patrick.net

I will:

F: start shorting the banks that hold the mortgages

I will do what wthrfrk80 is doing. Fundamentals will assure that another "bubble" can only be temporary.

A lot of people will simply move.

wthrfrk80 says

I will:

F: start shorting the banks that hold the mortgages

Same here, of course I don't live in the BA. But the way this state is ran I wouldn't be surprised if many will want to abandon it simply.

IBM has job openings in San Jose and San Francisco on a regular basis that can't be filled. Most of their people can't afford to live in the area.

Things aren't gonna change. There's no reason. The trust fund babies are still here. The wealthy Baby Boomers are still here. The Berkeley profs who live in Orinda and Lafayette are still here.

If anything, the property situation and income disparity are likely to get worse.

There's too much money here...but that's how it is. Been that way for years.

wouldn't do anything different.

1. keep renting
2. keep investing the extra money i save by renting, in stocks and bonds

i make good money. rent is cheap. no reason to change my strategy.

I think this is just a spring bump up that will not last. Yahoo laying off thousands of workers will balance out the facebook IPO.

We are looking, but will keep renting til we find exactly what we want. We are looking in the 400-600K range in the city and I have been following very closely.

There is a shadow inventory out there and banks are sitting on vacant homes, even in desirable places within San Francisco.

Everyone who bought between 2004 and 2008 is underwater, to the tune of 100K or more.

The only reason we are seeing bidding wars is because realtors are listing places for under what they know they will go for. There are plenty of places that are sitting fort 30, 60, 90+ days.

1sfrenter says

The only reason we are seeing bidding wars is because realtors are listing places for under what they know they will go for. There are plenty of places that are sitting fort 30, 60, 90+ days.

Well the thing is that even though the realtor was trying to insinuate that things were heating up, there are a lot of houses that have been sitting, sometimes for a marked period of time. Now- granted most have now sold and some seemingly more recently. But some had been sitting for 6-9 months.

At least in the area we live in it seems that there are homes that will sell, but only at a certain price. Anything that's north of 500k seems to sit. Anything over 600k sits for quite a long time. Perhaps I find this a bit comforting. My wife and I make a dual 6 figure income and there's no way I would touch anything over 500k. Otherwise our mortgage- even with a big down payment- would be a lot more than we're paying in rent. Perhaps others are feeling the same and thus the reason why only houses that aren't crazy expensive are selling.

Hysteresis says

rent is cheap

Rent is FAR from cheap... Last I checked rents were at a historic all-time high and increasing.

Rent isn't cheap as it was. Our situation is unique in that we've lived in the same house 9 years with no rent increases. But even if we rented now it wouldn't take much of a house in the BA to suddenly pay a lot more than renting the same house, and that's also after adding in a down payment.

BoomAndBustCycle says

Hysteresis says

rent is cheap

Rent is FAR from cheap... Last I checked rents were at a historic all-time high and increasing.

i wasn't speaking for you. i was speaking for me.

rent -for me- is cheap.

rent is cheap relative to my income, and relative to the cost of housing in my neighborhood (median around $800k).

i suspect, although i haven't looked too deeply, my rent is cheap relative to a lot of the rent prices in the bay area even though i'm in a nice neighborhood. i've had one rent increase in the 6 or 7 years i've been living here.

Anyone got an opinion on Mountain View?

Personally, I think this generation is a little tired of housing as a bubble so I expect the next bubble to be elsewhere. BUT if I did suspect a bubble situation then:

A.5 Buy a house on cheap & easy credit, flip it, make 25%. Rinse and Repeat.

Duh. Absolutely nothing but fantastic things have happened to the people who did this last time EVEN if they acted a fool at the end.

Goran_K says

I will do what wthrfrk80 is doing. Fundamentals will assure that another "bubble" can only be temporary.

I'll not only short, I'll do shorting on margin. Bring it on!

