patrick.net

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.

B.A.C.A.H. says

Your nightmare scenario will create a shortage of housing and make the rents go up even more.

And? I would lose at most 1 month rent. I'd probably stick around and help the owner pick through the pill trying to collect my stuff for a while though. I'd rather he did all the financial heavy lifting and I just get a workout and feel like I'm helping as well. ;)

Has this forum gotten so desperate to find reasons why not to buy as having to go to the earthquake scare?

B.A.C.A.H. says

Your nightmare scenario will create a shortage of housing and make the rents go up even more.

That is if there is still anyone left who would want to live here. Rents in Chernobil are not scheduled to go up for another 348,000 years.

SubOink says

Has this forum gotten so desperate to find reasons why not to buy as having to go to the earthquake scare?

As opposed to the "rates are going up", "you will be priced out forever", and my favorite "real estate never goes down" scares?

Whoever says that there is no risk of earthquakes in Northern California is a fool. Remember the saying about fools and money.

Helloeeze says

Your doomsday knickers are showing, people. Why not just let the housing charts speak for themselves. Prices have gone down. That should make you happy. You dilute your argument with all this earthquake/Chernobil talk.

This whole things started by some realtor saying that renting insurance is the same as owners insurance. It is not by a mudslide. Here is what he was really doing.

RentingForHalfTheCost says

SubOink says

Has this forum gotten so desperate to find reasons why not to buy as having to go to the earthquake scare?

As opposed to the "rates are going up", "you will be priced out forever", and my favorite "real estate never goes down" scares?

Whoever says that there is no risk of earthquakes in Northern California is a fool. Remember the saying about fools and money.

You could say the same thing about tornadoes in Ohio. I lived there thirty years and have never been in one.

What this is about is (yet again) what Michael Bloomberg and Judd Gregg have been saying for years. There will be certain places in the United States that are not affordable for middle class people in which to live. The Bay Area is most certainly in that category.

rootvg says

There will be certain places in the United States that are not affordable for middle class people in which to live. The Bay Area is most certainly in that category.

This is a bitter, bitter pill, but I am slowly swallowing it. It is extra hard to do since I grew up here, more than 80% of my family is here and I love that the weather enables me to go outdoors year-round. Unfortunately, RE here is a sick game designed to milk every last penny out of middle-class folks, and I will not be so foolish as to try to play. None of the players of this game actually win; it has been devised for the service and pleasure of the large interests that run it (NAr/CAr, state & local government).

RentingForHalfTheCost says

As opposed to the "rates are going up", "you will be priced out forever", and my favorite "real estate never goes down" scares?

It's been a long time that I have heard anybody say that...other than the bears quoting it from 6 years ago.

Show me a recent thread where anybody posts that, other than you rephrasing it.

The earthquake scare on the other hand was actually mentioned. And the doomsday cannibal anarchy scare gets mentioned in about every post. The prices will go down forever scare happens every day. And 1975 prices coming to your neighborhood too.

You don't realize just how similar you are to the old "prices will go up forever".

Maybe that's the biggest sign of a recovery. When the dow was at 6500, everyone said it was going to 1000.

But it didn't. It's now double that. Despite cannibal anarchy.

I got a feeling the anarchy won't happen, but don't bite the messenger now...:)

bmwman91 says

rootvg says

There will be certain places in the United States that are not affordable for middle class people in which to live. The Bay Area is most certainly in that category.

This is a bitter, bitter pill, but I am slowly swallowing it. It is extra hard to do since I grew up here, more than 80% of my family is here and I love that the weather enables me to go outdoors year-round. Unfortunately, RE here is a sick game designed to milk every last penny out of middle-class folks, and I will not be so foolish as to try to play. None of the players of this game actually win; it has been devised for the service and pleasure of the large interests that run it (NAr/CAr, state & local government).

I hear you. It is a pure freak of nature that my wife and I are here. We're in tech and built our resumes to the point where no one else could afford us. That's what happens when you're from the midwest and they pound it into you that you should focus and work your ass off and hope for the best. You end up in a place you don't think you can afford (we can, on paper) and with a culture you barely understand. It's hard to keep the values we grew up with here. It's damn near impossible.

rootvg says

We're in tech and built our resumes to the point where no one else could afford us. That's what happens when you're from the midwest and they pound it into you that you should focus and work your ass off and hope for the best. You end up in a place you don't think you can afford (we can, on paper) and with a culture you barely understand. It's hard to keep the values we grew up with here. It's damn near impossible.

I hear you there. I lived in Santa Rosa (North Bay) for 3 months due to a job. I quickly realized there was no future there for me: a totally foreign culture and shacks going for half a million.

CA is a great place to visit, like New York City. Not a place for your average middle-class person to live.

rootvg says

You could say the same thing about tornadoes in Ohio. I lived there thirty years and have never been in one.

