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The message I take from this article is that it is horrible time to buy a home but a great time to sell one if you live in the Bay Area.
"At the same time, Portola Valley, Atherton and Palo Alto - with million-dollar-plus median values that now exceed their boom-time heights - should see appreciation above 12 percent, Zillow said."
Well, didn't I mention this in the other thread? It's all about location, location, location. @Patrick just keeps saying look at your rent vs. buy ratio, but doesn't factor in the appreciation these Fortress markets have been enjoying for decades. Had Patrick bought in 1998, he would have been sitting pretty now instead of creating this website for us to chat, argue and whine.
contrary to popular belief. (The expensive areas have ways to fall back in 2010/2011)
The takeaway is zip codes that are the last to fall are the first to rise. This is always the case in any corner of the world.
I fought Patrick for years to not let the buy/rent calculator dictate your decision as it is useless. The calculator says buy in the Ghetto and don't buy in prime, that's it. It gives the wrong/opposite signals. Here is the proof why.
This is generally true but expensive areas can fall back more on nominal values (not percentage.) If you can afford it, expensive areas always have higher ceiling. Theoretically, a rent vs. buy calculator can work but the appreciation/depreciation part is anybody's guess.
The message I take from this article is that it is horrible time to buy a home but a great time to sell one if you live in the Bay Area.
bad logic on your part.. .why sell today, if the price will be surging much higher over the next six months? don't be like @underwaterman who sold last year and left a fortune on the table!
I agree with the first part of evilmonkeyboy's comment (it's a horrible time to buy in SF Bay Area), but Roberto is right about the near future. One of Roberto's comments put it very well: the time to sell is when more listings start showing up, then underprice the market by a little bit. Right now, there aren't enough listings to keep up with demand, and there isn't enough construction to change that in the near future. If SF Bay Area allowed more construction in areas that are already built up (i.e. not parks), this kind of bubble wouldn't get so big, but the law isn't changing any time soon and construction doesn't happen overnight - yet.
In what direction? Down is the only one I'll believe, and I don't even live in the Bay Area. I hear you need to be a millionaire to buy a condo out there already, doubt there will be a price increase, market fundamentals look weak.
I hear you need to be a millionaire to buy a condo out there already...
Nah - just sign on the dotted line, finance 97% with a loan that Fannie or Freddie will buy and Bubbles Ben will add it to the Fed's balance sheet. Red is the new black, i.e. debt is the new "wealth".
Yes. Our state is fixed!
http://www.zerohedge.com/news/2013-02-19/californias-budget-miracle-mirage-after-all
The message I take from this article is that it is horrible time to buy a home but a great time to sell one if you live in the Bay Area.
bad logic on your part.. .why sell today, if the price will be surging much higher over the next six months? don't be like @underwaterman who sold last year and left a fortune on the table!
I don't own property in the Bay Area, but if I did I would cash out this summer. There are to many investors in this market, the 20% down buyers are gone (not many people can save up 140K) and FHA loans are getting a lot more expensive this year.
With price up 30% year over year in Santa Clara Co. and homeowners not buying houses it is not going to be pretty when the bubble pops.
You may be right, maybe the Bay Area will just keep going up in 2013 but to me it is not worth the risk.
I agree with the first part of evilmonkeyboy's comment (it's a horrible time to buy in SF Bay Area), but Roberto is right about the near future. One of Roberto's comments put it very well: the time to sell is when more listings start showing up, then underprice the market by a little bit. Right now, there aren't enough listings to keep up with demand, and there isn't enough construction to change that in the near future. If SF Bay Area allowed more construction in areas that are already built up (i.e. not parks), this kind of bubble wouldn't get so big, but the law isn't changing any time soon and construction doesn't happen overnight - yet.
I agree with what you and Roberto are saying it just that underpricing the market by a little bit in the Bay Area dropping 100k off the price. I would rather get out an invest that money in a market that isn't so bubblisious.
Meanwhile rental inventory is surging in the SFBA. Good luck with your price increases. If I owned I would sell. Just sold my two condos in overheated markets elsewhere. Good luck to all owners.
@Patrick just keeps saying look at your rent vs. buy ratio, but doesn't factor
in the appreciation these Fortress markets have been enjoying for decades. Had
Patrick bought in 1998, he would have been sitting pretty now instead of
creating this website for us to chat, argue and whine.
Agreed. Unfortunately, that advice has been extremely harmful to my sister in law, a former patnet adherent who introduced me to this site.
