patrick.net

CameronCrazy says

"The median price of single-family, re-sale home in Santa Clara County reached $830,000 in May—up $30,000 from April, according to Hansen’s research. That is a mere $38,500 below the all-time market high of $868,500, reached in October 2007." - Does anyone else see something wrong with that?

People are over looking that interest rates are roughly 50% lower, so that 830K house runs a mortgage of closer to a 600K house back in 2007.

pkennedy says

People are over looking that interest rates are roughly 50% lower, so that 830K house runs a mortgage of closer to a 600K house back in 2007.

For now at least. Tomorrow?

New Renter says

pkennedy says

People are over looking that interest rates are roughly 50% lower, so that 830K house runs a mortgage of closer to a 600K house back in 2007.

For now at least. Tomorrow?

They will pay even more for tomorrow. If you didn't buy during this downturn, you only missed the 1st part of the run up. The best part of home price appreciation is yet to come. Hang on tight. Don't complain later and say I didn't give you the warning.

E-man says

New Renter says

pkennedy says

People are over looking that interest rates are roughly 50% lower, so that 830K house runs a mortgage of closer to a 600K house back in 2007.

For now at least. Tomorrow?

They will pay even more for tomorrow. If you didn't buy during this downturn, you only missed the 1st part of the run up. The best part of home price appreciation is yet to come. Hang on tight. Don't complain later and say I didn't give you the warning.

I'm a believer.

CameronCrazy says

That is a mere $38,500 below the all-time market high of $868,500, reached in October 2007." - Does anyone else see something wrong with that?

If we were to believe the RE shills, realtors and journalists.. there are many people in SFBA who earned an extra $40-50,000 over last year... SFBA is just like SoCal.. no substance!

thomaswong.1986 says

If we were to believe the RE shills, realtors and journalists.. there are many people in SFBA who earned an extra $40-50,000 over last year... SFBA is just like SoCal.. no substance!

Well, here's the wage growth:

San Francisco-Oakland-Mateo, Calif.
> 1-yr. wage growth: 24.7%
> Average weekly wage: $1,706
> Dec. 2011 unemployment: 7.2%
> Dec. 2012 unemployment: 6.1%
> 1-yr. employment change: +4.1%

http://finance.yahoo.com/news/american-cities-where-wages-are-soaring-172506054.html?page=2

The article implies that San Francisco's wage growth is an outlier due to specific reasons:

"In some of the cities where wages increased the most, growth appears to be the result of a single large business moving to the area. The obvious example of this is the San Francisco metropolitan area, where the one-year wage growth was more than double that of any other metro in the country.

The reason behind that growth is likely the social media company, Facebook Inc. (FB), which moved its headquarters from Palo Alto to Menlo Park at the end of 2011. Menlo park is in San Mateo County, which is in the San Francisco metro area. While other counties in the San Francisco area all grew less than 10%, in San Mateo, the average weekly wage grew more than 100%."

tatupu70 says

Average weekly wage: $1,706

I don't see how you can buy a $1 million house with $1700 a week.

xenogear3 says

tatupu70 says

Average weekly wage: $1,706

I don't see how you can buy a $1 million house with $1700 a week.

You can't.

But the kid of a Princeling in some foreign place, fresh out of his/her US grad school program, can just pay cash.

tatupu70 says

thomaswong.1986 says

If we were to believe the RE shills, realtors and journalists.. there are many people in SFBA who earned an extra $40-50,000 over last year... SFBA is just like SoCal.. no substance!

Well, here's the wage growth:

San Francisco-Oakland-Mateo, Calif.
> 1-yr. wage growth: 24.7%
> Average weekly wage: $1,706
> Dec. 2011 unemployment: 7.2%
> Dec. 2012 unemployment: 6.1%
> 1-yr. employment change: +4.1%

http://finance.yahoo.com/news/american-cities-where-wages-are-soaring-172506054.html?page=2

what percent of those rising Bay Area wages are directly or indirectly tied to rising housing prices? what is it ? 50% 75% 80% 100% ? What percent of Detroit's top line in 2005-2007 came from HELOCs and all that housing mania wealth effect ? what was it ? 50% 75% 80% 100% ? I'm sure the wages in and around Detroit suffered a bit when they got their answer.. SF Bay Area wage/income prognosticators will as well..

House prices can only double from here though open houses seem to be popping up at every corner here in the sunset!

