patrick.net

In a rational world with a truly free market, you would be right.

However, what we have is a highly manipulated market controlled by large interests with a desire to keep prices as high as possible. Those large interests are ultimately sitting on a font of unlimited money (tax payers) and they can stall indefinitely, or until the entire nation implodes, in which case real estate is the last of anyone's concerns.

I doubt that anyone would argue against the logical reasons why housing prices have more to fall. However, in practice, it is unlikely that they will without some sort of larger implosion of the economy as a whole. Believe me, I would LOVE to see prices tank again as a prospective buyer, but I sort of doubt that they will. So, I focus on enjoying my life and the fact that I am financially secure with zero debt to my name.

bmwman91 says

However, what we have is a highly manipulated market controlled by large interests with a desire to keep prices as high as possible.

Do they? Or do they just want enough buyers at this level, and then the next and then the next?

In other words, are they getting exactly what they want as an outcome? They need to move inventory, and the best way to do that is to entice people off the sidelines and then let it drop some more?

CL says

Do they? Or do they just want enough buyers at this level, and then the next and then the next?

In other words, are they getting exactly what they want as an outcome? They need to move inventory, and the best way to do that is to entice people off the sidelines and then let it drop some more?

Well, there are multiple parties that want high prices. I think that they outnumber, and overpower the groups that don't.

1) Government: property taxes
2) Realtors: commissions, their "reputation" after lying out their asses about house prices always increasing
3) Current house owners: they want to be able to sell and at least break even, some want to ride the HELOC train

Individuals in 2 & 3 vote, and make up a significant portion of the electorate. In addition to this, group 2 has powerful lobbyists behind them. Combine that with the fact that group 1 is broke as fuck and wants to be able to tax higher valued properties, and you'll have group 1 doing all sorts of stuff ot keep prices up. Since CA's income is severely dampered by Prop 13, they desperately need a supply of people buying high-value properties now to pay full taxes on that property's value.

There is, of course, a lot of pressure on prices to go DOWN for all the reasons you mentioned in your original post. There's an epic struggle between those forces and the 3 groups I mentioned. Overall, the downward forces already overcame the 3 groups in a large way in most areas, and the pressure is lower now so they are having some success in fighting it. Only time will tell what is going to happen. I keep my fingers crossed for a $400k house on 0.25 acres with a 1000SF detached garage within 30 minutes of my office, but I am sure as hell not holding my breath lol. Frankly, I don't EVER expect to see that happen around here. It's more likely that I will make $300k per year and just buy what I want...and the actual odds of that are SLIM lol. Still, it is more likely than "cheap" housing in the Bay Area in my opinion. Frankly, the Bay Area has too much money and not enough people looking at the big picture in life (LIVING it, not just making money to live it with "someday" which never comes). Anyone interested in LIVING life has to compete with people that think making money is LIVING, and the results are in plain sight for all to see. $1.5M for a 700SF shit shack in Palo Alto and that sort of thing.

I hope you are right.

All I know is that from where I sit, here is San Francisco, prices have gone crazy in the last 4 months.

We've been looking since Jan 1 and gotten overbid 4 times already - on houses that would have gone for less than list last year.

Give me some good arguments why we should wait longer to buy here in the city, because with 30% of all sales here being all cash and inventory down 45% since this time last year, it looks like we'll be renting whether we want to or not.

I sure am gonna be pissed off if I waited 12 years for the bubble to pop and then missed the bottom by 6 months.

Sick of renting already.