For years, she continued to "wait" because Patrick continued to advocate price/rent, not as if it was some idealized metric that would be nice to see, but instead as if it was some axiomatic kernel of truth that would come true if only she waited juuuuuuust a little longer.
As it turned out, here in DC 2009 was not just the beginning of the bottom, but a hard bottom, with prices that havent been seen since. Coupled with the fact that her rent has gone up +20%, she is absolutely livid for ever having believed that waiting on rental parity would be in her best interest.
don't be like @underwaterman
Just FYI - like a few other excitable bears before him, it appears he has rolled up shop, deleted his account & posts, and left the site.
I don't own property in the Bay Area, but if I did I would cash out this summer.
I own a house here and have no intention of selling. I bought a house to live in and if the value goes up and down, I don't care.
Coupled with the fact that her rent has gone up +20%, she is absolutely livid for ever having believed that waiting on rental parity would be in her best interest.
If someone jacked up my rent by 20% I would just move. Easy solution. People make such a big deal out of moving, like it is the end of the world. It takes about a weekend of work. Cost about a 1/2 month rent and is a great time to clean up your crap.
Also, don't blame Patrick for your sisters ordeal. Blaming someone that has actually brought together globs of information about real-estate for your troubles is a total cop out. You are the owner of your destiny. If you always seek to throw the responsibility to others then you will always be in trouble IMHO.
I have screwed up royally sometimes. They are my problems though and I hope I learn from them. I could have easily blamed others, blamed my parents, my manager, my broker, my neighbour, etc. The only person to really blame is life itself and pick yourself up and move on. Good luck to you and your sister.
I don't own property in the Bay Area, but if I did I would cash out this summer.
I own a house here and have no intention of selling. I bought a house to live in and if the value goes up and down, I don't care.
How great the real estate market would be if this was everyone's thinking. Imagine, buying a house to live in. How surreal.
I don't believe that buy vs rent ratios analysis are necessarily wrong and I am a homeowner. The problem occurs when these ratios are analyzed in a static manner and don't take rent increases into account. You can't simply do buy vs rent and analyze it in year 1 only as that prevents you from properly analyzing lifetime housing costs for apples to apples properties.
Your only opportunity to lower housing costs is to refinance. Now that interest rates are bottomed out, tough luck using that to lower your housing cost.
Now all thats left is debasing the currency. Oh, wait. They are doing that.
I don't believe that buy vs rent ratios analysis are necessarily wrong and I am a homeowner. The problem occurs when these ratios are analyzed in a static manner and don't take rent increases into account. You can't simply do buy vs rent and analyze it in year 1 only as that prevents you from properly analyzing lifetime housing costs for apples to apples properties.
I have rented in the SFBA for over 15 years now and only once was presented a rent increase by a landlord. It was in the end of 1999 during the dot com days. I got the letter in the morning on my way out the door, and that evening presented him with a letter saying we were leaving. We rented a cheaper place down the road and watched the house sit idle for 6 months while the dot com crash happened. I'd say if the landlord learned his lesson and didn't repeat his mistake then his losses are probably finally recouped by now. ;)
Good luck to all slimy landlords. May the buck be your driving force in life.
Rent increases?
I have lived in the Bay Area since 2000. There has been no substantial rent increases. By moving from city to city, neighborhood to neighborhood, I can pay $1500 for a 3bd/2bath or $4500.
If my landlord increases rent by $100, I move to a place that is affordable. If there are no places that are affordable, I find a roommate, or become a roommate, perhaps family or friends (I'd never do that, but 50% of everyone else find this a more preferable situation). I think the rent expectation in the bay area has always been $500-750 per room.
So your argument is that there have been no substantial rent increases because you are able to lower the quality of your rentals so as to maintain the same rent you were previously paying?
We rented for over a decade. From late 2000-all the way to around 2008-2009 rents were fairly low and stable. At least for us rent never increased. We paid $1,600 to rent a 4 bedroom house. But- had we decided to move, that same house would have been $2,500-$3,000 a month. I think that's what got the ball rolling on buying because as of now the mortgage is about the same as we were paying in rent. So it made financial sense. Back in 2003-2007- no way in hell. Rents were dirt-cheap and home prices were sky-high.
Coupled with the fact that her rent has gone up +20%, she is absolutely livid for ever having believed that waiting on rental parity would be in her best interest.
The same thing happened to me last summer, my rent went from $2100 to $2300 (10% increase). So I got on the housing maps and found a condo being rented out in a much nice area closer to my work and it has a garage (something my apartment didn't have). Oh and the price tag is $1800 a month (new place also includes trash pick). When I gave my notice the apartment manager offered to keep my rent at $2100 but it was to late because the new place is way nicer.
