patrick.net

edvard2 says

Just take it easy and take your time.

Thanks for the reassurance. This is about where we are, too. Resigned to be patient and kissing a$$ to our landlord so we don't find ourselves in a desperate situation.

It's also given us some time to re-evaluate our priorities. Although we know we want to buy, we have decided to get something a lot smaller and cheaper than originally planned.

It's easy to get caught up in the realtor's and mortgage broker's way of doing things (borrow and buy as much as you can).

It may be a blessing in disguise that we have not gotten any of our offers accepted. A smaller, cheaper house means the difference between possibly paying off the mortgage in 15 years vs. debt slavery until the day I day.

1sfrenter says

RentingForHalfTheCost says

High rent? Where do you live? If the BA then your rent should be much less than the cost to own. Not the same elsewhere though.

San Francisco proper. My once working-class neighborhood has turned shi-shi (I've been in the same nabe for 15 years, same SFH rental for 12).

Single family homes in SF are not rent controlled.

As someone posted previously, if you need anything bigger than 2 bedrooms (we have kids) and want a garage and a yard (kids=car) and pets, then apartments can be hard to find.

Our landlord raising the rent by $200 month is what made us start thinking that now is the time to buy.

Apparently everyone else, including the infestors, decided the same thing.

Run the full numbers and expenses and compare you rent verses a comparable house to buy in you hood. I think you will be surprised how much better of you are right now to rent.

APOCALYPSEFUCK is Tony Manero says

A friend who did two of these in different states said the catalogs these days for factory built homes are incredible.

But do they come with pre-fab arsenals and gun-ports?

edvard2 says

Perhaps another question would be what about renting until you retire?

But let's say you rented for another 10-15 years, then retired, then moved either out of the Bay Area or out of state?

Been renting for 30 years. Don't want to anymore. Too old (and have kids and pets) to have to move whenever house gets sold (owner-occupied eviction has happened to us twice!) and single family homes are not rent controlled here.

I've said it before: when you are young it's no big deal to chase cheaper rentals and get boxes off craigslist and borrow a truck and get your pals to help you move with a case of beer and some pizza. Throw in some kids, a few pets, a piano, a bad back, etc., not so much.

And JOBS. We have stable jobs with seniority. Moving to work in another school district given the cuts in education just doesn't make sense.

And this is our home. Yes there has been a mass exodus of middle class folks out of San Francisco, but the idea that hundreds of thousands of people (ie., anyone who makes less than 250K a year) should leave their home and the place they love is ridiculous. That's what happens during a war.

I guess this is a war. Class War. And we are losing.

APOCALYPSEFUCK is Tony Manero says

Given the advancement in the art, sure, very likely.

Get off the grid and the only weapons you'll need are fishing poles and a knife

1sfrenter says

I guess this is a war. Class War. And we are losing.

I think Buffett would agree.

I hear what you're saying. Moving sucks... for everyone. Young, old, and those inbetween. Trust me. We have a TON of crap, and yes- we too are attached to where we live. But where we live is semi-desirable and thus we've made some exceptions to where we will buy simply because to us the additional costs of living where we live aren't really worth it.

True, we don't have kids and that alone makes a huge difference. But I still think you have options. Plenty of people buy or rent homes in the East Bay and commute to SF. I did it for 2 years and it wasn't that big a deal. Its easy to forget that SF is about 15-20 minutes from the east bay. So its not like we're talking some huge chasm.

But everyone has their own idea of what they place value on and how much they're willing to pay for the privilege.

wthrfrk80 says

1sfrenter says

I guess this is a war. Class War. And we are losing.

I think Buffett would agree.

LOL. Then why are we arguing about home prices here?

edvard2 says

But everyone has their own idea of what they place value on and how much they're willing to pay for the privilege.

You are so very right. As a gay surfer, I am willing to pay to live in a place where people don't throw eggs and empty beer cans at me out their car windows (been there, done that) and will pay extra to be able to catch a few waves before I have to be at work.

AND, I can still complain about class warfare.

I don't think decimating the middle class and passively watching as we all become beholden to the landlord class is a good idea.

That's why I appreciate these online forums and the Occupy movement and anything else that brings these issues to light.

I also believe that the suburbs will be the new ghettos. I prefer the city.

BoomAndBustCycle says

edvard2 says

TONS bought in 2003-2006 with crappy credit and little wiggle room and now TONS can't sell

I would say that anyone with "crappy credit" or not enough income to afford their home already foreclosed long ago. I do know a bunch of highly paid upper middle class dual income professionals who bought in 2004-2006. I'd imagine another HUGE leg down in housing would make this round of buyers seriously consider strategic default. They already feel manipulated and cheated.... so while the sub-prime mortgage crisis is over. If home prices are allowed to fall another 40% like some are calling for.. We'll have an entirely new crisis on our hands... the strategic default crisis.

