patrick.net

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.

klarek says

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.

OK 9 years ago...All that is left is the correction for prices doubling between 1998-2000.

thomas.wong1986 says

OK 9 years ago…All that is left is the correction for prices doubling between 1998-2000.

Don't think they doubled in that time period in any market.

Tude says

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!

I really don't see very many minimum wage earners having 90K laying around to put down as a down payment either.

I don't know if Gary Shilling is very accurate in past predictions, but here are his claims for what they are worth...
Who knows much about this guy? He claims another 20% drop nationally in housing will be coming.

http://finance.yahoo.com/tech-ticker/gary-shillings-5-things-to-worry-about-yftt_536059.html

About housing in Japan-- as far as I know, home mortgages are very "recourse". One more reason why a few of the people underwater just commit suicide.

junkmail says

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…

Interesting looking ahead.
But there is enough land in USA. USA is a big open space, house with driveways, wide streets, big cars, big american ego. History repeats itself, it is human nature. And Americans have short memory. Without efficient public transport such as found in Europe/Asia, cannot compare with them. When will we see shinkansen corridor SF LA Boston NY or even a bart extension to san jose? The fact of the matter is nobody knows what the future lies ahead.

I've been really surprised not to see more information about ARM terms during the last year. Since the peak of the housing market is generally agreed to be April 2006, this April marks five years since the peak. ARMs generally come in three and five year terms. A very large percentage of mortgages taken in California were necessarily ARMS due to the incredible differences between sales prices and income. This was often reported during the bubble.

So have they all been refinanced? Considering the dollar amounts involved according to articles in all the major newspapers(WSJ, NYT, WashPost), I'd expect more attention to the April milestone.

If a big number of those ARMs are in place, I expect some of the largest price adjustments in California to occur.

uni6jon2 says

So have they all been refinanced? Considering the dollar amounts involved according to articles in all the major newspapers(WSJ, NYT, WashPost), I’d expect more attention to the April milestone.

So here's part of the answer. Interest rates have stayed low and the indexes to which the ARMs are tied stayed low. So no large defaults. Seems the interest rates must go up as prices fall, so loan agents balance their returns.

http://seattletimes.nwsource.com/html/realestate/2014325127_realarms27.html

Zlxr says

And Thomas - what about the tripling of house prices between 1975 and 1985?

More like doubled from what saw I from 1998-2000 due to easy lotto winning from stock options/tech bubble.

I would say from 1980 - 1989 there was good reason why prices went up. The birth and expansion of local tech companies. Boom in industries led to boom in hiring and incomes with near zero global competition. We are talking about not only professional salary jobs but also hourly wage earners. So it effected all income brackets. We had plants working 3 shifts daily 6-7 days a week. Yes we had that here in Silicon Valley. Yes that maid/janitor would have made more if they worked in tech mfg and many did.

Overall back in the '80s we didnt see the tech stock and than housing speculation as we seen 1998 to present. It was more reasonable era back than.

klarek says

thomas.wong1986 says

OK 9 years ago…All that is left is the correction for prices doubling between 1998-2000.

Don’t think they doubled in that time period in any market.

Like dunken sailors, some who cashed out their stock options could and did pay any amount.
Plenty of uncashed stock options left, so lets party. Except the party ended back in Q1 of 2000.

It was very common to hear.. "its free money anyway, i never really earned it".

vain says

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.

Somebody is having nostalgia from the housing bubble, where people could magically afford a house 5.5 times their annual salary. And your assumption that someone at that income level would typically have $90k saved up is outrageous.

edit: that is an old post, I know, but the outlandish math being used to justify SF prices shows just how desperate people are to make themselves believe that it's anywhere near sustainable.

klarek says

vain says

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.

Somebody is having nostalgia from the housing bubble, where people could magically afford a house 5.5 times their annual salary. And your assumption that someone at that income level would typically have $90k saved up is outrageous.
edit: that is an old post, I know, but the outlandish math being used to justify SF prices shows just how desperate people are to make themselves believe that it’s anywhere near sustainable.