FunnyBayAreaBuyer says

The reason behind that growth is likely the social media company, Facebook Inc.
(FB),

good one, but I don't think so..

xenogear3 says

tatupu70 says

Average weekly wage: $1,706

I don't see how you can buy a $1 million house with $1700 a week.

IPO.

People seem to use "overall" employment numbers when looking at the high end houses in the bay area. If you make 50K/year in the bay area, you're renting with someone else, not buying. And if you do look at buying it will be the outskirts of tracy in a condo or gilroy.

Those 1M houses go to the people making 200-300K and they get that from dual income couples. And there are a lot of them.

Wage increases below 50K are bleak, 50-100K are doing ok, wage increase over 100K are great! People are paying up for those employees.

50K of housing, costs around 3K extra per year in mortgage payments. If you're making 150K and only got a 5% raise last year, you can afford to offer up that extra 50K for a house, or 100K...

xenogear3 says

I don't see how you can buy a $1 million house with $1700 a week.

I agree. And I don't think the median household is buying a $1MM house either.

tatupu70 says

xenogear3 says

I don't see how you can buy a $1 million house with $1700 a week.

I agree. And I don't think the median household is buying a $1MM house either.

Trulia shows meidan home-price for SJ as 600K and SJ has been reported as having the highest median income in the nation, 77K plus.

If you are single income, and can put 200K down, with no outstanding debt, that gets you close. If you are home buying, you are likely doing better than 77K, may be dual income, and probably have 200K or more to throw down.

Rew says

Trulia shows meidan home-price for SJ as 600K and SJ has been reported as having the highest median income in the nation, 77K plus.

I think we need to be careful--the median household isn't really buying the median home. There are 35% of the people renting, mostly in apartments.

The bay area is cranking out the overpriced house slaves. get large wage and feel rich - overpay for POS house - lose job in the next recession - lose house.
Rinse and repeat.

Moderate Infidel says

- overpay for POS house - lose job in the next recession - lose house.

Rinse and repeat.

I think you're referring to those who OVERBORROWED. There's lotsa wealthy immigrant elites who paid cash or made very large down payments. They may have overpaid but they did not OVERBORROW. Their "cost" is only their property tax, and besides they can always get more cash from "back home".

B.A.C.A.H. says

I think you're referring to those who OVERBORROWED. There's lotsa wealthy immigrant elites who paid cash or made very large down payments. They may have overpaid but they did not OVERBORROW. Their "cost" is only their property tax, and besides they can always get more cash from "back home".

Those people are a tiny portion of the average housebuying fool.

tatupu70 says

Rew says

Trulia shows meidan home-price for SJ as 600K and SJ has been reported as having the highest median income in the nation, 77K plus.

I think we need to be careful--the median household isn't really buying the median home. There are 35% of the people renting, mostly in apartments.

So 65% have a house ... ok.

What is the median household income buying then? Or are you saying they are all renting? Is that likely, even with your 35% are renting number?

I agree, it isn't straight median income that is purchasing homes, it is those making over that ... but it looks comfortably within their reach.

I thought the Japanese bought everything in the US in the late 70's/early 80's?

Moderate Infidel says

I thought the Japanese bought everything in the US in the late 70's/early 80's?

I didn't say that. Their rich didn't send a tsunami of their kids here for grad school + H1. That's the difference.

Moderate Infidel says

Those people are a tiny portion of the average housebuying fool.

Agreed.

But in The Fortress, they are the average buyer.

Rew says

What is the median household income buying then?

I don't know, but it's almost certainly higher than the quoted median income. So, to really look at income/house price, you need to understand that using median income is not really accurate. Especially as disparity grows.

Rew says

o 65% have a house ... ok.

What is the median household income buying then? Or are you saying they are all renting? Is that likely, even with your 35% are renting number?

I agree, it isn't straight median income that is purchasing homes, it is those making over that ... but it looks comfortably within their reach.

65% are home owners.

More than half of existing homeowners may not be able to afford to buying their own home today! Their payments and tax bills are much lower because they bought the house a long time ago (either low monthly payment to begin with or refied to low payment) or have have paid off already or inherited the house.

Reality says

More than half of existing homeowners may not be able to afford to buying their own home today! Their payments and tax bills are much lower because they bought the house a long time ago (either low monthly payment to begin with or refied to low payment) or have have paid off already or inherited the house.

That's true for my family and for everyone on my culdesac. Silly-Con Valley is only for the rich to buy into nowadays. God bless'em paying those super high assessments to subsidize local government for the rest of us.

