patrick.net

RentingForHalfTheCost says

Yah, but Shiller doesn't live in the Cupertino, Phoenix, Las Vegas, Fremont, San Francisco, etc.

Don't forget Philadelphia, Houston, San Jose, or San Antonio. You know, 4 of top 10 cities (by population) in the U.S.

As Paul Krugman famously concluded (and somehow played Captain Obvious and won a Nobel Prize for it), people move towards big cities for jobs. Guess what? Some of these people will desire houses as well. Why these cities aren't included in the Mr. Shiller's Housing "Index" is beyond me.

It would be very helpful to add the aforementioned cities. This would help track housing trends correlating data based on the 50 largest cities in the U.S. It should be updated every 10 years via the latest U.S. Census Bureau data. This information would be more relevant to more people.

Take a look at either the Top 10-City or Top 20-City Composite Housing Index. It's just a chart run by idiots and consumed by popular media outlets as the unquestionable de facto standard for housing information.

Shiller and crew are a bunch of idiots. This is why I visit patrick.net instead.

K Dub says

As Paul Krugman famously concluded

Paul who ? You better read up on Shillers books.. Shiller was way ahead of many back during the dot.com and housing bubble. Even as late as 1999 Shiller spoke about SF and Boston area showing a disconnect between RE prices and Incomes/Inflation.

All Kruman came to be was the left wing media's darling boy in economics but didnt make any analysis or conclusion as Shiller did that prices would fall.

fewy says

A dual income family with only one person employed in the tech sector should be able to afford a 500k to 600k home.

We have had dual income families for decades.. still even during the best decade of growth 1980s.. Prices did not skyrocket as they have post 2000.

WHY ?

SubOink says

Insurance? My homeowners insurance = what my renters insurance used to be. Same shit. ($1000/year)

If you been around during the Northright earthquake in the early 90s. You would know, that isnt going to even cover a $250K home. Now how is that going to cover a home with market value of $500K or more. You the home owner will have to put up the difference... What happened to the Ins. companies back in the 90s.. they went belly up !

Helloeeze says

I put some stock in his charts though. He has been right the last few years.
Still, around the Bay Area most homes sell quickly at asking prices (which are lower than the peak, sure) But in good areas house will sell at 2005 prices easily. Whether those buyers later on will regret buying in 2012, we will have to wait and see.

DQNEWS.com

Santa Clara and San Mateo County declines vs last year

Sept-11 SCC down -6.0% SMC down -3.6%
Oct-11 SCC down -10.4% SMC down -6.5%
Nov-11 SCC down -1.5% SMC down -9.6%
Dec-12 SCC down -4.3% SMC down -10.7%
Jan-12 SCC down -4.8% SMC down -7.8%
Feb-12 SCC down .7 % SMC down -4.6%

Another 25% drop, back to 1997 prices where the bubble started, + inflation and we will be at the bottom.

But that is too much for some to accept..

Just like the dot.com aftermath, the RE agents here are still believing .. IT WILL COME BACK... 10-20% annual appreciation ! thats what their thinking..

I bet they will prematurely age 10 years worring about it...

fewy says

RentingForHalfTheCost,

A dual income family with only one person employed in the tech sector should be able to afford a 500k to 600k home. Even with 5 years of experience this family should be making 150k a year, if they have ten years of experience I would say that would be around 200k. With those incomes and maybe some sort of down payment this house falls into the historic 3x annual salary range.

I would absolutely agree with you and also be a potential buyer in this market. If we didn't have this one little thing to work out. The little shadow being cast over us called distressed homes (on or off the market). I won't even attempt to put a number on it, because truth is so distorted here that the proof will be in the next few years. I don't think the Bay area is in the clear here. It was part of the problem and will suffer for it in my view. There are a lot of people that have the opportunity to buy here, absolutely. Not nearly enough to offset the failures in home finance that exist though. I could be wrong, this place might be so special, blessed with holy water, sun shining even in the worst of times, but I don't think so. Hence, I'll keep renting and saving.