Moving cost me about $100 bucks for a uhaul +gas.
Rents only went up on people that don't know how to negotiate or don't realize their options.
I think its entirely possible to pay too much in rent too. I have known my fair share of people who paid as much as 50% more than we ever paid. As in some of the small cramped apartments in SF cost a LOT More than the house we rented. That and people who rent on the Peninsula also tend to pay a crapload more in rent.
Money is money. If you spend too much on rent, its not really that different than paying too much on real estate.
If someone jacked up my rent by 20% I would just move. Easy solution. People make such a big deal out of moving, like it is the end of the world. It takes about a weekend of work. Cost about a 1/2 month rent and is a great time to clean up your crap.
Clearly you don't have kids, if you think moving is not a big deal
So your argument is that there have been no substantial rent increases because you are able to lower the quality of your rentals so as to maintain the same rent you were previously paying?
I have never had to do this in the SFBA, but knowing I have that option is comforting. Renting=flexibility.
If someone jacked up my rent by 20% I would just move. Easy solution. People make such a big deal out of moving, like it is the end of the world. It takes about a weekend of work. Cost about a 1/2 month rent and is a great time to clean up your crap.
Clearly you don't have kids, if you think moving is not a big deal
Actually, I do. Not school age yet though so I'm sure that makes it harder.
So your argument is that there have been no substantial rent increases because you are able to lower the quality of your rentals so as to maintain the same rent you were previously paying?
I have never had to do this in the SFBA, but knowing I have that option is comforting. Renting=flexibility.
And an entire life time of renting=?
If someone jacked up my rent by 20% I would just move. Easy solution. People make such a big deal out of moving, like it is the end of the world. It takes about a weekend of work. Cost about a 1/2 month rent and is a great time to clean up your crap.
Clearly you don't have kids, if you think moving is not a big deal
Actually, I do. Not school age yet though so I'm sure that makes it harder.
Yes, once they are in school and have friends it becomes a big deal.
Why SF Bay Area? Does anyone see anything like a new dot.com happening here? NO!
Do the recent spur of hiring entry level people at some tech companies make up for the layoffs of seasoned employees years ago? NO!
Semi and software are being done overseas so what's left here in Silocon Valley? Dreams of glory days long past!
So your argument is that there have been no substantial rent increases because you are able to lower the quality of your rentals so as to maintain the same rent you were previously paying?
I have never had to do this in the SFBA, but knowing I have that option is comforting. Renting=flexibility.
And an entire life time of renting=?
Don't have a problem with that. My goal is to retire or cut back work as soon as possible. If renting give me that 5 years earlier then I'll rent and enjoy it. I don't get the pull to own a sugar shack. I'm sure others get benefits, but for me I don't see it. I actually feel that I would give up parts of my life to be an owner. So, not only would it have to at some point reach rent to owner cost parity, it would have to beat it. i.e. cheaper to own. Until that day, I'll enjoy my choice to rent. I actually love it. People that have visited my rentals have talked about how much they love the place. Most of them own a crappier place and pay more for it. To each his own...
In the end, I would buy, if I could find an appropriately priced "Deal" on a house that needs significant work. However, we all know that this is a "buisness" now, so that's impossilbe.
Finding a home I could invest sweat equity in, and improve it's desirability to the next owner would be a wonderful perk of owning a home.
Right now I can rent for less than I would pay in Property tax, HOA, and mortgage interest (minus the deduction), and maintenance.
This is only possible because every home in the bay area that exists in a desirable neighborhood, or within 2 hours of my employment is beyond this number, yet I can find hundreds of rentals that fit under this number. And the number of rentals is only going to increase.
Bingo! You win the free case of coke and lifetime supply of chiclets for being so bright.
Why SF Bay Area? Does anyone see anything like a new dot.com happening here? NO!
Do the recent spur of hiring entry level people at some tech companies make up for the layoffs of seasoned employees years ago? NO!
Semi and software are being done overseas so what's left here in Silocon Valley? Dreams of glory days long past!
Still many $200K+ salaries kicking around here for doing little of nothing IMHO. Many times it is the companies burning through their VC funds, so time will tell how long they will last.
So your argument is that there have been no substantial rent increases because you are able to lower the quality of your rentals so as to maintain the same rent you were previously paying?
Quality is arbitrary. I have seen mansions for $3000, and slumbuckets for $2450.
The confirmation that housing quality is arbitrary is found in the amount of "fixers" that are going for market rate right now.
