Most of these "bulls" are realtors since only high home prices ensure higher commissions.
Equity is a mear instrument to get more debt. Equity isnt anykind of wealth or forced savings.
Its sad to see people dont know how to save or have counted on higher debt as form of savings. Its insane!

klarek says

It’s exactly what I knew was going to happen, and the numbers confirm this more with each passing month

We'll see. I've seen several reports stating that housing acivity strengthened in February. I think it's still too early to tell. If prices are still falling month over month in July, then I will agree that you are correct.

Nobody's gonna take your arguments seriously, even if your right.

Haven't been back for a long time, wondering how the old pals are doing?

HARM, astrid, FAB, Peter P, Randy H, skibum, SP, EBGuy, SFWoman, etc, are you guys still lurking around? Does everything work out as you have envisioned? Is MarinaPrime still around?

Seriously, I am so beyond buying or remodeling or trading up or building from scratch. Me thinks that we are in so much sh*t that I would hesitate to invest a dime more in something so immobile as real estate. Gotta stay nimble.

vain says

Put 20% down ($90k). ... San Francisco minimum wage is nearly $10/hour. A couple earning minimum wage has a household income of $41k.

Any useful tips on saving $90k reasonably fast while living on a minimum wage in SF?

gameisrigged says

We’re on to you, bub.

Yes, we're on to you, bub!

From Bloomberg:

SFBA home/house prices/values fall for FIVE MONTHS STRAIGHT - now nearing NEGATIVE 5% y-o-y. The dead cat bounce facilitated by knife catchers/investors chasing yesterday's news ended half a year ago or so.

http://www.businessweek.com/news/2011-03-17/san-francisco-bay-area-home-prices-fall-for-fifth-month.html

Several counties in your metro area ARE DOWN significant double digits Y-O-Y - more leveraged losses for mainstreamers - how nice.

Just out a few minutes ago:

http://news.yahoo.com/s/nm/20110321/ts_nm/us_usa_economy_housing

Housing/real estate IS TANKING - prices are at 9 YEAR LOWS, WHICH ARE BRAND-NEW LOWS BY THE WAY, and sales of existing homes are just plain collapsing / in the gutter.

One point of view that hasn't been addressed that of cultural psychology. It doesn't take a brain surgeon to realize there's a shift in the wind. I'm talking about the buyers and the buyers to come. Seems most folk here are from the Bay Area or California in general, so there's no excuse...

If you pay attention to the next gen coming up into the work force, it's a completely different animal. Tomorrow's buyer WILL NOT BE THE SAME AS YESTERDAY'S. All the charts posted here about the housing boom-fall-rebound fail to take that into account. All charts should say "ALL THINGS BEING EQUAL". There's a serious movement away from status symbols. This will affect THE most important factor on home prices... Demand. When that drops, it's goodnight sweet prince. And it has. Those throwing up graphs I ask you to honestly try find a reliable graph showing the negative effects of the technological revolution and the aftermath, then plot the return where we become the power-house in manufacturing we once were. No? Because you're not stupid. You know it's over in manufacturing for this country. Why can't it be the same for housing? Don't give me that malarky about "Everyone needs somewhere to live."

If it is true (as I claim) that the US is metamorphosing into a leaner, environmentally aware, coffee drinking, live/work, shared-space, bicycle riding, low key, urban dweller... who doesn't have a dirt-bike and a boat and a jet ski and all the other trappings that hobbled the baby-boomers and Gen-Xers. Todays buyers don't sense a stigma attached to having little to no belongings, living in an 800 sq ft apartment... they don't give a shit and the machine that used to convince them to buy into the American Dream broke down a few years ago.

What I've described above are not a bunch of listless teenagers who will 'grow-out-of-it'... this isn't a fad. They are changing like this out of necessity. Adapt or die. Job opportunities not looking good for them, so they have to keep it tight. Gas prices high? Public transport or bicycle for you my friend. Where does a house fit into all this again?

If you think I've lost my mind... and you haven't been on a plane in recent memory I advise you to go to Barcelona, London, Paris... any large metropolitan city and see how families live all their lives in tiny apartment. No biggie... we're talking middle class. Notice I didn't mention Asia where EVERYONE lives in a shoebox, and they don't even feel bad about it. Their minds are on other things, so are their values.

So if you own a big house, or just bought a big house... you're a dying breed and the meteor just hit.

Theres no fundamental change other than our standard of living going down.

Its been going on for a while. People who got in early have houses with yards, its a real luxury
now pretty soon the majority of people buying will settle for a condo.
owning or even renting your own house is becoming a luxury that not many people can afford.

junkmail says

If it is true (as I claim) that the US is metamorphosing into a leaner, environmentally aware, coffee drinking, live/work, shared-space, bicycle riding, low key, urban dweller… who doesn’t have a dirt-bike and a boat and a jet ski and all the other trappings that hobbled the baby-boomers and Gen-Xers. Todays buyers don’t sense a stigma attached to having little to no belongings, living in an 800 sq ft apartment…

I agree that there ought not to be any stigma about where we live. But the other part, there is a whole lot of the USA between The Left Coast and NYC/DC. I don't think so many of those folks are ready for the metamorphosis we're observing in the Cool and Hip Coastal areas. If anything, as their standard of living declines in proportion to their dependence on gasoline for their Red State lives, they will get angry and start to look for scapegoats. Like us.

schmitz_kris says

Just out a few minutes ago:
http://news.yahoo.com/s/nm/20110321/ts_nm/us_usa_economy_housing
Housing/real estate IS TANKING - prices are at 9 YEAR LOWS, WHICH ARE BRAND-NEW LOWS BY THE WAY, and sales of existing homes are just plain collapsing / in the gutter.

But the bulls have said that prices were UP! Er, or was that flat? Both apparently.