BoomAndBustCycle says

Hysteresis says

rent is cheap

Rent is FAR from cheap... Last I checked rents were at a historic all-time high and increasing.

In the BA rents are way under the ownership costs. By a lot! That makes them cheap when comparing against the alternative of buying.

Hysteresis says

wouldn't do anything different.

1. keep renting

2. keep investing the extra money i save by renting, in stocks and bonds

i make good money. rent is cheap. no reason to change my strategy.

Ditto. I'd probably pick up a few home depot shares cause if people are going to start living in the empty foreclosures they will need to fix them up first. ;)

Hysteresis says

i suspect, although i haven't looked too deeply, my rent is cheap relative to a lot of the rent prices in the bay area even though i'm in a nice neighborhood. i've had one rent increase in the 6 or 7 years i've been living here.

Your situation is the exception to the rule. You must have a very generous landlord.

jessica says

Personally, I think this generation is a little tired of housing as a bubble so I expect the next bubble to be elsewhere. BUT if I did suspect a bubble situation then:

A.5 Buy a house on cheap & easy credit, flip it, make 25%. Rinse and Repeat.

Duh. Absolutely nothing but fantastic things have happened to the people who did this last time EVEN if they acted a fool at the end.

Yes, I too think this generation is tired of housing as a bubble. That said, there are a lot in my generation who graduated college when the dot-com busted and thus we missed that one and then by the time we got decent jobs the housing boom had priced us out. So people like me got double-screwed by bubbles.

Secondly, what I and others have seen and knew is that bubbles inflate and pop. But these cycles take time and don't necessarily result in the desired outcome. I remember all of us bubble watchers assumed the pop would happen- which it did. But what we didn't expect was that prices wouldn't fall to levels that were even close to being that great. The aftermath 6 years into the bust cycle is that places like the BA are still damned-expensive and due to investors buying up all the cheaper stuff it meant the lower priced houses were off-limits and the remnants are basically just so-so houses that are still in the half-million dollar range.

I was in my early 20's when the housing bubble hit. I'm now in my mid-30's. Its taken half a generation for a full cycle of boom and bust to occur. While I am wary of bubbles I can also say that I'm not going to get screwed again and come another bubble, I'll either leave this area or I'll buy something because booms and busts take years and I'm not necessarily willing to wait it out another 10+ years again.

I suppose the good thing about the boom was that it forced us to rent and save for 10 years. We now have a lot of cash and savings. We could very easily go out and buy something now. Had there not been a bubble I might have blown a lot of cash on a house instead.

BoomAndBustCycle says

Hysteresis says

i suspect, although i haven't looked too deeply, my rent is cheap relative to a lot of the rent prices in the bay area even though i'm in a nice neighborhood. i've had one rent increase in the 6 or 7 years i've been living here.

Your situation is the exception to the rule. You must have a very generous landlord.

1 more. My rent has not increased in 4 years - not the only exception.

BoomAndBustCycle says

Your situation is the exception to the rule. You must have a very generous landlord.

I don't think it's all that uncommon for landlords to hold the rents steady for good, long term tenants. I have several paid for single family rental homes in coastal CA and I haven't raised the rents on long term tenants in four years and have no inclination to do it in the near future even though they are rented for under fair market. My lowest priced rental is $2100 a month and the others are are several hundred a month more. The one that rents for $2100 and another one has long term tenants. For whatever reason (renters become buyers in some cases, job changes, etc.) the other homes seem to turn over every few years. I have several friends that are landlords as well and they also have long term tenants that they don't raise the rates every year even though they could.

My properties are paid for and I don't need to squeeze every dollar out of them because I have been very fortunate to have done well over the years. I would rather keep the rent steady for several years for a good, long term tenant that pays on time and doesn't cause me or the management companies any trouble. It cost money to turn over rental homes; advertising, management fees for new tenant, etc.

bubblesitter says

BoomAndBustCycle says

Hysteresis says

i suspect, although i haven't looked too deeply, my rent is cheap relative to a lot of the rent prices in the bay area even though i'm in a nice neighborhood. i've had one rent increase in the 6 or 7 years i've been living here.