Worse case for me if I am wrong, is I just move away (many options) and buy something with value. I'll leave this place for the blessed. ;)

thomas.wong1986 says

Helloeeze says

I put some stock in his charts though. He has been right the last few years.

Still, around the Bay Area most homes sell quickly at asking prices (which are lower than the peak, sure) But in good areas house will sell at 2005 prices easily. Whether those buyers later on will regret buying in 2012, we will have to wait and see.

DQNEWS.com

Santa Clara and San Mateo County declines vs last year

Sept-11 SCC down -6.0% SMC down -3.6%

Oct-11 SCC down -10.4% SMC down -6.5%

Nov-11 SCC down -1.5% SMC down -9.6%

Dec-12 SCC down -4.3% SMC down -10.7%

Jan-12 SCC down -4.8% SMC down -7.8%

Feb-12 SCC down .7 % SMC down -4.6%

Another 25% drop, back to 1997 prices where the bubble started, + inflation and we will be at the bottom.

But that is too much for some to accept..

But Apple just release that they are paying a dividend? I don't get it. Apple should just buy all the distressed homes in Santa Clara and put the skip back into the Realtors stride. Their leases on the ML500's have to be coming due soon. It will be like the option squeeze in the market. You thought they were dirty before, wait until they are in jeopardy of losing their sweet ride. Yikes.

RentingForHalfTheCost says

Hence, I'll keep renting and saving

For many of us, "renting and saving" is not really an option. Right now our rent is equivalent to PITI on a similar house. This is only now true, as I have been waiting and renting for more than a decade.

13 years renting the same SFH and 250K to the landlord, who is not a nice person by any stretch of the imagination.

1sfrenter says

RentingForHalfTheCost says

Hence, I'll keep renting and saving

For many of us, "renting and saving" is not really an option. Right now our rent is equivalent to PITI on a similar house. This is only now true, as I have been waiting and renting for more than a decade.

13 years renting the same SFH and 250K to the landlord, who is not a nice person by any stretch of the imagination.

My landlord is a great guy, self made millionaire who hates to see us leave but understands we have to do what we have to do. I might even succeed at turning his son into ham radio operator. There was a thirty foot radio tower at the property we rented that I didn't even know about.

1sfrenter says

For many of us, "renting and saving" is not really an option. Right now our rent is equivalent to PITI on a similar house. This is only now true, as I have been waiting and renting for more than a decade.

Similiar circumstance here. First, I feel that I am being punished for making a good real estate decision by selling at a good time before and now with the little inventory available at the highest price possible, basically, the banks balance sheet wish list price. My point is is that it would be in my best financial interest to buy something where my monthly payment is LESS than rent.

I had this in Dallas for awhile. Would you believe a stranger actually called me while I was there and said 'oh no, you can't do this, everyone has a mortgage, it's tax deductable' True story.

More whining because I am blocked, sorry.

thomas.wong1986 says

SubOink says

Insurance? My homeowners insurance = what my renters insurance used to be. Same shit. ($1000/year)

If you been around during the Northright earthquake in the early 90s. You would know, that isnt going to even cover a $250K home. Now how is that going to cover a home with market value of $500K or more. You the home owner will have to put up the difference... What happened to the Ins. companies back in the 90s.. they went belly up !

So, basically your advice is - don't buy a home because if an earthquake happens that wipes out your house 100%, you may be screwed?

Good advice....Not.

SubOink says

thomas.wong1986 says

SubOink says

Insurance? My homeowners insurance = what my renters insurance used to be. Same shit. ($1000/year)

If you been around during the Northright earthquake in the early 90s. You would know, that isnt going to even cover a $250K home. Now how is that going to cover a home with market value of $500K or more. You the home owner will have to put up the difference... What happened to the Ins. companies back in the 90s.. they went belly up !

So, basically your advice is - don't buy a home because if an earthquake happens that wipes out your house 100%, you may be screwed?

Good advice....Not.

