patrick.net

Robert is clearly correct. Mortgage rates are into the 2% range people! I guy I know did a refi at 2.78 and rates are lower today.

I'm not happy about rock bottom rates and CD paying 1% - but this is what the people in charge decided to do to - the US is like china a lot now - run like a corporation and connected businesses never fail. At least we still have internet porn! :-)

Nice analysis Roberto. I'm hoping this is just an intermission before another leg down. But I can only hope. It would be great to add to the portfolio....

we are seeing more mixed results than outright increases across the board in BA... Some people said mid 200s wouldnt happen in the Bay Area.. but that is what happened in Contra Costa..

Contra Costa $255,000 $295,000 up 15.7%

http://www.dqnews.com/Articles/2012/News/California/Bay-Area/RRBay120614.aspx

robertoaribas says

In Phoenix this has actually been extreme

You were very lucky to have the media put so much attention in Az regarding the overbuilding and speculation. Hum! Recently, how many Californians did move to Az ? many im sure.

I dont belive KPFK, those people are using scare tactics to get thier agenda passed. (so far its working!) and so since the deadbeat loanowners 'cannot be foreclosed upon, ever'(thats thier agenda) we are seeing them WIN - they got prices to go back up by letting deadbeats get underwater refi, mods galore, 3 years to foreclose.

The liberals want higher house prices and are winning. weird huh.

PockyClipsNow says

agenda

Agenda? They are a poor little radio station that has to beg for funds to keep the lights on.

I take my news where I can get it.

PockyClipsNow says

I dont belive KPFK, those people are using scare tactics to get thier agenda passed. (so far its working!) and so since the deadbeat loanowners 'cannot be foreclosed upon, ever'(thats thier agenda) we are seeing them WIN - they got prices

ditto.. yes, thats pretty much it.. in fact i doubt you will hear them talk about homes being over priced to begin with. I think even their listeners will point that out. Fact is they dont talk about past prices in SF BA..

David9 says

Agenda? They are a poor little radio station that has to beg for funds to keep the lights on.

Poor little radio station or the CA state gov.. they have doubled down on bubbles.. Stock Bubble, RE Bubble, and even Education Bubble.

They too complain about education cuts, yet not once have they questioned .. WHY have costs of Education gone up ?

But they are good at PAY ME, GIVE ME.. Its my human rights !

APOCALYPSEFUCK is Shostakovich says

The banks thought they were being clever by getting the accounting rules shifted.

Its not the Banking or Accounting issue.. its the issue of Consumers not asking. Why am I paying 200-300% vs a few years ago ? Since when is this normal ?

But they actually believed in 20-50% appreciation in the long term.

thomas.wong1986 says

radio station

I wasn't endorsing the radio station or a perceived general viewpoint of the radio station listeners, just one hour of programming on housing.

I get my news where I can, including here, which is a blog.

Robert is absolutely correct! I have posted here in late March, early April about the difficulty I was having finding a home. I am still looking and have put in several offers, so many I don't want to take the time to count. I am extremely frustrated trying to locate a home that meets my criteria. Yes there are some homes that I have seen drop in price, but these are the ones no one wants. Except when the price drops low enough for a cash investor to snatch up. I have continually been out bid or late to make an offer because there are multiple offers and they are no longer excepting. I was the first and only person to see a home, I immediately submitted my offer $11,000 over asking price, it was excepted and sent to the bank for approval. The owner hired a short sale Lawyer who was going to help speed up the process. The bank sold the loan to another bank, we resubmitted to new bank, then one day the owner got a knock on the door, the bank foreclosed on the owner without giving notice making my contract offer void. I hit the market again a month later, and prices have increased even more.

I am so sooo upset. I can't believed the crap I qualify for in my price point. If I would have started my search aggressively six months ago, I would have saved myself $50,000 - $100,000. This is no Joke.

To those that are talking crap to Robert, just shut up!

Your are complete idiots! You know nothing. If you knew anything you would have been able to predict this stupid upswing. I believed the majority of you big mouths on this site and waited, thinking that prices would go farther down. When you are actively looking for a home then you can talk. I hate what is happening, and hope that something changes. But there are so many investors out there. I wouldn't be surprised if it isn't the banks buying up all these homes. There is very little inventory. Also manipulated by the banks.

