patrick.net

mell says

It's not "stupid" for a bank to loan out to people they know cannot pay back, it is criminal/fraudulent, but definitely not stupid. Most of the money they lend out is backed by nothing and most of the the involved parties get instant kickbacks. Then when they foreclose they get the home for free as they have not had the money on the books to begin with. Also if the bank ever folds - which is unlikely as they keep getting bailed out with taxpayer money - most have made enough money, far more in those "golden" years than they would have if they had to pay themselves "regular" salaries on a lifelong basis.

+1

Mell has also explained another way that banks make money through defaults regardless of whether they even practice Fractional Reserve banking...

Which they do.

Something is not right in this market. Prices of houses were much lower both in the bay area and socal, when the dot com boom was in full swing. Companies were fighting over employees and people had so much hope, confidence and money . Housing was much, much lower than now.

Since then we have had the dot com crash, housing bubble bust , offshoring of iT jobs and now back office jobs too and CA is broke and yet in many places, the prices are higher than before the dot com bust. Something ain't right.

lostand confused says

the prices are higher than before the dot com bust.

Some places like Palo Alto, Los Altos prices are even much higher than they were in 2007 at the peak of the frenzy.

Another Miner says

absolutely average homes are getting multiple offers in the $500k+ rang

Realtors have been saying that for the past several years and yet even with rates declining .. prices have also declined.

Amen. I know of three homes that have sold in the more desirable side of Petaluma over the past couple of months. In all cases, the real-a-doors(tm) told me that they expected 10+ offers after the opening weekend. More than 45 days after the offers were accepted, only one of the three homes has a resident. The other two (both sold for north of 550 for 3/2 bd/ba's) have long browning grass, unraked yards and one still have a lock box on the front yard.

Supposedly, most accepted offers in the area are all cash. The (buffoon) mortgage broker I was using (until I confirmed he was sloppy and incompetent) said that 35% of the market was all cash, and the balance was 3.5% FHA. No place for prudent savers. I decided to sit this party out until at least Feb.

Like you said, something aint right.

lostand confused says

Something is not right in this market. Prices of houses were much lower both in the bay area and socal, when the dot com boom was in full swing. Companies were fighting over employees and people had so much hope, confidence and money . Housing was much, much lower than now.

Since then we have had the dot com crash, housing bubble bust , offshoring of iT jobs and now back office jobs too and CA is broke and yet in many places, the prices are higher than before the dot com bust. Something ain't right.

Perhaps people had lost all hope in the stock market, jobs, business start-ups & internet enterprises that their home is they only thing left for them to make money off...

Which is actually kind of sad.

Well, iv'e been sitting on the sidelines for the past three years hoping prices will get into a realistic range so i can get into something(to live in, not invest). And i don't even know if that would be a wise thing based on the politico and economic realities that have developed.

I'm at a point in my life where i have stable employment and finances and am enjoying life now, but i don't know about the future of this country. Not sure i want to get invested in anything here anymore. Patrick has been an immeasurable resource for cutting through all the party line you get from the mainline media sources, and it makes you realize how controlled our country has become from these monied investment interests.

I think the baron is right; the market is going to go up in these cycles and then come down siginificantly in a matter of months.

http://www.zillow.com/homedetails/315-12th-St-Petaluma-CA-94952/15755261_zpid/

thomaswong.1986 says

Realtors have been saying that for the past several years and yet even with rates declining .. prices have also declined.

This house was a time warp from middle class 1910. As in, there was not an updated system in the house in the last 100 years.

Real-door(tm) can say whatever they want, but someone paid 500+ for this and it needs another 200 to be brought into this century. This isn't Palo, but you wouldn't know it by the prices.

KILLERJANE says

California is still high. I mean completely stoned.

Done stoning? :)

The central valley & inland empire of CA got decimated. The coastal neighborhoods are holding up better. The fortress is .......... well, still expensive as ever. :)

The fact that the fortress has cities with prices still higher than 2006, is a sure sign that the true RE bottom is nowhere close in sight. During the NASDAQ bubble collapse, the bell-weather cisco stock dropped from $80 to $10. The nifty-fifty stocks took a beating during the 70's downturn. From real estate, examples, we've had former fortress enclaves: Tokyo, Hong Kong, London and many others take brutal beating during their respective recessions. The Bay Area fortress will be no different. I expect to see a brutal crash, here, just because, prices have been going up for so long, that everyone, here, is blindly convinced that this area is truly invincible. Now, historically, it's always been the case, that after a bubble, the top-tiered places will see earlier appreciation. This happened back in 1970's and 1995 and many other examples of this. So, if we are seeing that cities like Phoenix going up before the fortress areas of the Bay Area, this cannot be a true recovery. Places like Phoenix and Las Vegas don't lead the RE market, they follow it, and only once other places have sufficiently appreciated, do places like Phoenix and Las Vegas start to rally. Places like Palo Alto and Santa Monica lead the prices action, and, since this is not happening this time around, it cannot be a true recovery.

