patrick.net

ih8alameda2 says

we got an approved letter from our mortgage broker, waived our loan contingencies and offer FULL Asking

Not a frenzy. Just normal realtor fraud and deception.

The asking price has little to do with what they'll accept. It was just a trick to get you to make some kind of investment in investigating their place.

The sellers and their realtor cheated you.

http://patrick.net/?p=1211500

It's absolutely deceptive. If they list it for purchase at price X, but are willing to take higher offers for a set amount of time, it should be noted. I'm all for buyers doing their homework, and while what's being done isn't illegal -- it should be. If you're not willing to sell it for price $XXX -- don't list a price.

I think you offer went into the shredder.

The longer you wait the more you win in this market. Prices aren't going to be going up for a long time, even with all this artificial government force.

You are actually saving money by not buying anything. And just remind yourself that wealth is mobile, real estate is not.

There is a lot of overreaction on this site. We too are in the market and this is the first time we've gone house hunting. We've waited 12 years to buy and have saved up a lot of cash, have perfect credit, and good jobs. Yes- there is a shortage supply problem.

That said, I've talked with a lot of people lately and the general attitude is that yes, there's a shortage, but also because there are a lot of folks who bought in the bubble who can't sell or move up. There are also still a lot of foreclosures in the pipeline. The Realtor I talked with a few days ago said that something like 20% of the homes for sale in our area are foreclosures but many times that amount were in the process of going through default as we speak.

Is this the start of another bubble? Nope.

It isn't a bubble. The mechanisms that fuel one are not present anymore. What it is, is a severely reduced supply of decent properties coupled with the typical high-demand of the Bay Area and RE investors. Lots of people see this & assume that it is somehow permanent, freak out, and push-up their plans to buy, thus exacerbating the problem. So, chock it up to transient market conditions and typical consumers' mass-hysteria.

WHEN inventories return to their normal levels, everything will calm down again. Prices aren't going to drop dramatically or anything, but it is silly to think that prices will do more than get a seasonal upward bump this year. It's a transient, fed off of historically-low inventories.

Not a frenzy. Just normal realtor fraud and deception.

Does anyone bother to read the articles on this site? Guess not.

edvard2 says

The Realtor I talked with a few days ago said that something like 20% of the homes for sale in our area are foreclosures but many times that amount were in the process of going through default as we speak.

Funny, a realtor I talked with 2 years ago said pretty much the same thing. Still waiting...

tiny tina says

Funny, a realtor I talked with 2 years ago said pretty much the same thing. Still waiting...

Why would that be an advantage to a Realtor? In that case there's still a lot of bottom side risk out there. Otherwise they would say that nope- there were no more foreclosures and I better buy buy buy

But anyway, I would have to agree with BMWman. I say this because we just went through the approval process ourselves. Banks are pretty scrutinizing these days. You need multiple forms of proof of your financial situation. Furthermore, you have to have really high creditworthiness. Lastly, you need a lot of cash as a down payment. We did this, but it took 10 years to do so. I'm guessing many couples did not do this.

The thing to remember is that circa 2004-2006, prices only got as high as they did from artificial financing mechanisms that no longer exist. Thus without those prices won't get anywhere near that high simply because the local jobs don't pay enough to do that. Simple as that.

edvard2 says

Why would that be an advantage to a Realtor? In that case there's still a lot of bottom side risk out there. Otherwise they would say that nope- there were no more foreclosures and I better buy buy buy

They say it to earn your trust. It seems to have worked so far. For once, someone on this board isn't bashing what a realtor told them; rather, they are spreading it around as fact. It may also be wishful thinking on their part. If there is low inventory, they won't be making many sales/purchases. You should remember the saying, "realtors are liars," even when what they tell you is something you want to believe.

tiny tina says

They say it to earn your trust. It seems to have worked so far. For once, someone on this board isn't bashing what a realtor told them; rather, they are spreading it around as fact.

I've been on various housing bubble sites since 2004. I was on this one way back in the day and forgot what my username was and came back more recently in the last year or so. If there was anyone that should be skeptical of the real estate industry, it would be me. The experience I've had with realtors is like that of any other salesperson: There are agents who I've met and simply wanted me to buy something right away and then others who acted professionally. Prior to my current career I too was a salesperson. Albeit not a Realtor, but I got a commission for what I sold. I never sold anyone something they didn't need. If what they needed cost less than the nicer model, I suggested the less expensive model first. I never told anyone they had to buy this or that. Likewise if a Realtor starts feeding me lines of realtor-speak: " Its a grrreat time to buy!" etc etc, I immediately turn them down for business.

The large number of foreclosures in the system isn't really news. It was on NPR recently. There are still a ton of foreclosures coursing through the system. California is at the top of the list. A lot of the houses we've looked at- even in nicer areas- are foreclosures. So its not like he was telling me stuff I already didn't know.

edvard2 says

Likewise if a Realtor starts feeding me lines of realtor-speak: " Its a grrreat time to buy!" etc etc, I immediately turn them down for business.