Few top reasons why home prices will not go up any time soon:

1) UE rare. Lack of abundant high paying jobs.
2) Zero chance of using HELOC to cover the not affordable mortgage in first place.
3) No more loans without that hefty 20% down payment, certainly not for the 20% of the current home prices.

SF ace says

A actually know someone recently, just got the keys, 20% with a 360K or so loan. It’s a little house on silver (800+ square feet with potential to spend 20K and add 400 Sq Ft) terrace. Small family with combined income around 90K and passed the underwriting test. Saved over 100K over tens years, 75% of it came from the stock market.

Saving $100k != Saving $25k + profiting $75k from stocks.

I was talking about people making $65k, not $90k, and the ability to pay a mortgage at 5.5 times their annual salary.

Thank you for the anecdotal story though. Hope your friends don't notice when their investment money goes up in smoke.

SF ace says

I agree, 65K is not doable normally.
But, if they made 65K, they are mostly likely looking at below market purchase program. (around 25% of market price) There must be about 10K of such units.
You see a major tower going up with 1.5M dollar penthhouse. Well, 15% is set aside for mandatory Below Market Program. In a housing project of 300 units, 45 will get in at 65K salary with the help of the city.

Follow the conversation back to vain's point.

klarek says

edit: that is an old post, I know, but the outlandish math being used to justify SF prices shows just how desperate people are to make themselves believe that it’s anywhere near sustainable.

It has amazed many how twisted the thinking/justification over RE prices has become over the past 10 years.

gameisrigged says

Are you for real? This is a joke, right? I mean, it’s hard to believe anybody is really that stupid.

Delusional, more like it.

thomas.wong1986 says

gameisrigged says

Are you for real? This is a joke, right? I mean, it’s hard to believe anybody is really that stupid.

Delusional, more like it.

or simply childish argument as he made to the redfin home sold price chart I presented to him, " not enough sales data to gauge the price decline since 2009" - ghost bottom.

There's a lot of debate in this thread as to how bubble should look on a chart, and I'm not really sure why. It's as though you're expecting to figure out where prices are going to go next year as soon as you can solve the puzzle on the chart and mark the 'X' at the bottom. It just doesn't work that way. It's true that market movements have certain tendencies and that over time patterns emerge. But you can't expect those patterns to generate predictions with any timing or accuracy. There are no 10/3 year rules, and there is no guarantee of symmetry in the markets. The best you can do read the picture price movement is painting and combine that with the fundamental information on hand.
Is the collapse over? I don't think so. The big panic has passed us, but the repercussions of the bubble haven’t worked their way out of the market. There is a massive amount of shadow inventory out there, and this is in no way a normal market. And there are still a lot of people in various types of option arm loans that are not going to be able to pay their mortgages when the payments reset, a lot of those houses will soon join that inventory. As these houses are leaked into the market how is that going to affect the charts? I don’t know, I don’t think anyone can. It’s not happening in a normal way, the gov’t and FED are pumping money into banks so that the banks can keep toxic assets on their balance sheets and still pretend they have reserves to lend against. And to keep their balance sheets up banks are being slow to reclaim nonperforming loans, thanks to recent laws they don’t have to claim the losses until the houses have been foreclosed on.
And even if you want to say that “the collapse is over” and technically we are done with the bubble cycle, where does that leave us? Look at the fundamentals. Wages are down, unemployment is up. Inventory is high, demand is down. There are no logical reasons to be optimistic about the housing market anytime soon, especially here in California.
In fact, here in California is where I’m most concerned. Prices in San Diego are still close to 160% of their 2000 price, according to the latest Case Shiller data. I look at the houses on the market and I just don’t like what, and with the fundamentals where they are right now it just looks insane. I can't imagine these prices holding over the next few years.

klarek says

All recent news is pointing exactly opposite of what you’re saying. Tanking prices, tanking sales, dogshit market, etc.

I guess to you everything is negative. If you find a $20 bill on the ground, that's bad because it should have been a $100 bill...