Carolyn, my wife and I are in the same predicament as you (same area in fact). It's clear from you tone that you are being led by your emotions. This is never a good thing when it comes to buying a house (well, except for the seller and the real estate agents). Please take a breath and start looking at the bigger picture.

We've been looking to buy a house since 2002 and it seems house prices always tick up around this time of year. There are a few other factors leading into the price increase you are noticing, and as we get closer to the election you will probably see some other wacky fluctuations in price.

Point being, expect to be discouraged over the next few months, but keep watching for signs that pricing continues it's slow trend lower starting sometime in early 2013:)

Carolyn C,
I've been in the same situation for 19 mos. RealtyTrac & Zillow will show foreclosures. RealtyTrac shows foreclosures for sale & foreclosures that aren't on the market. You can compare these to resales through MLS in your area. Do not get upset.
Remain persistent. A good rule to follow is: Never have an EMOTIONAL attachment to a house. Another rule:Your looking for a deal, not to make the seller or bank any money. This is business not morality.

As far as advice from comment sections, don't take them as gospel. Including mine.

Thanks for the advice.

E-man says

SophiesChoice says

but keep watching for signs that pricing continues it's slow trend lower starting sometime in early 2013:)

So you expect these same homes to drop $50k-$100k by early next year. It would be fantastic if you're correct. What if you're wrong? Wouldn't you be better off now had you bought in 2002?

Learn from your victory. Prosper from your failure.

In Pleasanton, I don't know, but it could happen fairly quick in Dublin/San Ramon as 50K is just a 10% drop on a lot of the current inventory. Plus there are a lot of townhomes / condos in that area which fluctuate greatly and could put pricing pressure on the SFH's.

Also, for me I wouldn't have been better off if I bought in 2002 although my situation is probably atypical of the average BA buyer. At the time I was too young and would have overpaid for a 2bd in a somewhat bad school district (it almost happened twice). Fast forward to 2012 and now I have 2 kids and know the added value that location can bring. If I had bought in 2002 the timing would have put us trying to sell a 2br right after the 08 crash. Might have been a wash on the sale price, but I would have lost my equity / Down payment. instead it's been investing and growing for the last 10 years.

Like I said, I think things will start to slide in 2013 but it might be a long slow slog as we find bottom and bounce along for a decade or so.

Everything is being thrown at housing to make prices rise. Simply wait this temporary situation out and prices will resume their fall. Mortgage rates rose this week and huge tax increases are coming in january. Time is the buyers friend.

Strategic Renter says

Everything is being thrown at housing to make prices rise. Simply wait this temporary situation out and prices will resume their fall. Mortgage rates rose this week and huge tax increases are coming in january. Time is the buyers friend.

This post pretty much sums up the situation, much better than the OP (with all respect of course).

The fed is propping up prices with low interest and help with closing costs which make buying a house cheaper, in order to get this basicly free money you have to buy a house,

California real estate tax incentivizes not selling your house if you have owned long term, live in huge house and sell and scale down costs actually can go up, so why hassle with selling and moving when you are doing fine as is. If they need money then they sell if they have enough they stay.

The banks know more supply means less money so don't expect a huge tsunami of houses out of them, but you can count on a steady flow unless they sell them all to investors in bulk to rent.

I think with rising prices there is still a good group of sellers who will get pushed onto the market. so I think there will still be a oscillation up and down in prices right now we are in the up.

DEAD. CAT. BOUNCE.

I think a lot of folks just remember the 06 insanity and attribute slight margin play in random markets as a sign of YTY 20% appreciation.

Reality is that such cannot occur again. Real estate market will be a non event for a good number of years. Each market is different and all are very saturated.

I'm sure there will be articles pumping up real estate, or whatever else since news are paid for... nothing more than sales pitches and waste of time. If you don't read into it too much you'll be fine. Just make sure you are out of debt and are comfortable with your life.

Thanks for the analysis Robert. RE is the big focus of everyone right now (and sort of always has been). Pricng seems really volatile in desirable areas (for living, or investing) since supply and demand are at historic opposites now. Add in a lot of government and bank intervention, and the whole system is just wildly unpredictable in the short term. The hard part is accepting that the longer term may seem predictable, but intervention may well make things go another direction. Many of us on here want a downward trajectory, but we might not get it. That's a bitter pill to swallow, considering the last decade or so of irrationality and in some cases, outright idiocy, that priced rational people out of the market.

