patrick.net

Why do you guys argue, when it is fact that wages and compensation are stagnating. Housing prices are manipulated and localized. Borrowing costs are so low, can't be more obvious.

From my own experience and talking to friends, $120K is normal for an experienced programmer near San Francisco or Silicon Valley. Starting programmers can easily get $90K if they have a good degree. I think there is really no upper limit. Depends on how much the company needs you.

Of course most of that money goes to your landlord or the previous owner of the house you buy, because we still do not have a land value tax, but instead tax income from work to punish productive people.

Oh, and yes, the best way to get a raise is to leave your job, or have a very good ability to do so. In fact one of my very first posts on Patrick.net was about exactly that:

http://patrick.net/?p=11

Of course most of that money goes to your landlord or the previous owner of the house you buy, because we still do not have a land value tax, but instead tax income from work to punish productive people.

God Bless Prop 13.

Of course most of that money goes to your landlord or the previous owner of the house you buy, because we still do not have a land value tax, but instead tax income from work to punish productive people.

Amen

wthrfrk80 says

God Bless Prop 13.

Yes we REALLY should revisit that one...

ZMan says

This is a question for all.

I will be totally honest with you. And hnestly, this takes food of my table to admit it. But NO. It has not. It's not a bubble any more obviously but it has not shit the bed yet like it oughrt to have. OR better to put it this way...it is suffering induced constipation

Seven years from now this will all be dust.

ZMan says

Now I'm looking for some possible articles/links in regards to all theses high paying jobs.

One very important point when using data from sites like salary.com or glassdoor is how the salaries are reported. I once went into an annual review and was laughed out of the room by my CEO when I used salary.com as a benchmark. My sympathetic boss explained that people tend to exaggerate how much they make on such sites. In light of this it may be prudent to knock off 10% or so from the reported salary. The Radford Survey on the other hand is data as reported by HR and is thus the metric by which most SV salaries are set.

New renter says

In light of this it may be prudent to knock off 10% or so from the reported salary.

no sir. this is an insult to prudence. never aim low.

New renter says

Yes we REALLY should revisit that one...

Except now no one, no matter how "progressive", can let property taxes rise. That would cause their property to lose value.

the housing market bottoms every year until the free fall in the winter.

New renter says

In light of this it may be prudent to knock off 10% or so from the reported salary. The Radford Survey on the other hand is data as reported by HR and is thus the metric by which most SV salaries are set

Correct, pretty much every HR department uses Radford Survey, so what ever some website uses .. is totally ignored. Anyone can log on to these websites and inflate salary info. They are all bogus. Radford has been around for ages.

From my own experience and talking to friends, $120K is normal for an experienced programmer near San Francisco or Silicon Valley. Starting programmers can easily get $90K if they have a good degree. I think there is really no upper limit. Depends on how much the company needs you

Housing can't bottom. With interest rate at 0, which is where it is you can't have housing bottom. This is the peak, it's as high as it can be.

You'll see prices decline once interest rates climb. What you don't know is when that will happen.... but for now there is no reason to buy anything. It's a liquidity trap.

When Foreclosure starts are outnumbering actual sales 3 to 1, how can anyone believe there is a housing bottom?

http://www.dsnews.com/articles/number-of-foreclosure-starts-nearly-3xs-higher-than-sales-lps-2012-07-09

Even though foreclosure starts and sales saw similar monthly increases in May, 11.6 percent and 10 percent respectively, the actual number of foreclosure starts was significantly higher than foreclosure sales. Foreclosure starts numbered 202,707 while foreclosure sales totaled 73,439.
Also, foreclosure inventory maintained historically high levels at 4.14 percent.

Kinda funny you mention interest rates.
I remember back in the 80's, locking into a 10.75% interest rate mortgage and I was thrilled. This was standard rate back in the day, not due to any credit or whatever issues.
Now today we are at 3.5%-4.25% and still lack of demand.

Thanks everyone for your replies. I now realize this is mostly CA site. On average most people from CA. seem to have the same opinion that things are doing ok. Its is kinda funny because when big tech layoffs HP / Cisco, or when you hear like Stockton CA filing for bankruptcy it all affects Cali. Seems like alot of bad data news come out of California but the people feel the happiest.

ZMan says

Now today we are at 3.5%-4.25% and still lack of demand.

And just for some above who may not be completely aware, actual interest rate is 0. Rate you would pay is 0% + inflation + risk premium + very little profit spread.