Don't understand why that is not "good advice". What is money management if it is not about managing the risk. Earthquake is a risk and it needs your attention if you own a place in the BA. I wouldn't be hoping for the best here if I owned. I would pay to make sure my home is protected. Are you saying I shouldn't?

RentingForHalfTheCost says

Don't understand why that is not "good advice"

Advising not to buy because an airplane could crash into your home, is not good advice inmho.

SubOink says

So, basically your advice is - don't buy a home because if an earthquake happens that wipes out your house 100%, you may be screwed?
Good advice....Not.

Nope! my advice is for buyers to sober up and offer much much less than the stupid bubble prices.

SubOink says

- don't buy a home because

You really are a FU realtor arent you ? Pathetic...

To add every part of the country has something. Earthquakes, snow, hurricanes, mudslides, dust storms etc.

It could be debated about the "big one" but then again they'd do the same debate in Japan.

Some things can be predicted but I doubt that quakes really can that accurately. I used to think that inches of snow would be the most I would see but last year and the seasons before it was in feet. Roofs started collapsing in some areas.

thomas.wong1986 says

SubOink says

- don't buy a home because

You really are a FU realtor arent you ? Pathetic...

What is a FU realtor?

SubOink says

2500/m over 30 years = 900k in rent spent. That is, if you don't have a rent increase EVER. Highly unlikely to go 30 years without rent increase. After 30 years you practically spend a million bucks. Remember, you still have to live somewhere when you retire...meaning...keep paying rent.

From a cost point of view, renting may not really save you money. However, the reality is that job security is a major issue nowadays. If I can pay minimal down payment in a non-recourse state, I may have jumped the gun. But that is not the case.

thomas.wong1986 says

To somehow infer, your rental insurance is the same as a CA SFH earthquake insurance is dishonest .. serious REA misinformation

Completely wrong Thomas! And it goes to show you how you take something and just roll with it.

Here is what I wrote:

SubOink says

Insurance? My homeowners insurance = what my renters insurance used to be. Same shit. ($1000/year)

FYI, homeowners insurance is NOT earthquake insurance. Earthquake is a second optional policy.

thomas.wong1986 says

Yes that that was under 1989 prices. Now factor in the same homes/property with market values 6-8x more.. We were very lucky we didnt have the big ones happen in 2006-2008. And what would the total damage cost $$$ come to and who would pay for it ?

Single family homes have almost no risk of earthquake damage unless they straddle the fault line or are sitting on fill no matter what they cost. What part of this don't you get?

SubOink says

RentingForHalfTheCost says

Don't understand why that is not "good advice"

Advising not to buy because an airplane could crash into your home, is not good advice inmho.

It absolutely is 'good advice' if your house was built at the end of a major runway. Risk is there in everything, we just need to give it the proper level and hedge against it if needed. I would not in a million years own a home here in the BA without answering how much risk there is in an earthquake causing me financial distress. The way most houses are built around here, that risk is real.

"Ahh, it is only a tiny amount of houses that will be damaged. Nothing to worry about. Sign here quickly, I don't like having my M-class parked in this neighborhood"

bob2356 says

thomas.wong1986 says

Yes that that was under 1989 prices. Now factor in the same homes/property with market values 6-8x more.. We were very lucky we didnt have the big ones happen in 2006-2008. And what would the total damage cost $$$ come to and who would pay for it ?

Single family homes have almost no risk of earthquake damage unless they straddle the fault line or are sitting on fill no matter what they cost. What part of this don't you get?

The part where you are lying.

thomas.wong1986 says

All Kruman came to be was the left wing media's darling boy in economics but didnt make any analysis or conclusion as Shiller did that prices would fall.

Krugman called a bubble in Housing in 2005:
http://www.nytimes.com/2005/05/27/opinion/27krugman.html

At the time, the usual Krugman bashers explained that Krugman just wanted to make shit up so Bush would look bad:
http://www.powerlineblog.com/archives/2005/08/011131.php

RentingForHalfTheCost says

"Ahh, it is only a tiny amount of houses that will be damaged. Nothing to worry about. Sign here quickly, I don't like having my M-class parked in this neighborhood"

If I were buying a Mercedes, the E-class is what I would want. They're primarily used as taxis in Germany with an ample supply of OEM parts both here and overseas. It's a German Crown Victoria.