The same logic as my Dad used to use on me when I was training in college towards my first national title. He really didn't understand exercising, so justified it by saying that he heard of someone who died in a marathon from a heart attack. That then excused himself from keeping fit. So, just because people have lived for 30 years in a high risk area, doesn't mean it is suddenly riskless. I am not saying it will happen soon, what the hell do I know. However, I am saying there is a risk, and you need to do some research and give the proper energy to the risk. Earthquake insurance seems like a no brainer to me. If you disagree then send me an email a few days after the big one, if it hits, and see if it has changed your mind. Your life.

A lot of people are probably betting the Federal Gummint will ride to the rescue after the "big one" hits.

Sort of like how the banks were betting the Gummint would bail them out if they took huge risks. And they were right.

SubOink says

It's been a long time that I have heard anybody say that...other than the bears quoting it from 6 years ago.

I just went to an Open House 2 weeks ago and got fed the vomit by a realtor. I wish what you said above was true. I wish people talked about risk, about the real problems. There are times and situation where buying makes sense, absolutely. However, most realtors wouldn't know them if it hit them in the face.

bob2356 says

Did you actually read the report, not the summary? You are really basing you argument on this? The 25% number include multi family, mostly apartments. Lots of multi family. Everyone here is talking single family houses. Your contention is 25% of homeowners will lose their homes.

Not only that their own examples don't support the 25% damage to private homes number.

My contention? So, in your 30 minutes you just poked a bunch of holes in a report done by some of the best in the field. Your incredible. Not believable, but incredible. Keep on your blinders. It'll do you well in life.

Crazy talk from all realtors and home owners. I'll feel for the innocent when this crap hits the fan, but for you and others that think their decision are so great to buy. You deserve it!

RentingForHalfTheCost says

Earthquake insurance seems like a no brainer to me. If you disagree then send me an email a few days after the big one, if it hits, and see if it has changed your mind. Your life.

Earthquake insurance only makes sense if you have more equity in your home than the ultra-high deductible. (Which runs $40K-80K). So say you have $60K in damage to your home from an earthquake and for 10 years were paying $1K a year for insurance.

The earthquake insurance still wouldn't cover squat and you'd be out $70K.. ($60K repairs + $10K in premiums).

If you own the home outright or have a very large equity stake.. THEN earthquake insurance makes sense. Otherwise you just walk away... accept your FEMA aid... and start with a CLEAN SLATE when the big one hits.

Maybe rent for 5 years and then buy when the housing shortage really kicks in when people start forgetting and migrating back to CALI, and half the homes aren't habitable and rents and homes skyrocket.... after being rebuilt with even better earthquake resistant codes.

BoomAndBustCycle says

If you own the home outright or have a very large equity stake..

But but but. There was a big argument back a few weeks ago saying that people with no equity (mortgage) do own their home? I'm confused. From what realtors tell me these are the different stages of housing.

Rent - own nothing, you are useless
Own - have no to some equity but large mortgage
Close to own outright - large equity and little mortgage
Own outright - house with no mortgage

I like my definitions better

Rent house
Rent money to use house while saving so one day you 'own house'.
Own house

Simple and makes more sense.

Own outright sounds like I am left outside in the cold. Brrr...

BoomAndBustCycle says

than the ultra-high deductible.

Spoiler ALERT!!! There are people that are paid to analyze risk. You know the ones trained in looking at probabilities, historic similar situations, analyzing liabilities and expenses, etc. etc. That is what they studied, not the any fool can pass the realtors exam. When they say that in order to provide you insurance there needs to be a high deductible, then what they are telling you hints at their conclusions. Listen to them as opposed to the realtor that wants/needs you to buy. There is money (their money) behind their conclusion. There is also money (your money) behind the realtors views. Let the realtor do what their job (not really sure what that is, but maybe something), and let the insurance company do their job. Insurance companies manage risk, that is their business model. If they have a high deductible it is for a reason. Beware.

SubOink says

I got a feeling the anarchy won't happen, but don't bite the messenger now...:)

Yah, lets ignore the giant elephant in the room. The US Debt that just won't stop growing. You don't think this will have an effect on housing? It is growing trying to stop housing from collapsing. At some point we have to pay the price for that and housing will not be spared.

http://www.usdebtclock.org/

RentingForHalfTheCost says

here are people that are paid to analyze risk. You know the ones trained in looking at probabilities, historic similar situations, analyzing liabilities and expenses, etc. etc.

Only 12% of Californians own Earthquake insurance... that might have SOMETHING to do with the high deductible. Imagine how high automobile insurance deductibles and premiums would be if only 12% owned car insurance.

And the Northridge Quake in CA happened in 1994... That put a lot of downward pressure on Real Estate in Los Angeles in 1994-1997... Which makes the 1997 values that so many quote as "FAIR prices"... more likely a post-disaster drop below fair value.

The funny thing is if prices fall to 1997 prices in Los Angeles.. We are really at 1989-1990 prices. Home prices in 1989-1990... were higher in most areas than 1997.

So in reality, home prices in Los Angeles, if we keep dropping will fall back to 1989 prices BEFORE 1997 prices... wrap your head around that!