Since most loans are FHA these days and government backed, why would the lender even care if the borrower can repay the loan? As long are at the borrower qualifies based on income, they are good to loan (from what I have recently seen). Nothing fraudulent there...that is the way the government wants the game played.

I am not really sure why the government wants people in bubble real estate areas to go all in at 3.5% loans on $600,000 stater homes, since it will take very little to get them underwater, but that is not my problem. But it helps get the inventory off the banks foreclosure books.

You can trivialize it if you want, but fractional reserve lending is a big part of the problem, but that is not even worth discussing.

"whenever anyone says clearly demonstrating so little knowledge about finance or economics, it is best to just nod and smile. SImply put, they don't have either the education to bother talking to them..."

What a US President & a Founding Father has to say about Fractional Reserve Lending...

“No one has a natural right to the trade of money [loan money], but he who has money to lend.”
-Thomas Jefferson

I guess in your flawed estimation, Thomas Jefferson is also a dumb idiot who knew nothing about economics nor finance. His knowledge is also very poor. The only smart one is you.

robertoaribas says

whenever anyone says clearly demonstrating so little knowledge about finance or economics, it is best to just nod and smile. SImply put, they don't have either the education to bother talking to them... mell says

Self professed experts are always entertaining. You must have heard about fiat currency?

If markets were run by the free market, I'd agree, but government has been caputured by the corporatists and media is owned by them. The people are stressed to the limit, so they can't think for themselves and tons of misinformation is put in the public's line of sight, specifically for the few intrepid souls who want to try to wade through what is real and what is hype to get mired down in. And as a last line of defense, the means with which the market reports on itself is digital, which means open to hacking, and proprietarily complex, which means open to creative accounting. In short, the best illusionists and con men in history run the show, and prices will do what they tell them too, regardless of fundimental truths.

robertoaribas says

Robber Baron Elite Scum says

Because they create money out of thin air through fractional reserve banking.

whenever anyone says clearly demonstrating so little knowledge about finance or economics, it is best to just nod and smile. SImply put, they don't have either the education to bother talking to them... mell says

It's not "stupid" for a bank to loan out to people they know cannot pay back, it is criminal/fraudulent, but definitely not stupid. Most of the money they lend out is backed by nothing and most of the the involved parties get instant kickbacks.

ok, we have a society of the economically illiterate! have fun!

Look, I'm not trying to predict house prices (though I have a general direction), also I am generally happy for people who enjoy their home or can make decent rental income from their houses and the work they out in - IF I didn't have to substitute so many of the mortgages and zombie banks out there with my taxes time and time again. Debt should be treated equal without favoritism and rigged low interest rates at the expense of the saver. I trade stocks (besides having a full time job) - no bank crap though and not on margin - and maybe I am part of the system because of this, but at least I take full responsibility and all the risks for my investments. Also to simply deny that banks have not been using mark to market (thus inflating their value), hiding non-performing mortgages from their balance sheet, rigging interest rates (liebor), knowingly selling junk MBS for AAA and not practicing "one dollar spent/lent backed by one dollar of capital/collateral)" makes me wonder where you have been the last 5 years.

Raw says

Worst is over. We are in a sustained recovery.

I hope you are being ironic, or heavily drinking.

The only way new buyers in this economy can afford such prices is to be either the beneficiaries of rare circumstances (inheritance, lottery, being able to sell a similarly priced home, etc.), or via such exotic and unhistoric financing products that they are effectively renters whether they know it or not. The bottom is nowhere near here so long as prices remain so out of whack vs. incomes, and incomes are mostly going down or have been flat for the last decade with no end in sight. Prices will have to adjust to what people can afford, or else the property sits unsold, becomes derelict (Grey Gardens, anyone?), or gets eminent domained and turned into something else (like the way a lot of the mansions and near-mansions of old cities like Philly got chopped up and turned into apartments. This process will likely take decades to work out, because that's how long it took in times past.