I'm starting to sour on BMW. Their quality is slipping.

rootvg says

I'm starting to sour on BMW. Their quality is slipping.

Dude, tell me about it. The new ones are fat pigs that have lost most of their sporty character. The new 1 series is sort of a step in the right direction. Sadly, since the biggest market is soccer moms & status-seeking douchebags, their products have steadily been transforming to cater to that segment since ~2000.

I love my 21 year old 3 series. It is light, slightly underpowered, well built and fun to drive. There is a reason why I have been driving one for the last 11 years! The new ones are nice, but after a few years they have nothing but problems (electronic mostly, and the interiors don't hold up all that well). BMW still makes some of the finest engines out there, in my opinion, but I wish that the cars that they were attached to were 1500lbs lighter, with less silly features, no silly LCD displays in the center console, and none of this electronic throttle crap. Give me a good old mechanical/cable-operated throttle so I can FEEL the engine! Electronic throttles feel like nasty wet sponges, and they offer no tactile feedback.

I also wish that they would make some light, high-revving 4 cylinder models (or at least import them to the US) like the E30...a real enthusiast's car. No bells & whistles, just a solid engine, a sensitive steering system and a small & light chassis. Manual transmissions are mandatory.

thunderlips11 says

thomas.wong1986 says

All Kruman came to be was the left wing media's darling boy in economics but didnt make any analysis or conclusion as Shiller did that prices would fall.

Krugman called a bubble in Housing in 2005:
http://www.nytimes.com/2005/05/27/opinion/27krugman.html

At the time, the usual Krugman bashers explained that Krugman just wanted to make shit up so Bush would look bad:
http://www.powerlineblog.com/archives/2005/08/011131.php

Homo Economicus. A Legendary Creature, like Bigfoot, claimed to exist by Pseudoscientists.

Krugman is actually keen in terms of pointing out the problems. His issue is that he has ONLY ONE solution, which is runing more government deficit.

What I want is a German diesel SUV and I'm leaning toward the Mercedes over the BMW.

Then again, if I suddenly became wealthy I might opt for an American SUV simply because I know they're comfortable and trading or selling them every three years wouldn't hurt my bank account. The Americans DO make a solid truck but the long term expectation for build quality isn't the same.

Now, if MB brought the diesel GWagen stateside...THAT is a vehicle.

BMW has plans to bring a twin turbo four cylinder 5-series with manual transmission to the United States. They're being forced to by the EPA.

Depending on the price, I might be interested in one for my commute.

Renting,

Are you a local kid? Doesn't sound like it.

Your nightmare scenario will create a shortage of housing and make the rents go up even more. All the reconstruction will cause delays and bottlenecks for the homeowners but will also be an opportunity for all sorts of upgrades and deferred maintenance, which is what happened from the quake and also after the Oakland Hills fire.

You can pay for earthquake insurance to mitigate your financial disaster. The premium is not cheap and it is a sh*tty policy but it will prevent your property damage from wiping you out. Think of it as just another aspect of the high cost of housing in the region.

thunderlips11 says

Krugman called a bubble in Housing in 2005:
http://www.nytimes.com/2005/05/27/opinion/27krugman.html

no, he quoted both steven roch and shiller.. and wrote an opinion in a news paper... but did not do any analysis or the leg work to make that conclusion.

rootvg says

I'm starting to sour on BMW. Their quality is slipping.

actually the early model 300s like BMWman shows is fairly cheap.. and the engine is pretty solid. A good solid car to have and fun to drive... yes fun!

Nuff said, buying is cheaper than renting tO me in my neighborhood. Shut the hell up, you have no clue. To me, buying cheap and nice house is the most thing ever. Fuck renting. Those rental SFR are usually shitty.

thomas.wong1986 says

rootvg says

I'm starting to sour on BMW. Their quality is slipping.

actually the early model 300s like BMWman shows is fairly cheap.. and the engine is pretty solid. A good solid car to have and fun to drive... yes fun!