Rates can't go any lower since banks will have to lose money at that point to loan it.

robertoaribas says

Interest rates won't rise for no reason, they will rise when the economy is clearly recovering

That is a scary statement.

robertoaribas says

FAR more distressed homes are being sold through short sale, than foreclosed on. In Phoenix, since 2006, 170,000 short sales have happened, while banks have sold 80,000 bank owned homes. This doesn't even count foreclosure auctions that went to a third party... so this metro has disposed of a quarter million distressed properties for sure, and probably more like 300,000. Someone the other day tried to say the 20,000 foreclosures in process here guaranteed the market would tank, but I don't buy it at all.

That may be true, but I think the point of the article is to show that the Foreclosures, and distressed properties backlog is still growing faster than they are actually being sold. That would indicate that inventory should be growing just by the numbers LPS is presenting instead of falling...

... unless they are being artificially being held off the market which is a running theory on Patrick.net and other housing discussion communities.

ZMan says

That is a scary statement.

Not sure why it's scary. It's definitely true though.

ZMan says

Kinda funny you mention interest rates.
I remember back in the 80's, locking into a 10.75% interest rate mortgage and I was thrilled. This was standard rate back in the day, not due to any credit or whatever issues.
Now today we are at 3.5%-4.25% and still lack of demand.

Meaningless. Utterly meaningless w/o accounting for inflation.

The real interest rate = the nominal interest rate minus the inflation rate.

If you were able to get a 10.75% interest rate in 1980, for example, that was great. The inflation rate for that year was 13-14%. So your real interest rate would have been negative. It's very unlikely that someone was paying you to borrow money from them, of course.

Which year did you get a 10.75% interest rate?

robertoaribas says

More often than not in history, rates and home prices have risen together, than the reverse.

Probably true, since nominal interest rates rise as the inflation rate rises. Real interest rates are what matter.

robertoaribas says

This is a fine theory, if you prefer your theories completely plucked form thin air, and ignore all historical data...

Interest rates won't rise for no reason, they will rise when the economy is clearly recovering, and inflation is seen as the bigger threat. More often than not in history, rates and home prices have risen together, than the reverse.

Rob historical data suggests that prices drop when rates go up since most people buy into payments they can afford.

wthrfrk80 says

If you were able to get a 10.75% interest rate in 1980, for example, that was great. The inflation rate for that year was 13-14%. So your real interest rate would have been negative. It's very unlikely that someone was paying you to borrow money from them, of course.

Which year did you get a 10.75% interest rate?

1980's I don't the exact year, it was a few days ago :)
And like I said I was jumping for joy at 10.75%

FortWayne says

Rob historical data suggests that prices drop when rates go up since most people buy into payments they can afford.

No, it most definitely does not. Historical data suggests that there is very little correlation between prices and interest rates.

Full disclosure: I bought a month ago.

Has housing reached a bottom? That's almost impossible to determine but can only be done once prices are clearly rising and probably doing so on a national level. The same as when a peak is reached- when prices start to fall and thus there is a measurable difference.

But I don't think that its not exactly out of line to suggest that we're not in a bursting cycle and instead at the very least things are stagnate to slightly improving. So that would suggest that change one way or another is probably closer than it was a few years ago.

I also think the attitudes in regards to housing has changed. Back in the bad ole' days of the housing bubble- back when on any given day I could browse any number of housing bubble sites and see 100's of comments per thread pertaining to overpriced real estate, it was clear as a bell to all of us that the bubble was going to deflate. That sort of reassurance was in many ways comforting- to know that many other logical people were drawing the same conclusions. There must have been at least 20+ housing bubble blogs for the Bay Area alone. These days many of those sites are either gone or seldom updated. Others simply changed formats and the topics slowly went from being mostly about real estate to more of a mixture of things. Simply put- the intense interest in seeing through the collapse of the bubble dried up within a year or so after it was clear that the bubble had burst. This was followed by a few frustrating years of hoping prices would fall and fall more.

These days I'd say that people have gone from being scared to buy to suddenly being very interested in buying. Only problem is that due to the aftermath of the bubble pop, now a lot of people are scared of selling because they're underwater. Its possibly that those who couldn't afford to be underwater already exited during the initial bust and subsequent few years afterwards and thus those left are those who can afford their homes but don't want to lose money either. So its a catch-22: People want to buy and thus there is no supply and therefor more competition for what few homes are available.

That's at least how it is in the Bay Area. Others areas are of course totally different. Places like SF are probably closer to being at the bottom if they aren't already. If not- oh well. I could care less because my home isn't an investment.

edvard2,
Hope you got a good deal. I've made an offer at 50% off asking price & I'm waiting for a response. I expect a counter offer & if I'm insulted. I'll counter @ 55% off asking price.

edvard2 says

Has housing reached a bottom? That's almost impossible to determine but can only be done once prices are clearly rising and probably doing so on a national level. The same as when a peak is reached- when prices start to fall and thus there is a measurable difference.