The adage that, "markets can remain irrational longer than you can remain solvent" sort of comes to mind. While remaining a renter really isn't going to lead to insolvency if the individual is smart about saving/investing, it does sort of serve as a reminder that markets can remain irrational for a really long time, despite loads of logical reasons for why they shouldn't. A year or two I, and probably many people here, were feeling very optimistic about housing prices dropping and dropping. As of now, at least in the areas most of us live in and want to remain in, that optimism is fading in light of this year's RE performance. We are all looking for reasons why, since it sort of sucks to have your hopes trounced.

But, that is life. There are all sorts of places in the world where a middle class person or couple has no hope of ever purchasing anything more than a slummy 400SF flat in some highrise. We all think that we are different because we live in America. We are promised homeownership from the day we are born, and I think that a lot of us see it almost as a right to do so. Well, that promise may just be a lie in this day and age. RE ownership may be becoming a thing for the super wealthy (or the super irresponsible, in the hear future - FHA loans), and they will rent land out to everyone else. It wouldn't be the first place or time in history where that was the case. Just because we THINK it is different here, does not mean that it is. History has a tendency to repeat itself.

None of this means that you should "buy now or be priced out forever" though. If you aren't comfortable with the price now, then so what if you are MORE uncomfortable with it later. You either can afford it now, or you can't. Frankly, the options are renting or moving. America may well become a place where people are forced to make choices they don't like and live with them. It wasn't that long ago that the economy was forcing people to make those types of choices just to stay fed.

Nice summary bmw. This spike has gotten me to re-think my strategy, though I suppose I'm lucky in that I have multiple choices.

Current: Keep renting and see if one of my startups pays off (lol). See what happens to the market over the winter and into next year.

Other: Move to another state (OR or WA).

Other: Move back to Santa Cruz and get a low stress job, as my housing outflow would be ~$800 A YEAR =/

The last option is looking more and more likely.

CrazyMan, I think you are CRAZY to not be taking that last option. Hell, why deal with the SV rate race & douchebaggery competition when you could move to SC for $800 a year?! Yeah, SC has its own "special" vibe to contend with, but for that price who cares?

HEY YOU says

As far as advice from comment sections, don't take them as gospel. Including mine.

Those are words to live by. I take them as Gospel! :)

Yeah, I know I probably am crazy :)

I grew up in and then inherited that house and while I'll never let it out of the family, I've always wanted "my own" place. As a matter of fact that's why I've been saving for the past 15 years.

I certainly could afford to buy a house in Santa Clara/Campbell (I have a couple hundred K in cash I need to do something with) but I'm just not sure I want to deal with the rat race (indeed) for the next 30 years to pay it off.

So yeah, the 3rd option is certainly the smart and conservative move. Luckily my girlfriend is open to the idea as well.

As someone who recently bought and went through the whole buying experience, I too can attest to the fact that "things are different" from what they were even 6 months ago. I have a few humble opinions about it.

There seems to be a few things happening at once. First of all, there seems to be a generally improved outlook amongst many in regards to the Bay Area economy: Things are improving and people are less scared of the idea of buying. So demand has probably picked up. That opinion seems to have spread like wildfire and now many are like : " we gotta buy now!" Perhaps because the memories of the recent housing bubble are all too fresh in people's minds. I'd be willing to assume many of these same people probably also patiently sat out the bubble, have saved up, and been very careful. But lo and behold the market turned a corner and perhaps many feel that they'll sure as heck not get "priced out" again. Whether this is true or not or whether the current situation is a fluke I have no clue.

As constantly mentioned, inventory has fallen. That's an understatement. There are literally only about 40% of the homes for sale in our town as there was last year. Of those, it seems like there is very little within the "reasonable" ( by Bay Area standards) range. The weird, really crappy, or bad location houses sit. So there is a lot of competition for the "good stuff".

Secondly, as also mentioned interest rates are ridiculously low. In other words money has gotten cheap to borrow again. Doing the math, there isn't a whole hell of a lot of difference between buying a 500k and a 600k house: The rates are so low that we're not talking about a huge delta in monthly payments.

At the same time rents have gone up, and especially for rental houses. There are very few homes for rent in our area at this point and if you do find one the rent is pretty high. We were lucky in that the landlord never raised the rent on us. But if we had had to find another similar home the cost of renting would be more than what we now pay for the mortgage. When we first moved into our rented house there was about a 60% delta between the cost of renting and buying in our area. Now its about even or even slightly more to rent the same thing.