Your situation is the exception to the rule. You must have a very generous landlord.

1 more. My rent has not increased in 4 years - not the only exception.

Another. My rent was $1395/month in 1997 and is $1495/month now (month to month, midsize apt. complex in MtV). Spiked up about 15% higher during the .com bubble but came back down afterwards when I complained and has been at this level since 2006.

The downside is that I'd really like to live somewhere with a more intelligent and responsive manager, and less noisy neighbors, but moving to even the same class of apt. around here would cost quite a bit more at this point :-( On the bright side I have her boss' email and can go through him instead for most things.

bubblesitter says

BoomAndBustCycle says

Hysteresis says

i suspect, although i haven't looked too deeply, my rent is cheap relative to a lot of the rent prices in the bay area even though i'm in a nice neighborhood. i've had one rent increase in the 6 or 7 years i've been living here.

Your situation is the exception to the rule. You must have a very generous landlord.

1 more. My rent has not increased in 4 years - not the only exception.

and another. I've had one rent increase in 14 years and when that one happened I just moved. The place sat idle for about 4 months after I moved. That'll teach em.

oddhack says

The downside is that I'd really like to live somewhere with a more intelligent and responsive manager, and less noisy neighbors, but moving to even the same class of apt. around here would cost quite a bit more at this point :-(

And you say homeowners are immobile... All the "exceptions" here appear to be less mobile than they appear, if moving ultimately means a significant rent hike.

RentingForHalfTheCost, if you had bought 14 years ago.. there is no way you'd be underwater.. You'd be halfway done paying off your mortgage.. or 1 year from paying off your mortgage with a 15 year loan.

So RentingForHalfTheCost appears to be bragging that he's paying a "low rent" when if he'd bought 14 years ago with 15 year fixed mortgage.. he'd be a year away from only paying property taxes and maintenance.

BoomAndBustCycle says

And you say homeowners are immobile... All the "exceptions" here appear to be less mobile than they appear, if moving ultimately means a significant rent hike.

Shrug. I don't know what the "rule" is and neither do you, but I expect in general good tenants who've been there for a while will do better rentwise than the Google employee who just has to live 5 minutes from work.

RentingForHalfTheCost, if you had bought 14 years ago.. there is no way you'd be underwater.. You'd be halfway done paying off your mortgage.. or 1 year from paying off your mortgage with a 15 year loan.

I don't know about his situation, but if I'd bought 15 years ago when I moved out here... I wouldn't have bought, because I was flat broke having just left grad school. If I bought a few years later when I had enough cash for the then-standard hefty downpayment... prices had already escalated beyond a sane level in MtV at that time. And that was *before* the real lender shenanigans began.

BoomAndBustCycle says

oddhack says

The downside is that I'd really like to live somewhere with a more intelligent and responsive manager, and less noisy neighbors, but moving to even the same class of apt. around here would cost quite a bit more at this point :-(

And you say homeowners are immobile... All the "exceptions" here appear to be less mobile than they appear, if moving ultimately means a significant rent hike.

i'm hardly immobile.

it just means i'd be paying a higher rent than i do now (which i could afford). i just checked craigslist and apartments in my city are $500 to $900 more than my current rent. i guess i'm getting a good deal.

funny, at the time i signed a lease they were having problems finding tenants and giving a month free. i guess now there's a strong demand.

edvard2 says

If the bubble returns to the BA, what will you do?

What do you mean "returns"? It never left.

BoomAndBustCycle says

Hysteresis says

rent is cheap

Rent is FAR from cheap... Last I checked rents were at a historic all-time high and increasing.

NOTHING here is cheap...food, rent, or anything else. Flight instruction is needlessly expensive. Renting the aircraft itself is ridiculous. Getting a car worked on is higher than it should be.