The 'numbers' don't support the prices today, in aggregate. Isolated markets may have individual characteristics and home prices have plunged enough already...but, in aggregate US home prices seem richly valued.

Median household wages have declined 4% in the past 12 years...if the under reported official CPI numbers (relative to the model used prior to 1990) are used...inflation adjusted wages have declined over 30%. This is not a recipe for higher home prices going forward.

Our government now forcibly controls over 90% of the residential mortgage lending in the US - thru nothing down Fannie and Freddie and close to nothing down FHA. As recently as the late 90's one had to put 10% down...and either pay PMI for having under 20% equity or, dependent on income, it was sometimes a better deal to have a higher interest, 2nd mortgage on the balance. All of this has evaporated.

Government has simply stepped in and forced lower down payments and created lower mortgage interest rates to make the average US family more comfortable with higher levels of debt while real income declines.

One doesn't know the Minsky Moment when these government led subluxations of normal market actions cease to have positive effect...but when that debt load becomes too great for the average US family to bear will be the time home prices tumble again.

But, it surely will....

Robber Baron Elite Scum says

They want to crash prices because they never even lent the money in the first place.

They practice "fractional reserve banking".

When people default, they get to seize an asset for which they never even really provided money for.

Not to mention the losses they handed to the pension funds they sold the bogus MBS to, and the so called insurance, unregulated 'credit default swaps', they collected on that were paid by printing money that the banks paid to themselves. Now working people, especially you young folks, need to get back to work so you can pay the rent. Forget about owning. The stolen goods are not for sale.

KILLERJANE says

The big crash has occurred in Nevada and Arizona and Florida. California is still high. I mean completely stoned.

Just keep your blinders on! Common sense is a myth.

Seems like a fair assessment. Even if PHX, LVS, or MIA were to lose another 20% ... actually home prices would fall ... what? Another $500 apiece? haha j/k

CA doesn't make any sense. Have relatives who make around $50k renting what they can afford ... a small, dumpy apartment that doesn't even have a real front door. They'd love to buy but everything in LA County is priced at $400k+. And those aren't the nice houses.

And they are the lucky ones who have a job. At some point in the next 10-20 years, those houses are going to have to change hands. And if incomes aren't WAY up by then ... I expect a slow, gradual decline in LA RE prices over several decades, which will gobble 30%+ or more.

I wanted to add to my post, but it was already getting too long, there is in all likelihood higher taxes on the way at both state and local levels and the aging of Amerika(sic) is happening. 10,000 Baby Boomers per DAY retiring bodes not well for resale prospects of today's mini-mansions.

Further, with Mexico and Sourh American economies, as well as the VAST majority if Asia better poised for future success...I don't see the waves of immigrants coming to the US as in decades gone by competing for homes.

There will be blips and dips, government intervention and innate yearning for a home of your own all pulling prices all over the place...but for all reasons I listed, and probably more I haven't, home prices would seem to be trending down, not up, in the future.

APOCALYPSEFUCK is Shostakovich says

taxee says

The stolen goods are not for sale.

Oooooooooo.

America's Epitaph.

Royalty own all valuable land. The peasants rent the junk.

Robber Baron Elite Scum says

o you guys agree? What do you predict? Do you think I'm right? Your thoughts?

I think there will not be a bubble reflation n housing, though there will be asset bubbles elsewhere in other commodities. Housing will over-correct past the mean just as all asset bubbles throughout human history have done, but at a much much slower rate, a la Japan, and with a few bumps and troughs along the way. IOW not a linear decay. Since time is an asset (hard to quantify) you need to do the personal math and decide whether the personal dividends are there for owning your primary as opposed to renting. It all depends. I know a guy who records music and wants a home studio, so a primary residence in his case might make more sense. Not in the Bay Area, though. Why would anyone buy in a hot market? That's just poor financial savvy.

bgamall4 says

f people live multigenerationally, and are frugal and hate the banks enough to avoid getting loans, they can save money and the new normal will be that they have some savings.

You are thinking miles outside of the box with that one. We are a pain-free society, and unless pain becomes marketable or fashionable, people will endure as little of it as possible.

bgamall4 says

JodyChunder says

bgamall4 says

f people live multigenerationally, and are frugal and hate the banks enough to avoid getting loans, they can save money and the new normal will be that they have some savings.

You are thinking miles outside of the box with that one. We are a pain-free society, and unless pain becomes marketable or fashionable, people will endure as little of it as possible.