I know many dual income (Tech Industry) couples with kids who bought in 2005-08 with 20-30% down payment. Even though their houses have dropped 10-30% They can still afford the mortgage and recent price bump is helping with lower rate refinancing. Some have even paid more money to makeup for the gap in appraised value and remaining loan amount to get lower rate financing. Many of them are in decent to excellent (as measured by API) school districts i.e. Cupertino, Fremont(Mission/WarmSprings/Ardenwood), Palo Alto, San Ramon, Dublin and Pleasanton. Million dollar home buyers refinanced to 2.5% 5/1 ARM. They are betting on low interest rate for a while (10+ years). Some of them are counting on stock grants to pay off the mortgage after 5 years if interest rates rise.

1sfrenter says

I also believe that the suburbs will be the new ghettos. I prefer the city.

Guess we all have our own preferences. I personally don't find the Bay Area suburbs- at least the immediate bay area burbs like Oakland, Berkely and so on as being that different in regards to attitudes and open-mindedness. I'm also not sure how the suburbs could become ghettos if they're getting filled up by priced-out city dwellers. But then again, the cities have undergone a transformation from being mostly ghettos to newly-minted gentrified playgrounds.

Its also sad that no matter where you live, there are ugly people everywhere. I grew up in the very rural, very conservative South. There were good aspects and bad. Open minded people and those who weren't so much. I've now lived on both coasts and many different places. People are people just about everywhere.

That said, I fully admit that I too am paying a rather huge premium to buy a house here. I suppose I could make an effort to relocate to somewhere else that has the jobs I am in- like Austin or something. But I've been here long enough and getting the an age where change is increasingly difficult. I complain about the BA but in the end its been good to me so far. Its also been good to a lot of other people and they too are willing to shell out the dough to stay.

sera says

know many dual income (Tech Industry) couples with kids who bought in 2005-08 with 20-30% down payment. Even though their houses have dropped 10-30% They can still afford the mortgage and recent price bump is helping with lower rate refinancing.

Oh no doubt, The bulk of these such couples are probably fine. But as mentioned above, some of them would be in pretty deep doo-doo if one or both of them lost a job because they bought at the absolute peak at the absolute top of their price levels counting on those 2 jobs to pay for the mortgage.

We too are one of those fairly high, dual wage earning couples. Even so, there is no way I would pay anything close to the 650-900k some of these folks are paying even though we would qualify. 450-500k is more like it and that's sadly still more or less a starter home here. Insane given what we make and what it costs to buy here.

1sfrenter says

I don't think decimating the middle class and passively watching as we all become beholden to the landlord class is a good idea.

Absolutely. It is shrinking across the US as a whole. CA is seeing it even more, and to top it off, lots of middle class people are leaving. Since my job isn't tied to any particular locality, I am working out the logistics of a move to Seattle. This area is an odd mix: many aspects of it feel like a sinking ship for middle class folks, while at the same time there is this boom in web services companies and a lot of people thinking that the sky is the limit here.

bmwman91 says

I am working out the logistics of a move to Seattle.

Stock up on anti-depressants. It's even cloudier there than where I live.

Rental Watch says

It costs a lot of money to put in the infrastructure for a subdivision (it's $4 gas driving those earthmovers), pay building permit costs, build a condo building, etc. Until you see prices support the development of additional land for the construction of new homes, supply will be limited, and prices will rise.

The most logical reason for low inventory.

hanera says

The most logical reason for low inventory

Really? Sounds like tautological used house salesman mumbo jumbo to me.

wthrfrk80 says

Stock up on anti-depressants. It's even cloudier there than where I live.

I am up there for work weekly. I have been going there for work for the last 4 years. It really isn't as bad as people say. You just gotta sack-up & get out and live regardless of rain, shine or otherwise.

bmwman91 says

You just gotta sack-up & get out and live regardless of rain, shine or otherwise.

lol. Good point.

Philistine says

Really? Sounds like tautological used house salesman mumbo jumbo to me.

It's more like economics and capitalism. Think of housing like a manufacturing process:

There are inputs to the process, raw materials, land, a regulatory environment to work within (permits, building standards, cost of improvements to hook into local sewer/water/electricity/drainage, etc.), and a process used to convert the raw materials to the product (energy and labor).

If the cost of the inputs, regulatory environment, and process exceeds the market price for the product, no one will produce the product.