RentingForHalfTheCost says

But but but. There was a big argument back a few weeks ago saying that people with no equity (mortgage) do own their home? I'm confused.

I recall that argument as well. ;-)

How does house insurance work? If I only own 10% of the house, than do I have to insure 100% of the house or 10% of the house? I thought I had to insure 100% of the house, even if I only had 10% equity.

wthrfrk80 says

How does house insurance work? If I only own 10% of the house, than do I have to insure 100% of the house or 10% of the house? I thought I had to insure 100% of the house, even if I only had 10% equity.

I'm really confused. Because earlier in the thread Renting made a big point about the difference between homeowner's insurance and renter's insurance. If I have a mortgage, shouldn't I be buying renter's insurance??

BoomAndBustCycle says

So in reality, home prices in Los Angeles, if we keep dropping will fall back to 1989 prices BEFORE 1997 prices... wrap your head around that!

Me likey. 1989 here we come!

I guess if you're worried about earthquakes, live in a mobile home. They have shock absorbers to smooth out any "bumps." ;-) And CA doesn't get too many tornadoes.

RentingForHalfTheCost says

Me likey. 1989 here we come!

If you add the past 23 years of inflation... to 1989 home prices... We may already be there.

My neighbors bought their home in 1983 according to Zillow. They paid $130K...

Zillow estimates the home to be worth $410K today.... that's an annual rate of 4% inflation...

Maybe a tad high, but not by a ridiculous amount... I'd say 3% appreciation isn't outlandish for premium cities, so maybe 4% appreciation is fair.

RentingForHalfTheCost says

I just went to an Open House 2 weeks ago and got fed the vomit by a realtor

Big surprise! A realtor tells you to buy a house...he gets paid that way. HELLO?

That doesn't mean you have to listen to it. A dentist wants to drill and fill holes, a showmaker wants to make shoes...an aspect of life, you gotta take everyone's opinion with a grain of salt, especially those that have an agenda. Mortgage brokers, realtors, doctors, insurance reps...blablabla

Everybody wants to make a living. It's your job to figure out what's best for you.

But just because realtors all wanna sell sell sell...doesn't mean buying isn't a good option if it makes financially sense in your own situation.

BoomAndBustCycle says

If you add the past 23 years of inflation... to 1989 home prices... We may already be there.

However, 1989 was the peak where prices declined 20-40% in various metros nationwide. After 1989 foreclosures spiked for several years. So skip using 1989 as base and look to mid 90s (1995-97) as a starting point.

thomas.wong1986 says

After 1989 foreclosures spiked for several years. So skip using 1989 as base and look to mid 90s (1995-97) as a starting point.

So Agree. But I'm not sure if prices will go that low, the fraudsters have done a pretty good job so far.

Yes, they are trying.. but even when we didnt have the intenet back in 1989-95 they couldnt stop the market from melting down.

it happens...$160 * 1.35 = $216 another 50K to go or so..

mid 90s prices... $160K

http://archive.dqnews.com/AA1997SCA05.shtm

inflation 35-40%

Current ...$264

http://dqnews.com/Articles/2012/News/California/Southern-CA/RRSCA120314.aspx

http://www.housingbubblebust.com/OFHEO/Major/SoCal.html

thomas.wong1986 says

However, 1989 was the peak where prices declined 20-40% in various metros nationwide. After 1989 foreclosures spiked for several years. So skip using 1989 as base and look to mid 90s (1995-97) as a starting point.

I did one better.. I went back to 1983.. (pre-late 1980s run up)... Like I said, my neighbors home sold for $130K back in 1983.. and is Zillow priced at $410K today. A pretty fair price considering it's 30 years later and assuming 4% annual appreciation.

Couldn't 1997 be an OVERSHOOT to the panic sell side? If historically we ALWAYS overshoot to the downside.. Then 1997 is by no means a starting point.. but a post-quake, post-bust, overshoot to the downside.

BoomAndBustCycle says

Couldn't 1997 be an OVERSHOOT to the panic sell side? If historically we ALWAYS overshoot to the downside.. Then 1997 is by no means a starting point.. but a post-quake, post-bust, overshoot to the downside.

Depends where you live..

I would say on the surface.. Florida looks appealing.

http://www.housingbubblebust.com/OFHEO/Major/Florida.html

SubOink says

RentingForHalfTheCost says

I just went to an Open House 2 weeks ago and got fed the vomit by a realtor

Big surprise! A realtor tells you to buy a house...he gets paid that way. HELLO?

That doesn't mean you have to listen to it. A dentist wants to drill and fill holes, a showmaker wants to make shoes...an aspect of life, you gotta take everyone's opinion with a grain of salt, especially those that have an agenda. Mortgage brokers, realtors, doctors, insurance reps...blablabla

Everybody wants to make a living. It's your job to figure out what's best for you.

But just because realtors all wanna sell sell sell...doesn't mean buying isn't a good option if it makes financially sense in your own situation.

Very well said.