People have already endured, Jody. Not in the bay area as much, but in the bubble areas. They know and they are changing their behavior as we speak.

Gary Anderson strategicdefaultbooks.com

I know people have had a lot of woes these last few years. What I meant is, saving is painful. It's nearly a dirty word. Change comes second to frugality in the pain index.

It's not really a suckers rally, houses are cheaper or expensive (take your pick), because the interest payments are cheaper. That's why investors are gobbling up single family and they rent great. For many, just having a family is all they can afford. Eat or be eaten, in the U.S., we eat our own, it's a fact of life here.

bgamall4 says

People have already endured, Jody. Not in the bay area as much, but in the bubble areas. They know and they are changing their behavior as we speak.

Endured what exactly? Most Americans consider $4/gal gas as a source of great suffering.

everything says

It's not really a suckers rally,

That rent income may look like chump change compered to the losses those owners may have to eat if house prices crash again. The bailouts may not be so generous next time.

New Renter says

everything says

It's not really a suckers rally,

That rent income may look like chump change compered to the losses those owners may have to eat if house prices crash again. The bailouts may not be so generous next time.

The government and fed has manufactured this 2nd bubble... So why wouldnt the bailouts be as generous? If anything, unlike the last bubble... The FED is fully to blame for homebuyers going under the 2nd time around. Finger pointing will be much easier.

I'm sure they are terrified. While they cackle and count up the trillions that are now legally theirs they are quaking in their boots.

Buying real things with money you print in your basement is a sweet business.

When people who got foreclosed on in 2009 are getting $600,000 of loan money to throw around any way they like, I would say it's not a "suckers rally" per say, more like a suicidal rally.

The bubble is back.

robertoaribas says

This proves my point about anyone who believes 911 conspiracies, they are simply so lacking in ablility to think, they should never ever think... and ESPECIALLY not express those thoughts. It is better to be silent and thought a fool, then to post on a blog and prove it to everyone!

Leave unrelated topics and subjects out of a debate.

Otherwise, go shit on some other thread.

bgamall4 says

Median household wages have declined 4% in the past 12 years...if the under reported official CPI numbers (relative to the model used prior to 1990) are used...inflation adjusted wages have declined over 30%. This is not a recipe for higher home prices going forward.

Well, like all the rest of SHITE this crew has creeped up on a stupid public, food has doubled, gas has doubled, utilities are at all time highs.
Wait, if they get re-elected watch the TAX CREEP

Robber Baron Elite Scum says

robertoaribas says

This proves my point about anyone who believes 911 conspiracies, they are simply so lacking in ablility to think, they should never ever think... and ESPECIALLY not express those thoughts. It is better to be silent and thought a fool, then to post on a blog and prove it to everyone!

Leave unrelated topics and subjects out of a debate.

Otherwise, go shit on some other thread.

Member of Banking Aristocracy

RobberBaron Scum, don't waste your time, just consider the source of the previous statement.

Children in fortress neighborhoods are much less problematic. If they don't get a 4.8 gpa and get into Harvard, Stanford, Yale, CalTech, or MIT, they simply commit suicide! Problem solved!

If the decide to live and "only" go to UC, then they agree to wander the earth until wealthy before contacting their families again.

That makes the fortress neighborhoods worth the money. They will never deflate.

When buying trillions in property with money printed in your basement you can rent them out just for the taxes. The object is to make it look like you're running a business and that you're a nice guy.

Heck, If you are the 'right' people you can even let folks live for years in houses for free in order to extinguish any value or claim that some sucker investors thought they had. Then pick up the property for almost nothing with the full knowledge and cooperation of the US government.

Ceffer says

Children in fortress neighborhoods are much less problematic. If they don't get a 4.8 gpa and get into Harvard, Stanford, Yale, CalTech, or MIT, they simply commit suicide! Problem solved!

If the decide to live and "only" go to UC, then they agree to wander the earth until wealthy before contacting their families again.

That makes the fortress neighborhoods worth the money. They will never deflate.

What is this so-called "fortress" or GPA, big name school language bullshite? Real money, real old money doesn't live this way or act this way. You sound like a typical social climber by the language you use. You are watching too many movies.

bgamall4 says

Many Americans drive a long way to work and 4 dollar gasoline is difficult. There is no transportation infrastructure. You watch, 4 dollar gas will take this economy down.

No, rising rents and home prices will bring the economy down.