Very easy! what ever price you area was selling at around 1997 add inflation and your back to normal pricing.

http://www.youtube.com/embed/d__GPqOVNbE

Call it Crazy says

Actually, I got a interest rate of 10% back in 1980. If I remember correctly, normal interest rates were between 12% and 13%. I got a original owner financed rate of 10%, I though I hit the jackpot!!

I would say you hit the jackpot, yes! That would have been a real interest rate between -3 and -4%. It's like someone paying you to borrow money.

Very easy! what ever price you area was selling at around 1997 add inflation and your [sic] back to normal pricing.

Not quite so easy. Even ignoring inflation (which is probably wise in actuality given the effect of deflation on housing), a simple regression function will land you between 120-130 considering all data available. There are long-run secular trends in the data as well as cyclical factors. If you apply non-linear growth assumptions...say if you believe population and derivative effects such as increasing regulations are affecting market function over this long a period...then you will end up closer to 150.

Call it Crazy says

So, 3.5% interest rates today are a STEAL.... (only if you have a job and the down payment unfortunately...)

You missed my point I think. Sure, 3.5% is much less than 17%, but that's just the "nominal" interest rate. Inflation is also much lower now than it was then(between 13 & 14% in 1980).

real interest rate = nominal interest rate - inflation

Why is that the case? Because inflation eats away debt.

tatupu70 says

FortWayne says

Rob historical data suggests that prices drop when rates go up since most people buy into payments they can afford.

No, it most definitely does not. Historical data suggests that there is very little correlation between prices and interest rates.

hope this helps
http://www.freddiemac.com/pmms/pmms30.htm

thomas.wong1986 says

Very easy! what ever price you area was selling at around 1997 add inflation and your back to normal pricing.

Not necessarily. The housing market doesn't behave " as it should". Regardless of current prices and their relation to past historical performance, if and when prices do go up then that would be your best indicator that the bottom- aka- the lowest average prices will go- has been reached.

HEY YOU says

edvard2,
Hope you got a good deal. I've made an offer at 50% off asking price & I'm waiting for a response. I expect a counter offer & if I'm insulted. I'll counter @ 55% off asking price.

Not sure where you live but sure- we too could have offered 50% less than asking. Anyone could. That means we wouldn't have gotten the house because around here houses are typically going over-asking. Yes- we got a pretty good deal. Close to 200k less than what the house had been listed for during the housing boom. But it was the right "deal" for us, and that was after 12 years of saving and renting a dirt-cheap house.

I got a interest rate of 10% back in 1980. If I remember correctly, normal interest rates were between 12% and 13%.

Yes, those were common rates for home mortgages then. It wasn't uncommon to find someone carrying a 10.5% 30 year mortgage.

But then again, those weren't normal times by any measure. Those rates were the product of stagflation; and that was the 2nd bout of that malaise. It's one of the main reasons we all voted for Reagan.

Funny how this always boils down to predicting where house prices go. The job market in tech definitely has heated up again due to smart investor money parked on the sidelines during the crash and fueled by relentless artificially low interest rates, but mostly for senior positions and the interview process is much longer and harder than during the dot-com bubble. In fact a lot of companies have positions open for 6-12 months, churning though potential candidates and claiming the cannot find any rockstars. If you talk to a few recruiters you will find out that it is very hard to place engineers for them, so they stepped up their game and mass-email anybody who could be a potential match. House prices may show some swings in the future, but even if they go up temporarily, it will not be sustainable as real wages continue to stall or decline. $120K per year just pays the bills for a 3 person family (1 child), usually you need double income. As soon as the new venture capital dries up and backers remove their support for flailing companies you will see layoffs again. And if the main breadwinner loses their job, they will lose their house unless they have lots of savings/investments. Taking again that $120K per annum salary, any property buy above $500K is financial stupidity IMO and everything over 400K is risky - if you rent, try to stay around $2500 (excl. utilities) or below. What you say?

In the US the real rate equals the nominal rate except in the very short-term (as in overnight rates). That's the power of seniorage. The same is largely true in Japan and was true in the Eurozone until the Germans fractured from the ECB on notes.

FortWayne says

hope this helps
http://www.freddiemac.com/pmms/pmms30.htm

Nope. This is completely meaningless to the point at hand. The graph you need has been posted here many, many times. It shows nominal home prices vs. mortgage rates.

I guarantee you that it shows very little correlation.

Call it Crazy says

OK, so what is the "real" interest rate today?

Are you talking mortgage rates?

Mortgage rates are about 4%, and inflation is about 2%, so that makes real interest rates about 2%.

Of course, that assumes your income keeps up with inflation. It might not.

Randy H says

That's the power of seniorage.

I've got to admit, I've never heard that term.

I googled seigniorage but I can't say I understand it.