It's pretty obvious that rental prices in the area are going up. That you can move to a cheaper place isn't an argument against that.
Don't have a problem with that. My goal is to retire or cut back work as soon as possible. If renting give me that 5 years earlier then I'll rent and enjoy it. I don't get the pull to own a sugar shack. I'm sure others get benefits, but for me I don't see it. I actually feel that I would give up parts of my life to be an owner. So, not only would it have to at some point reach rent to owner cost parity, it would have to beat it. i.e. cheaper to own. Until that day, I'll enjoy my choice to rent. I actually love it. People that have visited my rentals have talked about how much they love the place. Most of them own a crappier place and pay more for it. To each his own...
Your argument only has any resonance to people because you live in an expensive area. I have rented my entire life because I am an expat (I finally bought a house in Monterey as a bolt hole and a good decision it was too).
Every single one of my friends who bought a house in the UK in the 90s has made out like gangbusters and the same still appears true for many in the US during that period. I missed that opportunity just as you did not buying 15-20 years ago if you are of that age. To have spent your entire time renting during that period means that you have missed a major opportunity. It wouldn't have greatly impacted on your ability to invest and it would have given you a house that would have soared in value. Those are the facts. It is less clear going forward, but the decision of a single man is not the same as one with a family. And your personal stories of half price rent and 16% returns aren't the realities for the vast majority of people in the US or the UK.
I missed that opportunity just as you did not buying 15-20 years ago if you are of that age.
I didn't miss anything. I own 4 houses (owned 6 before and just sold 2 recently). I have benefited greatly from the free money flow. My only beef with housing is the SFBA. If I lived in about 99% of the rest of the U.S. then I would most likely buy. However, here you are just downright lying to yourself if you think buying is cheaper than renting. Renting is a steal! I have rented for 15 years here and each month I beat the pants out of owners in the long run. My life has been a thousand times better than if I had bought at any point. I have traveled the world, taken sabbaticals, paid for relatives education expenses, paid off relatives debt, benefited from when everyone sold like idiots in the stock market crashes, purchases the latest new electric cars, had amazing family trips, etc. None of the above would have been close to possible if I owned a million dollar sugar shack in the bay area. I would have been cash poor while making over 200K in income. Just dumb.
So your argument is that there have been no substantial rent increases because you are able to lower the quality of your rentals so as to maintain the same rent you were previously paying?
Quality is arbitrary. I have seen mansions for $3000, and slumbuckets for $2450.
The confirmation that housing quality is arbitrary is found in the amount of "fixers" that are going for market rate right now.
It's pretty obvious that rental prices in the area are going up. That you can move to a cheaper place isn't an argument against that.
Lies! Rents are definitely dropping in the bay area. Anyone saying different is most likely an owner in denial.
Lies! Rents are definitely dropping in the bay area. Anyone saying different is most likely an owner in denial.
And that claim is based on what?
Renting is a steal! I have rented for 15 years here and each month I beat the pants out of owners in the long run. My life has been a thousand times better than if I had bought at any point. I have traveled the world, taken sabbaticals, paid for relatives education expenses, paid off relatives debt, benefited from when everyone sold like idiots in the stock market crashes, purchases the latest new electric cars, had amazing family trips, etc. None of the above would have been close to possible if I owned a million dollar sugar shack in the bay area. I would have been cash poor while making over 200K in income. Just dumb.
And why would you have been unable to do any of that if you'd bought in the area 15 years ago, for example? One doesn't preclude the other. A home in old Palo Alto in 97 vs one now...
I have rented for 15 years here and each month I beat the pants out of owners in the long run.
If you had bought 15 years ago, the price difference from then to today makes your assertion that renting has worked out better completely ridiculous.
My parents bought a house for $600k in 1997 that now has an estimated value of $1.6M. I don't know anyone anywhere in this part of the SFBA who would claim they have not enjoyed significant increases in their home valuations over the past 15 years no matter HOW close they are to a toxic plume:
http://www.mercurynews.com/science/ci_22454526/ten-years-after-toxic-plume-morgan-hill-and
http://www.sfgate.com/bayarea/article/The-valley-s-toxic-history-IBM-trial-is-latest-2826844.php
http://www.paloaltoonline.com/news/show_story.php?id=18496
Liquefaction zones? Huh? What do you mean the earth isn't stable here?!
http://quake.abag.ca.gov/liquefaction/Bigsby says
Lies! Rents are definitely dropping in the bay area. Anyone saying different is most likely an owner in denial.
And that claim is based on what?
I would also like to see some data as my lease is up for renewal next month.
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