Thus proving why feeding you something you want to hear can be a good tactic to earn your trust.

Look, if you don't want to believe I heard a similar line 2 years ago, that's fine. I'm not sure what my ulterior motive is. I don't live in your area and don't care if you buy a house.

Lol at the concept that there was a brief 3-6 month window that was the effective bottom. All this crap we've been through for over a decade now, and people still stubbornly cling to the same old crappy false cliched beliefs.

Advertised price = Invitation to treat, is not an offer to sell at that price.

hanera says

Advertised price = Invitation to treat, is not an offer to sell at that price.

Legally, an advertised price is definitely an offer to sell under most conditions.

* toasters
* stocks
* cars

Why should real estate be any different?

Maybe sellers in the east bay are envious of the silliness on the Peninsula and want a piece of that action? Perhaps you could say...they have peninsula envy?

That's just crazy @ptiemann.

Living a normal life and buying a house should not be such a bend-over and take it up the ass experience. Realtors are really the scum of the earth.

Ask what you want and think it's worth and take it when you get it. The upside of all this is because of my frustrations, I'm actually become an even happier renter.

ih8alameda2 says

Living a normal life and buying a house should not be such a bend-over and take it up the ass experience

I just had to agree. Thank you. It's ridiculus not to trust a (any)market for any length of time.

(oh, it's not an open, free RE market, my apologies. I get confused.)

The reason there will be no bubble in the Bay Area is that very, very few people will qualify for a loan over 820k. The cash requirements are too strict. Sure if you're looking at 600k properties there are a lot of buyers.

robertoaribas says

Homes are anything but commodities, each and every one is different

rowemoore says

The reason there will be no bubble in the Bay Area is that very, very few people will qualify for a loan over 820k. The cash requirements are too strict. Sure if you're looking at 600k properties there are a lot of buyers.

I think that the term "bubble" is getting used too loosely by some. Folks in here seem to want to call any possible increase in pricing in the Bay Area a "bubble." I agree, the mechanisms that led to the big bubble here are no longer present (free liar loans). However, the market is heavily manipulated by both public & private interests and we currently have an order of magnitude more demand than supply. Couple that with people that let their emotions drive the largest financial decision in their lives, along with a temporary glut of money coming from a pumped up stock market & a few IPOs, and you get what we have: a frenzy over the few available houses and bidding wars. It's stupid, but it isn't a bubble.

The Bay Area really is the perfect storm of idiocy & money needed to make the place totally unreasonable for middle and upper-middle class folks that want to have disposable income & financial security after borrowing for a house.

Love that photo of all the identical houses! Worth 1000 words for sure.

bmwman91 says

we currently have an order of magnitude more demand than supply.

I disagree. What units are you using for demand?

Demand is the number sold at a given price. You could say that demand is sufficient to maintain current prices at the moment, but demand can't be higher than supply unless the supply is completely sold out at current prices. We do have a large supply of houses on the market though.

For example, Zillow shows 134 houses for sale in Mountain View right now:

http://www.zillow.com/homes/Mountain-View-CA_rb/#/homes/for_sale/Mountain-View-CA/32999_rid/37.452104,-121.904469,37.355013,-122.258091_rect/11_zm/0_mmm/

http://en.wikipedia.org/wiki/Demand

Sorry for being picky. It's just that "demand is greater than supply" is one of those fallacies realtors use all the time to scare buyers into making bad decisions.

Sorry, let me clarify that.

Demand exceeds the supply of houses that are a) livable & priced somewhere around reality and b) cheap enough for people to not care if they are livable. There aren't enough decent "middle class" houses out there. Have you SEEN the piles of crap in MV, and the asking prices on them?

Overall, prices have nowhere to go but down as a whole. Outside of SF & Palo Alto, junky shitboxes won't sell at the outrageous prices they are asking, so they either sit or get taken off market as part of some seller's wishful thinking about the future.

rowemoore: hilarious response with that picture! +1.

bmwman91 says

think that the term "bubble" is getting used too loosely by some. Folks in here seem to want to call any possible increase in pricing in the Bay Area a "bubble."

Agree. Seems like there's a bubble in calling everything a bubble.

rowemoore: your picture shows all the differences. Some home have windows on the left, while some on the right. Some have two fireplaces while other have one. Some have an off-white garage while others have just plain white. There are differences everywhere. I bet the layouts are all different as well.

The one on the end of the court is so cute, and the one on the beginning is really aggressive. Like a smorgasbord of personalities.