My wife had an '87 325 with manual transmission right after college. I swear it was bulletproof. I loved that car.

RentingForHalfTheCost says

Their leases on the ML500's have to be coming due soon. It will be like the option squeeze in the market. You thought they were dirty before, wait until they are in jeopardy of losing their sweet ride. Yikes.

http://www.makemiamihome.com/

This Realtard makes me want to puke.

Clara says

Nuff said, buying is cheaper than renting tO me in my neighborhood. Shut the hell up, you have no clue. To me, buying cheap and nice house is the most thing ever. Fuck renting. Those rental SFR are usually shitty.

Yah, renting money has no strings attached. If you are really lucky you can squat for years and just wait for them to tear gas you out of your shack.

B.A.C.A.H. says

Renting,

Are you a local kid? Doesn't sound like it.

Your nightmare scenario will create a shortage of housing and make the rents go up even more. All the reconstruction will cause delays and bottlenecks for the homeowners but will also be an opportunity for all sorts of upgrades and deferred maintenance, which is what happened from the quake and also after the Oakland Hills fire.

You can pay for earthquake insurance to mitigate your financial disaster. The premium is not cheap and it is a sh*tty policy but it will prevent your property damage from wiping you out. Think of it as just another aspect of the high cost of housing in the region.

I'm as local as most around here. I'm definitely on the conservative side when it comes to my high priced items. I wash my own car to make sure the paint doesn't get killed. I park away from other cars to avoid getting dinged. I don't mind the extra time it takes me for these things. It protects my large purchase items. I have and would treat a house purchase with even more care. Does it mean I am cheap? Not at all. I put good money into tipping, into charity, into eating well and living well. Assets are just assets to me. I'd rather overpay for service or better quality. I love that I live like this. I wouldn't change it for anything.

I witnessed many people around me losing their homes during the 80's. Good people who really couldn't understand what a 15-18% interest rate meant, until they couldn't afford their payment. That was when I was a teenager and winning national math competitions. How adults couldn't take the time to use a scientific calculator when they were playing with leveraged money just amazed me. The need for greed just overpowers everyone. I am still amazed today, some 30 years later. On one hand I am very sad that more good people are now losing everything, but on the other we need this to survive. My worse fear is that we keep putting lipstick on this pig for the next 20 years. It could happen. 3 lost decades of growth for the US would be a disaster.

Nice snippet from the berkeley link I referenced in the "Lessons Learned" section. That was 15 seconds folks. And in 1989 before the huge run up in prices. Even God couldn't help us if that same or worse things happens today.

Don't believe the realtors here trying to downplay the risk. It is real and needs attention and risk management. Otherwise, you are living on hope.

"The Loma Prieta earthquake deepened an already existing housing crisis in the Bay Area. Many home owners and multi-family building owners were probably carrying as much debt as the property could carry, and could not afford to take further loans to rebuild or rehabilitate the property. It was apparent that the normal single-family housing-oriented recovery programs would not be sufficient to enable real housing recovery. Furthermore, because the earthquake hit hardest in areas of concentrated multi-family low-income housing, the market was not able to provide alternative or replacement housing at affordable rents, without some assistance from the public. Overall, only 40% of the housing losses were served through the normal disaster assistance process, and 60% can be described as a residue of unmet needs. Of these, half found some assistance through the one-time solutions, but these are not models for future disaster relief and recovery programs."

If we have a Loma Prieta earthquake at peak prices, only damaging similar number of homes and property it would bankrupt many parties, families, insurance companies, and industries. Your dealing with highly inflated values...

Whats the damage come out to.. Trillions! and who is going to pay or would want to pay for damage in Fortress areas of Marina or Palo Altos... Who would pay for a fire in Beverly Hills.

RentingForHalfTheCost says

Nice snippet from the berkeley

Yes.. a sobering period afterwards...and for some who were here, do not want to see a repeat.