There's too much money here!

Hysteresis says

And you say homeowners are immobile... All the "exceptions" here appear to be less mobile than they appear, if moving ultimately means a significant rent hike.

Try renting once you have kids and a couple of pets. There's immobility for you.

BoomAndBustCycle says

oddhack says

The downside is that I'd really like to live somewhere with a more intelligent and responsive manager, and less noisy neighbors, but moving to even the same class of apt. around here would cost quite a bit more at this point :-(

And you say homeowners are immobile... All the "exceptions" here appear to be less mobile than they appear, if moving ultimately means a significant rent hike.

RentingForHalfTheCost, if you had bought 14 years ago.. there is no way you'd be underwater.. You'd be halfway done paying off your mortgage.. or 1 year from paying off your mortgage with a 15 year loan.

So RentingForHalfTheCost appears to be bragging that he's paying a "low rent" when if he'd bought 14 years ago with 15 year fixed mortgage.. he'd be a year away from only paying property taxes and maintenance.

Not true at all. My life would be different for sure. However, I would have not been able to live in Switzerland, U.K. , Canada, spent 2 months in Brasil, 1 month in Hawaii, and take almost 2 years off from work to do all the above. A house would have kept me from traveling, and from doing what I love. I would have been indebted to the 30 year note.

Now, 14 years later, I am not behind. Back 14 years ago I would have just barely had the 3.5% down for a BA home. Now, I really don't need a note to get a home. 14 years of savings and investment without the debt of a note has given me that privilege. Obviously, we are all different, but betting on the appreciation of a pile of lumber and nails is not my idea of investing. Did the BA do well in appreciating the wood and nails assets. Sure, but I did better in my investing and these last few years I just lapped every home owner on the track. :)

SubOink says

A 30 year fixed mortgage as laughable as it may seem to you now, is going to be as cheap as it gets.

:)

Fear fear fear. How do you know that the 30 year note couldn't drop another 50% in rate? You don't. Today's 4% could turn into 2% before this free money train turns around. Then home prices could go up for a change. ;)

BoomAndBustCycle says

RentingForHalfTheCost, if you had bought 14 years ago.. there is no way you'd be underwater.. You'd be halfway done paying off your mortgage.. or 1 year from paying off your mortgage with a 15 year loan.

Just for the record, I did buy a house in that 14 year period, just not in the BA. In central valley and for a weekend home. I sold in 2009 and glad I did, cause I can buy it back now for about 25% less than I sold. I paid about what I thought was a reasonable value considering the rent and housing construction costs at the time, and I sold as soon as someone was willing to pay me an unreasonable amount for it. Pretty simple formula.

SubOink says

those that can afford to buy - buy. Those that can't - don't. It's been that way forever.

Ha! (HA!!!) The choice whether to buy anything today has more to do with available credit than it does with individual solvency.

E-man says

RentingForHalfTheCost says

Just for the record, I did buy a house in that 14 year period, just not in the BA. In central valley and for a weekend home. I sold in 2009 and glad I did, cause I can buy it back now for about 25% less than I sold.

This says it all for me. Anyone with a double digit IQ would know what happened to you. Now I know what kind of financial shape you're in, and why you despite high home prices in the Bay Area. ;)

Learn from your victory. Prosper from your failure.

We all should despise high home prices that are only justified by funny named loans like Jumbo, non conventional, arm, FHA ( f&*ing half assed), etc. Remove this bull and then we might just have a reasonable market where wealth is not about how much debt you can step into during your life. :)

RentingForHalfTheCost says

Today's 4% could turn into 2% before this free money train turns around. Then home prices could go up for a change. ;)

So what. Then you re-fi at 2% and it gets even cheaper.

Austinhousingbubble says

SubOink says

those that can afford to buy - buy. Those that can't - don't. It's been that way forever.