Reality says

More than half of existing homeowners may not be able to afford to buying their own home today! Their payments and tax bills are much lower because they bought the house a long time ago (either low monthly payment to begin with or refied to low payment) or have have paid off already or inherited the house.

This is a huge point. Many people bought when SJ wasn't a big deal, or when their neighbourhoods were like living in Gilroy or Tracy, but today they're front and center.

The people buying now, have the high levels of income necessary to buy there. The 77K average income is pretty high, but if you remove the 35% who are renting, I bet that shoots up. If you remove the people who have lived there 20+ years, the income probably shoots up even further.

B.A.C.A.H. says

Those people are a tiny portion of the average housebuying fool.

Agreed.

But in The Fortress, they are the average buyer.

I live in the Fortress, and while most of my neighbors are immigrants, they came through the "traditional" path; come as a student, work in high tech, save money, then buy a house. Just because someone speaks a foreign language or is named Wong doesn't mean they have access to unlimited commie dragon gold. There's many wealthy immigrants, but most made their money here.

Yes, there are more Asian buyers with foreign-earned cash nowadays than 10 years ago, but it's not the majority.

SiO2 says

I live in the Fortress, and while most of my neighbors are immigrants, they
came through the "traditional" path; come as a student, work in high tech, save
money, then buy a house. Just because someone speaks a foreign language or is
named Wong doesn't mean they have access to unlimited commie dragon gold.
There's many wealthy immigrants, but most made their money here.

Yes, there are more Asian buyers with foreign-earned cash nowadays than 10
years ago, but it's not the majority.

This demographic is also very diligent and skilled in saving money. They don't blow all their cash at the mall every weekend to stimulate the economy aka transfer their money to the 1%.

pkennedy says

Reality says

More than half of existing homeowners may not be able to afford to buying their own home today! Their payments and tax bills are much lower because they bought the house a long time ago (either low monthly payment to begin with or refied to low payment) or have have paid off already or inherited the house.

This is a huge point. Many people bought when SJ wasn't a big deal, or when their neighbourhoods were like living in Gilroy or Tracy, but today they're front and center.

The people buying now, have the high levels of income necessary to buy there. The 77K average income is pretty high, but if you remove the 35% who are renting, I bet that shoots up. If you remove the people who have lived there 20+ years, the income probably shoots up even further.

So, short summation, we are saying lots of people own their homes, they are worth a lot more than they were in the past, they make a lot of money, and can afford to buy/sell in the South Bay.

To original post : Must be #5 then!? Unless economic total disaster or Tech suddenly collapses and is replaced by ... ? ... sounds like a good bet.

# 5 Drink the Cool-Aid!

dublin hillz says

SiO2 says

I live in the Fortress, and while most of my neighbors are immigrants, they

came through the "traditional" path; come as a student, work in high tech, save

money, then buy a house. Just because someone speaks a foreign language or is

named Wong doesn't mean they have access to unlimited commie dragon gold.

There's many wealthy immigrants, but most made their money here.

Yes, there are more Asian buyers with foreign-earned cash nowadays than 10

years ago, but it's not the majority.

This demographic is also very diligent and skilled in saving money. They don't blow all their cash at the mall every weekend to stimulate the economy aka transfer their money to the 1%.

No, they transfer it to the 0.1% who run the banks.

SiO2 says

I live in the Fortress, and while most of my neighbors are immigrants, they came through the "traditional" path; come as a student, work in high tech, save money, then buy a house. Just because someone speaks a foreign language or is named Wong doesn't mean they have access to unlimited commie dragon gold. There's many wealthy immigrants, but most made their money here.

how are they any different from other past silicon valley worker bees... so why didnt the former worker bees who did all the heavy lifting make more...

did these people make the CPU run from 8mhz to 3 Gigh or expand Storage space from 10 megbytes to 2 Terabytes... evolve software from DOS to what it is today...the list goes on.. and on...

Nada... not even close! so in fact they are overpaid in their projects and product innovation. Seems to me many are just collecting a pay check.

Rew says

Must be #5 then!? Unless economic total disaster or Tech suddenly collapses and is replaced by ... ? ... sounds like a good bet.

And thats what pushed prices down from late 80s to mid 90s. Japanese entered
the Tech business/industries and dumped products on US/Global markets way
below their cost to produce. All hell broke lose and shit hit the fan for manufacturing.

And Product Dumping below cost happens still everyday.

Remember when Netscape went bust when Microsoft gave Web Browsers for free.

thomaswong.1986 says

Rew says

Must be #5 then!? Unless economic total disaster or Tech suddenly collapses and is replaced by ... ? ... sounds like a good bet.