Some people believe that in fact, if there was demand at current prices, builders could and would build at a cost that allows them to make a profit. In some parts of the country, this may be the case. I do not believe this is true in many parts of California based on my experience (land is too expensive, regulatory environment too expensive--build it green initiatives, permit costs, etc.). If it were true, you would see more grading of new lots...what we see instead is predominantly building on existing inventory of finished lots.

So, if you are in an environment where cost>price, there will be no new supply. If there is no new supply, but a growing demand for the product (in a location with a growing population, there is a growing demand for shelter), simple laws of supply and demand dictate that eventually prices will rise.

Land is the plug number...it's value is the residual of what's left after you back out all the other costs and a profit margin. If after you back out all the costs, the number is negative...no new development. If after you back out all the costs plus a profit margin, you get $X, then a builder will generally pay $X for the land.

Today, near the coasts, this calculation yields a number >$0, if a builder can find a willing land seller at a price of $X, and a municipality willing to grant entitlements, then they can buy the land, build the home, and turn a profit. If there is no land available at a price that makes sense in the calculation, they won't buy, and they won't develop/build.

Farther inland, the calculation in many places yields a number of less than $0, so the only way builders generally have been able to make sense of the math in those markets is either a) they have existing partially/completely developed land in their inventory that they can justify building on because they already have sunk costs in land and infrastructure, or b) they are buying finished lots at less than the cost of the infrastructure from distressed land sellers or financial institutions.

There is a finite amount of lots that fall into categories "a" and "b". Once they are gone, there will not be additional development in the negative residual land value locations until the math makes sense again to develop more lots. The cost of the inputs needs to fall, or the value of homes needs to go up. With the Fed printing money, thereby weakening the dollar, and interest rates low (and affordability high), the likely outcome is prices rising, not cost of the inputs falling.

Perversely, exacerbating the situation is that many builders (public and private) sold finished land inventory for big losses to investors when times were the worst (2009/2010) because in addition to raising some cash in the sale, they could claim huge losses on the land sale, and get tax refunds from Uncle Sam for income taxes paid in prior years. This reduced the number of lots they can build on now--some of those investors are selling the lots back to the builders today at less than replacement cost, but above what they paid.

Other investors are just sitting tight on the finished lots, under the theory that eventually the math will need to make sense for homebuilding to occur on raw land again, meaning the lots will eventually be worth much more than they are today in that particular market.

1sfrenter says

Apparently everyone else, including the infestors, decided the same thing.

No, despite stagflation one income and huge inflation in gas , food, rent and tuition, people are still trying the real estate ponzi scheme because helicopter ben is shoveling free money at the problem interest rates are basically zero in real terms.

Despite this the middle class is crushed, pay is stagnant and ever departing from the cost of living increases, and the scam and ponzi artists pretend that they will retire rich in real estate instead of like, you know, actually being an honest and productive worker, entrepreneur or business owner - not that that's rewarded anymore.

The world is for those who take massive risks, and the 1-2% of those who take said risks they get to be elevated and walk on the middle class. And those 98% who fail, well, we the hard working middle class with kids get to carry them around on social programs until they go off and bet the farm again.

What a joke. The bay area, for all its prosperity, is a stinking, moldy outdated trafficy pile of crap. And now the NY-style gordon geckos are coming and running the place, long gone are the guys with sandals running cool new businesses in a relaxed way and in come the rats from afar here to try and milk the last vestiges of the systems for whatever.

Joke. Innovation is basically dead.

bmwman91 says

many aspects of it feel like a sinking ship for middle class folks, while at the same time there is this boom in web services companies and a lot of people thinking that the sky is the limit here.

The only limit in the sky is the pie. Its bull. The failure rate is astonishing, and if you see, in just about every case, the success is ordained, as in, Instagram guy and Zuck had met before... And google bough ad words from Oingo/Applied Semantics, they bought Andriod and youtube.

Innovation is dead. Rainmakers rule, and the rest is robotic global 500 type companies kicking the employee in the nuts.

If you arent executive management or high end sales, you are getting screwed to the wall in the bay area.

sera says

Many of them are in decent to excellent

No public school in the entire state of CA is excellent. Public schools are worthless today. Totally. its the biggest scam I've ever seen. I have an API-950 school,for the kids, garbage. And of course private is 20-30k/yr.

Bay Area sucks. Its time to pack it in. 2 more years or so.

rowemoore says

APOCALYPSEFUCK is Tony Manero says

Given the advancement in the art, sure, very likely.

Get off the grid and the only weapons you'll need are fishing poles and a knife

Tough with kids.

Mick Russom says

Tough with kids.

Easy, each kids gets his/her own pod.

Only Ikea could design a $86,500 house that looks like a $17,500 house.

Worst part, I assembled the damn thing and I've got 100 left over pieces.