The last couple clear capital reports posted on various threads here have been very careful to say that there is evidence that the market appears to be turning around. That the data is older so it doesn't show it, but recent evidence shows the market strengthening. Not sure if it will turn out to be true, but there is certainly news out there that says the opposite of what you say.

tatupu70 says

I guess to you everything is negative. If you find a $20 bill on the ground, that’s bad because it should have been a $100 bill…

Tatupu - the ship is sinking.

The more time that passes, the bulls look more and more desperate. We've broken 2009 lows (yes, even for concord) and it's headed lower.

The only reason we had a headfake in RE is because of the tax credit. Too many are in denial that the tax credit pumped up prices, but the verdict is in.

O.K., fair enough.

joshuatrio says

tatupu70 says

I guess to you everything is negative. If you find a $20 bill on the ground, that’s bad because it should have been a $100 bill…

Tatupu - the ship is sinking.
The more time that passes, the bulls look more and more desperate. We’ve broken 2009 lows (yes, even for concord) and it’s headed lower.
The only reason we had a headfake in RE is because of the tax credit. Too many are in denial that the tax credit pumped up prices, but the verdict is in.

We shall see. You bears have a pretty solid record of gloating long before the verdict is in.

You might be right, but it's way too early to call it. Get back to me in July...

sybrib says

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.

Agreed. Although somewhat thinly spread, there are a lot of people (and registered voters) in between the coasts. And neither Wall Street or Silicon Valley is generating jobs, wealth or stability for them.

dunnross says

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.

much agreed.

tatupu70 says

You bears have a pretty solid record of gloating long before the verdict is in.

That's because - just speaking for myself - this was all expected, and it was pretty easy to approximate how far off prices were at the market's peak, and that the interruption in declines was driven by govt manipulation, breeding a false sense of recovery. I actually feel bad for the people that jumped in based on it, though they're much better off than those who bought in 2005-2007.

I am putting in crown moldings in my bull trap this weekend - very exciting!

klarek says

tatupu70 says

You bears have a pretty solid record of gloating long before the verdict is in.

That’s because - just speaking for myself - this was all expected, and it was pretty easy to approximate how far off prices were at the market’s peak, and that the interruption in declines was driven by govt manipulation, breeding a false sense of recovery. I actually feel bad for the people that jumped in based on it, though they’re much better off than those who bought in 2005-2007.

I think you missed my point. You are interpreting the data in the way that conforms to your expected result, rather than looking at it objectively.

Mr.Fantastic says

SubOink says

I am putting in crown moldings in my bull trap this weekend - very exciting!

Your life must be markedly unexciting.

Hater...:)

dunnross says

Look at the graph. The spring bounce is lower than it was last year and the year before. Bounces are getting smaller and smaller, while drops are getting bigger and bigger

Spring started less than a week ago and you're declaring the spring bounce over? Otherwise how do you know if it will be larger or smaller than last year?

tatupu70 says

dunnross says

Look at the graph. The spring bounce is lower than it was last year and the year before. Bounces are getting smaller and smaller, while drops are getting bigger and bigger

Spring started less than a week ago and you’re declaring the spring bounce over? Otherwise how do you know if it will be larger or smaller than last year?

1. Last year's bounce was smaller than the year before.
2. Last year's bounce was pretty much over by April, much earlier than 2009 which was over in June. I predict that this year's bounce will be even more fleeting.
3. Regardless of how long it will be, it should not break overhead resistance which is the 2009 low. This is because all those so called "cash investors" who bought in March, 2009, hoping to flip it for a quick profit, somehow got stuck with it, and want to unload at a break-even point.

dunnross says

I predict that this year’s bounce will be even more fleeting

That's fine. It's your opinion. The graph doesn't show it, you just think it will be the case. Just wanted to clarify.

tatupu70 says

I think you missed my point. You are interpreting the data in the way that conforms to your expected result, rather than looking at it objectively.

My view has been that housing was overpriced and that the "bottom" formed in 2009 was the result of the tax credit. which after its expiration prices will continue declining. People who have been adamantly denying that this was the case have a pretty hard time explaining the data. Something is not conforming to someone's expectations, but that's on your guys' end, not mine.