And thats what pushed prices down from late 80s to mid 90s. Japanese entered

the Tech business/industries and dumped products on US/Global markets way

below their cost to produce. All hell broke lose and shit hit the fan for manufacturing.

And Product Dumping below cost happens still everyday.

Remember when Netscape went bust when Microsoft gave Web Browsers for free.

I remember the dot com bubble, sure, but that wasn't due to competition. Sony didn't make low cost goods and it ruled that era. They were the premium, and they rated it, with best products.

You think tech will crash, trend down, because knockoffs will flood the market taking out Goog, Sam, and Apple? I've watched tons of cheap tablets and media players sell in insignificant numbers and not impact things at all over the past couple years. Cheap is cheap and you get what you pay for. I don't see it having an impact.

The big US corps. aren't actually too focused right now in the US. The markets they want are the emerging market spaces. (India, china, Latin America, eastern Europe) The knockoffs and cheap goods rule in volume there, but the demographics are changing, and as soon as the better products take hold, they are brand sticky.

I'd like to see a knock off with integrated cloud, store, or automotive integration hit the market. Hint: cannot happen. That takes an integrated and costly service or 3rd party partnership to happen. The knock offs won't touch the leading edge at all. Cheap HD TVs, etc etc ... sure ... but any of the new innovation, even if the Chinese manage to patent troll/steal won't be able to copy what is being done.

I think the effect will be negligible. Tech probably isn't going to be as lustrous as say energy or maybe bio/pharm ... but it looks like it will hold. The complex products of today take huge coordinated effort to produce. Unlikely a few factory theft and grey market manufacturers will compete at all.

Rew says

You think tech will crash, trend down, because knockoffs will flood the market taking out Goog, Sam, and Apple?
...
I'd like to see a knock off with integrated cloud, store, or automotive integration hit the market. Hint: cannot happen.

...I think the effect will be negligible. Tech probably isn't going to be as lustrous as say energy or maybe bio/pharm ... but it looks like it will hold. The complex products of today take huge coordinated effort to produce.

Thomas, you are old and jaded and you just don't get it.
It's different here.
It's different this time..

thomaswong.1986 says

Nada... not even close! so in fact they are overpaid in their projects and product innovation. Seems to me many are just collecting a pay check.

Well, they don't spend all day posting on patrick.net.

Just like Xenogear, Wong is a last name.
He will not change it even he was born in US.

FunnyBayAreaBuyer says

What would you recommend me?

1) Wait for a 5% decrease in good school districts, then buy

2) Wait for a 10% decrease in good school districts, then buy

3) Wait for a 25% decrease in good school districts, then buy

4) Wait for a 30% decrease in good school districts, then buy

5) Close your eyes, take a deep breath, and just buy! now! overbid everyone!!

Obviously it depends (a lot) on your situation and why you are buying. If it is for investment purposes primarily, you have to evaluate your plan with some assumptions about the future. If you are going to live there, and owning a house is important for whatever non-investment reason, you have to evaluate against that.

Interest rates aren't as important if you are going to flip it in a market that is going up, but overpaying could be a big deal....if you hold it for 20 years, a 1% interest rate change might be more important than a seemingly significant price swing...etc

For me it was a mix -- I wasn't necessarily looking for an investment but I didn't want to make a bad financial decision. I had to find a place that "worked" for my family, and the requirements (price, school district) we had drastically limited the inventory that was available to us. I did *not* want to pay for someone else's flip -- I don't mind paying their profit on the job, but they typically make decisions that I wouldn't make....why pay for that? Also I enjoy projects, so a house that needed some work was a plus in that way.

In the end we feel fortunate to have found a place that was within our budget, in the school district we are currently in, and hadn't been ruined by a flipper....It wasn't ideal in every way, but we are thrilled with it. In hindsight we almost missed out -- we were too timid, underbid the market, and only by some luck were able to secure the deal. I fretted and obsessed about interest rates, prices, trends, owner's equivalent rent, tax deductions, opportunity costs etc....I should have focused more on the emotional stress that we were enduring by being in house limbo for so long (committing to renting long term would have been an OK option too...it was the uncertainty that was a problem)

If I had it to do over? I'd worry less about the financial side (still being prudent, of course) and more about finding the right house. I'd be more aware of the emotional cost of being in limbo, and I would put more weight on acting sooner rather than waiting for some possible price drop in the future.