It's a bubble! Yeah, a sucker's bubble..

http://www.reuters.com/article/2012/04/26/us-usa-housing-negative-idUSBRE83P12E20120426

bmwman91 says

Overall, prices have nowhere to go but down as a whole.

you assume rational, thoughtful people. if people remain irrational prices can easily stay at current levels.

group-think in the bay area is strong. it was especially evident at the peak of the bubble (almost no bears. today we have a nice balance of bears/bulls). and the home ownership at all costs mentality is a big part of the culture; especially among asians.

you'd think 6 years after a housing bust, with prices --still-- falling, people would be more careful about buying houses but this is not the case. people are still buying as much house, as fast as they can. the main difference today is lenders aren't giving loans to poor people; but i have no doubt if easy lending came back we'd be right back into a huge RE bubble. people haven't changed much, the lending is what has changed.
amazingly, i still get the "you better buy before you get priced out" speech despite prices falling for years. no. it'll take a decade or two before people change their mind - assuming the housing slump lasts that long.

things i have learned:
a) people are extremely irrational about certain things - housing being one of them.

there's a very strong emotional component which blinds good judgment. my suspicion is generations have been brought up with the idea housing is the best investment money can buy and 6 bear years isn't nearly enough to change this deeply ingrained perception.
people are slow to adapt.

b) lemming behavior always trumps rationality.

c) don't fight the mindless masses. you can't win.

wthrfrk80 says

Agree. Seems like there's a bubble in calling everything a bubble.

LOL, nice.

In the bay area the housing market didn't correct to the same level as other metro's. This has left an investor mentality making the housing market behave more like the stock market.

For whatever reason you choose to believe we have low inventories right now. Buyers are wanting to buy because they saved up money during the four year recession and salaries have risen. This will cause the prices of homes to rise until some sort of equilibrium in met. Treating this as a stock market will mean sellers will not start listing until prices rise over their purchase price or the peak price in 2007/2008. This price point is called resistance and home prices might stop at this level. But if for whatever reason resistance in broken with strength, prices will keep going up at a fast rate. This would be the first sign of a bubble, prices will be going up, buyers will be buying out of fear of being priced out and the cycle will fuel it self.

This is unlikely to happen because the cause of the previous recession is never a leader in the next cycle. In this case housing will reach it's peak 2007/2008 peak pricing around the same time the fed will start raising interest rates somewhere around 2014. The higher rates should limit the upside in prices by making the total mortgage costs higher.

(If you want to see a bubble forming, take a look at rental prices)

Hysteresis, your user name is a one-word summary of what seems to be going on with RE prices. I guess we'll need 20% minimum down payment requirements on all loans, and greatly diminished demand to knock the prices off of the upper end of this hysteresis curve.

I agree about the group-think stuff. Yeah, "buying a house" is one of those unquestioned dogmas in the US, and it is especially pervasive in the BA. Maybe that is because prices are so high and everyone is always on the subject. The fact that we do have a lot of 0- & 1st-gen Asians & Indians also adds to it a bit since that brings in some other cultural elements that fixate heavily on having a house.

Then yes, add to that the fact that people are generally incapable of rational thought & decision-making, and that a "house" has become a pie-in-the-sky emotional dream, and it gets nuttier. So you are right, you can't fight the idiot masses.

fewy says

This would be the first sign of a bubble, prices will be going up, buyers will be buying out of fear of being priced out and the cycle will fuel it self.
...
(If you want to see a bubble forming, take a look at rental prices)

I don't agree that it would be a "bubble" though. The bubble was inflated by no-doc liar loans flooding the market with funny money. Buyers fighting to buy out of fear would lead to a bump in prices, but unless the funny money returns, there is nothing to fill the bubble with.

Now, with respect to rentals, there is certainly something going on there. I am not sure if I would call it a bubble since you still need to borrow money (in most cases) to get your hands on a property to rent it out. I would definitely call it a "bull stampede" since everyone & their mother "knows" that "rentals are hot, good cash flow" right now. The market is not flooded yet since new construction takes time, but there are apartment complexes going up all over the South Bay, and a number of very large condo complexes (that didn't sell very well) are starting to rent units to cover costs. I don't have any numbers, but given the present excitement over "investing in rentals" I can imagine rents dropping a bit in a couple of years.

Then again, if house prices DO rise, rents might get even hotter. Man, the BA is a pain in the ass!

fewy says

Treating this as a stock market will mean sellers will not start listing until prices rise over their purchase price or the peak price in 2007/2008.

They might as well be waiting for godot. Seriously, the loans for 2007/2008 prices do not exist now and will not exist in 5 years. May be a generation before they do. Easy credit days are gone.

edvard2 says

There is a lot of overreaction on this site. We too are in the market and this is the first time we've gone house hunting. We've waited 12 years to buy and have saved up a lot of cash, have perfect credit, and good jobs. Yes- there is a shortage supply problem.

I agree, not a bubble, but a supply problem.