At least from my experience I very shortly found that bidding on foreclosures, short sales, and whatnot was a useless endeavor: Not only were the houses nearly impossible to see, but more often than not investors would swoop in at the last minute. So I didn't even bother to look at them.

Wild card is future interest rates. But todays buyers will still be 'sitting pretty' if rates rise - even if they have to move or lose job its not like they are paid cash.

Only risk is downpayment AND you can easily get back your downpayment by squatting for 3 years before the foreclosure.

Lets remember CA is still non recourse state so a 3.5% downpayment is NOT at risk. Buying is risk free financially (unless u refi, then you can alwasy declare BK)

BMWman
The 4 decades of a technical professional:
20-30 Go wherever, do whatever it takes to gain the edge.
30-40 You are gold. They will recruit you.
40-50 Hang on or move up.
>50 Jump off or be kicked off.

I'll pass on the joys of being a landlord in *Phoenix* which rhymes with "fucked".

Roberto is lucky, he had the HUGE media focus on foreclosures in Phoenix plus all the overbuilding and very little hype in the aftermath of the bubble imploding. On the other hand SFBA still has the aftermath hype in full motion. Heck, his area may well start seeing more jobs migrate to Phoenix due to high costs. Not what I want to see, but certainly when cost of living is lower, its more attractive.

Fred Flintstone says

And Cinncinati has a lower cost of living.

Why lie for a liar??

Remind me again why Silicon Valley companies shut down operations and moved it to Arizona, upper New York, Colorado, Texas and other lower costs regions. All due to higher home costs. Not something im cheering about.. but at least the jobs are going to Americans.

Reversal = investors with shitpiles of money/easy credit, just like OP, so they can live/ride off the backs of ordinary working Americans. Nothing wrong with that, it's the American way.

RobertoAribas is perfectly credible IMO. He got a little lucky that he was living in an area where there were good buying opportunities and was smart enough to see it for what it was. I appreciate his highly localized but interesting info.

YesYNot says

RobertoAribas is perfectly credible IMO. He got a little lucky that he was living in an area where there were good buying opportunities and was smart enough to see it for what it was. I appreciate his highly localized but interesting info.

Agree. I think many people on this site wish we had similiar opportunities where we live, thus, more inclined to hopefully jokingly give him a hard time.

hehe, by the end of the decade there will be a widespread awakening to Arizona's water future AND peak oil. The double whammy will make houses much less desirable in that desert, and everywhere really. But in the desert they are going to be worth dogshit.

Prices may be bumping there now, but the coming crash will make what's happened so far look mild.

Get ready for the end of growth homies.

Global warming and peak oil are hoaxes created to get $ out of suckers and pass agendas/power grabs.

Jim Kunslter is a hack writer who only starting making real $ by pandering doomsday books to the global warming religion IMO.

There are probably 500 different doomsdays you can choose to believe in. I'm choosing zombie apocalyspe - its the most fun.

Peak Oil a hoax? Zombie needs to eat more brains.

As for the butt pulling Realtor, he's sticking his head in the desert sand

But lo and behold the market turned a corner and perhaps many feel that they'll sure as heck not get "priced out" again.
I know of a couple of young families in the Bay Area who are in that boat and bought earlier this year. That said, I was talking to a friend recently about some of his work colleagues. The highlights included one that was 'well off' but sold his two houses (one primary and one rental) at a loss. He did, though, take his remaining equity and bought a nice place east of the hills. Another had an ARM resetting and was trying a short sale on a million dollar home. Yikes.

http://www.wired.com/science/planetearth/magazine/16-05/ff_peakwater?currentPage=all

Intel is stockpiling water in Arizona. Maybe Robert can get himself an aquifer :).

Seriously, the above article has a good discussion of the two big water projects for Pheonix. It would be silly to write it off as a non-issue.

APOCALYPSEFUCK is Shostakovich says

But

it's

still

a

dead

cat.

How can you be so sure..... We'll only know in hindsight. But yeah, I do agree with this (in theory) or rather, I wish this were true -- thanks for the succinct perspective, Strategic Renter (like your name btw):

"Everything is being thrown at housing to make prices rise. Simply wait this temporary situation out and prices will resume their fall. Mortgage rates rose this week and huge tax increases are coming in january. Time is the buyers friend."