Ha! (HA!!!) The choice whether to buy anything today has more to do with available credit than it does with individual solvency.

And in order to get credit you have to qualify. Some do, some don't.

it's happening...

http://finance.yahoo.com/news/investors-looking-buy-homes-thousands-134405371.html

SubOink says

it's happening...

Nothing is new. That's been happening for years. All its done is that it has kept the overall median prices low.

But moving on, I think one of the reasons I still have a problem with the math in buying- at least for us- is that as of now our part of the rent is around $1,300 for a large 2 story 4 bedroom house we share with one other person. It has a large back yard and a 2 car garage as well. We've lived there for nine years.

As mentioned, we have saved up a lot of cash. We earn an income that probably puts us within the upper percentile of the area median income. We are frugal as you could probably get. We have nearly perfect credit and would thus qualify for the lowest interest rate. Thus logically you'd think we were perfect for buying a house.

But when I do the math its still almost nonsense. If we say- bought a $500k house and put down $100,000 with an interest rate of around 4.00-4.50%, the payments would still be over $2,000 a month. That's just for the mortgage and nothing else. On top of that, the 500k home in question would likely be a lot smaller than what we rent, probably need at least a few major repairs or need a total overhaul of the interior, and so on. So for almost double the cost we would basically be downgrading to a smaller home that would probably not be as nice . That makes zero sense to me.

Then again I suppose if we were paying current market rate rent, which for our house is around $2,500, then I suppose it would make more sense. The comparisons would be about the same if not slightly less to rent, but not dramatically less.

Rule of bubbles:
1. Bubbles can't be reflated.
2. You don't see another bubble in same asset class during the same generation.

SubOink says

it's happening...

http://finance.yahoo.com/news/investors-looking-buy-homes-thousands-134405371.html

Investors buy properties to resell at a profit or rent it out. That means these properties are likely to come back to market. Imagine if market does not improve and investors start dumping these houses!

SubOink says

Today's 4% could turn into 2% before this free money train turns around. Then home prices could go up for a change. ;)

So what. Then you re-fi at 2% and it gets even cheaper.

Austinhousingbubble says

So, your choices are

1) buy now at 4% so you can refi at 2% if rates go down - good choice
2) buy now at 4% and kick yourself in the ass when rates go to 6% and your property value sinks by 20%

My solution the above problem is 'don't buy'. If 1 happens then we are still in a world of trouble and the feds are still playing the free money game. If 2 happens then I'll eventually buy on the cheap and not have any debt.

Everyone is different, but you view things through just one angle. Buy and deal with the changes. My view is let the changes play out and take advantage of the situation. I could be wrong, have been before, but my opinion matters to me more than anything. If I went against my instincts and got burned then I have no one to blame but myself. I can live with going with my instincts and being wrong.

edvard2 says

But when I do the math its still almost nonsense. If we say- bought a $500k house and put down $100,000 with an interest rate of around 4.00-4.50%, the payments would still be over $2,000 a month. That's just for the mortgage and nothing else. On top of that, the 500k home in question would likely be a lot smaller than what we rent, probably need at least a few major repairs or need a total overhaul of the interior, and so on. So for almost double the cost we would basically be downgrading to a smaller home that would probably not be as nice . That makes zero sense to me.

If you are going to do the analysis, you have to get the numbers right. A 400k mortgage at 4% is 1900/mo (30 yr). Property taxes would likely be another $500 and insurance another $80. So you are looking at approx $2500 total. But if you really want to be fair, you need to factor in MID and the fact that you are paying principal as well. I think you are overestimating on maintenance. Most things can be done by yourself, and you never know - you might buy a place with a new A/C or roof, so a big expense isn't likely for many years. If you want to keep renting, that's fine, but if you are trying to do analysis about whether to buy, I think you should be more accurate. Plus, you may want to somehow account for your current sweet deal on rent. What if you had to pay the market rate? It seems like something you may want to factor in on your decision.