We are in the same boat as you, and I think there is some pernt up demand for people like us, the ones who waited.

But in a true bubble, everything gets snapped up, even the crap.

I see a lot of overpriced properties and crappy homes not selling. It's just the decent stuff that goes for over asking with multiple offers.

Looks like we might be renting another year....

bmwman91 says

WHEN inventories return to their normal levels, everything will calm down again.

But the WHEN is a big deal for those of us who have been waiting for 12 years. I'm going gray waiting for the correction and to stop being a renter.

edvard2 says

Furthermore, you have to have really high creditworthiness. Lastly, you need a lot of cash as a down payment. We did this, but it took 10 years to do so. I'm guessing many couples did not do this.

Or be an all-cash investor.

Here's a house that got bought for $425 LAST MONTH, and our realtor just sent us the MLS listing for $609, all shiny and new.

This house must have been bought at auction, because I never saw it listed, and we've been looking since Christmas.

http://www.redfin.com/CA/San-Francisco/1127-Burrows-St-94134/home/1977033

edvard2 says

Funny, a realtor I talked with 2 years ago said pretty much the same thing. Still waiting...

Why would that be an advantage to a Realtor?

Wishful thinking.

Did you send the offer to the seller yourself?

Patrick, I started a thread a few days back about whether or not to submit a personal letter to the seller via mail (with whom we made a personal connection at the open house) or to include it in our offer.

Pretty much everyone on this blog said submit with your offer.

They are accepting offers on Monday. I think I will drop off another copy of our personal letter in her mailbox, just to make sure she knows we have submitted an offer.

I don't trust realtors, and I know our offer will not be the highest. There is no other way to make sure the seller sees our offer.

1sfrenter says

But the WHEN is a big deal for those of us who have been waiting for 12 years. I'm going gray waiting for the correction and to stop being a renter.

I feel for you there, and I certainly have not been waiting 12 years (almost half of that). You mentioned that both you and your partner are teachers, correct? I think that some of the challenge lies in trying to live in the hottest real estate market in the region on a squarely middle class income. There is just way too much money in this area to compete with. Having saved for 12 years will definitely help you a lot, but it might not be enough to compete with all the money from other sources. Heck, my fiancee and I are both making solid salaries in high tech, renting in a much less desirable part of the BA than SF proper, and even on our incomes & having $200k in cash savings, it looks like a bad idea to get a house at this point. It is really disappointing to think about, but the BA just isn't middle-class friendly unless your hobbies include "making money" and "being house poor."

1sfrenter says

I think I will drop off another copy of our personal letter in her mailbox, just to make sure she knows we have submitted an offer.

I read that thread. Having thought about it a little, I think that delivering the letter straight to their mailbox is the best way to go. If you want to try to work the personal angle, it is the only way to go. You really have nothing else to lose in doing to. Good luck, hopefully the things that you have in common with the seller will work in your favor!

Stop with the hyperbole about the "idiot masses". Plenty of these "idiots" make good enough money to buy their homes and stay within the old 3x rule, some go out to around 4x. Most of my friends have bought within the last 3 years. All with graduate/professional degrees and good incomes. They can probably do the math just as well as some 26 year old anonymous internet person.

Let's see:
Dermatologist--bought a 2nd property up in Sonoma County
Derm/Engineer couple--bought Los Altos
Internist/Eng couple--bought Los Altos
Pharmacist--bought Hayes Valley
Pharmacist--bought SOMA
Harvard Law--bought SOMA
UPenn Law--bought Mission
Child Psych MD--bought Hayes Valley
Child Pysch MD--bought SOMA
Radiologist--bought Burlingame
Zynga exec--bought Burlingame
MBA/DDS couple--bought Burlingame
PhD/CPA couple--bought Burlingame
Stanford MD/Stanford MBA couple--bought Palo Alto
Harvard MBA--bought SOMA
Cornell MBA/Cornell MBA couple--bought Sunset
Northestern MBA/MBA couple--bought SOMA
Stanford MBA--Pac Heights

I've owned two houses before in DC/Austin. I held off for the longest time here in the Bay Area but found a property that I really liked in SF that's within 2 blocks of some of my favorite spots in the city. 22% off the high, got it around 8% off current comps, the HOA is low for SF. Rent to Buy ratio is approx 14.3. Had 3 prior contingencies fall through on financing but I came in with over an over 800 credit score so I beat out someone coming in with over 45% down.

Prices here are outrageous compared to where I've lived previously but there are lots of really damn smart/ambitious people here that make good incomes so guess what, it's not cheap to live here.

PS House poor? What does that even mean? My houses have gotten progressively smaller as I realize that I don't need the extraneous space. Who needs 3k of square feet? How about "outdoorsy poor"? Try living in Houston and see where you'll climb, swim, cycle (much less board/ski).