patrick.net

E-man says

I've never seen you post this when you were renting and looking to buy. :o)

This is the reason why I like BMWman. The guy is extremely honest with his opinions and his observations.

Of course, to each their own. As long as you and your significant other are doing well, it's good for the economy.

And why would I have? The market has changed. I have never claimed that I expected everything to remain the same. I fail to see anything dishonest about that previous assessment. Besides- you know what the saying is about opinion, right?

edvard2 says

Besides- you know what the saying is about opinion, right?

That some people's are worth more than others.

hrhjuliet says

When do you think the next real estate downturn will occur? Why?

When the new fallguy/girl has to slam on the brakes!

hrhjuliet,

1.5 years later, you and most housing bears are still renting while home prices have appreciated 25%-30%. Some condos have appreciated 100%. That's the down side about Patnet. It helped you to stay on the sideline during the bubble years, but didn't tell you when you should enter the market. You missed an opportunity once in a lifetime. It was an 80-year Great Recession cycle.

You forgot the fundamental of investing. Buy when there's blood in the streets. Now, when the sky is almost clear, and the economy has been slowly recovering, home prices have already shot up. Had you study the American history and followed the data, not someone else's opinion, you would have bought in 2011.

It was fantastic that you were able to avoid the bubble, but it was somewhat unfortunate that you didn't buy in the recent years. It sucks to wait for the next market down turn, which might happen in the next 5-10 years, when you had already waited 7-8 years. That's a looooong time to wait. There's much much more to life than waiting to buy a house at the exact bottom of the market while renting and paying off someone else's mortgage and enrich them.

This is how I see it. Housing will get a little more expensive after each cycle. Eventually, the few will own the majority of the properties. Getting 3% yield on real estate is better than buying a 10 year bond paying 3% interest rate. Housing has been one of the best inflation hedge. There's no reason to own gold or other hard assets when they produce no income.

With respect to the the peak of the housing market, it looks like 2016-2017 might be it if history is any indication. That means the next housing bottom would likely be 2020. Again, if history is any indication, the next housing bottom might have home prices at 2014 prices in nominal terms. So waiting another 6 years might get you back to square one. Only if we all have a crystal ball.

I sincerely wish you the best of luck.

E-Man

edvard2 says

As in 30-40 years or more, or about the same amount of time that it takes for the average American to retire. If you pull up a similar chart for real estate, that percentage is about half of that amount.

Have you considered that the average joe can get a loan to buy that real estate with 5:1 leverage (or 20:1 in many cases), reap the shelter dividend and (assuming a high enough income) take a tax deduction on the interest....and enjoy tax advantages when it sells, too.

Don't overlook the leverage advantage...it's real.

Thank you, but I own a home in the Bay Area, and if we would curb foreign investors and invest in our own country and community then we would all have a better quality of life. I find it disturbing that almost every hard working family I know of in the Valley has no hope of owning in this grossly inflated market and are paying outrageous rental costs. It is sickening, and I can not understand why good and mindful citizens do not stand against things like the schumer-lee-bill and bail outs. We are propping up a market that clearly needs to go down, not up. I own a home, but what about my friends and students? I own out of luck and being part of a system that is corrupt. I am not content with knowing my country and community are both going to hell while I hide in my fortress. We are going towards a new and sick form of feudalism and have already replaced the Republic with a plutocracy. We have slavery, but we renamed it, so everyone turns away in ignorant bliss. I can not validate injustice because I was born into wealth. Proud selfishness is very cool these days, but I am not overly concerned with being cool. We have to stand together and fix our country. We must look out for the health of the community, not just our own little square of land that we own. And what makes us think we own it? Because our government says we do? And governments are stable and forever? Ask the Russian aristocracy where their property went after communism, or the French monarchs after the revolution. Remember, it is a piece of paper that says you own that land, and that paper is only as valid as the system that stands behind it. Ignore the hijacking of our once great country at all of our own risk.

Everything is still running on smoke and Mirrors

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/12/27_Art_Cashin_-_Fed_May_Disastrously_Have_To_Reverse_Course.html

E-man says

This is how I see it. Housing will get a little more expensive after each cycle.

if this was always true, all of us would still be living in the cities. but that isnt the case, millions of families have spread westwards and outwards... the next boom area may well be in the north bay.. ah what paradise. just like what santa clara county became, a growth area... you might see regions north of Santa Rosa emerge as well. then again it might be in a different state.

when regions become not economically feasible, business and people move.

Housing is simply following inflation, and inflation in the bay area runs higher than the country side, like all big cities. That's why e-man said that housing will get more expensive after each cycle -- it will, because each year, inflation will push it up a bit and hold it there.

The north bay might expand, it might not, but that won't diminish the increases we will see around the bay area, which will reflect inflationary numbers, while the north bay might see faster rates as higher competition pushes people out.

Businesses are already paying an arm and leg to do business in the bay area, or downtown SF, they're doing it for a simple reason -- the best talent is here, and with that, the best talent is always in contact with more of the best talent, bouncing off ideas and becoming better. It's possible to steal a few people away and move them to another state, but you'll never be able to steal away a company's worth of employees and then keep them from wandering back or wandering off to another company. Then you're left with hiring local talent, which just isn't the same. It's not necessarily bad, it's just different, and doesn't scale as well when teams scale because everyone is on a different page. Never underestimate the talent in this area, it's amazing.

pkennedy says

Housing is simply following inflation, and inflation in the bay area runs higher than the country side, like all big cities.

The words are, "like all big cities". From what I know, prices in big cities hardly correct, and recover quickly to a new high. Although SV is a suburb, it is so well-known that many apolitical techies from all over the world prefer SV than elsewhere. In SV, technical skills are more critical than ability to navigate corporate and playing office politics. In other places, the opposite is true.

E-man says

I'm afraid that you will be proven wrong again. I was one of those in 2009 predicted that interest would go to 6%. Who would have thought? So I don't mind for being wrong again.

Good luck with your bet. :o)

I don't think it'll be a crash. But I think (in retrospect) easy money is over for that temporary explosion of flippers. Maybe some parts of the country is still going to be flipper ahoy... after all there are those constant reality tv shows showing constant flips.

pkennedy says

Businesses are already paying an arm and leg to do business in the bay area, or downtown SF, they're doing it for a simple reason -- the best talent is here, and with that, the best talent is always in contact with more of the best talent, bouncing off ideas and becoming better.

How do you explain why SV companies employ more outside CA than Santa Clara County... Just like GE, United Technology, or any other companies... Locations are no longer limited to one region. What you said, was only true during the 70s and 80s.... it stopped in the 90s as SV companies expanded far more in other states.

If your a head of operations, paying arm and leg will get you fired for being financial irresponsible.
these people are looking at margins and bottom line returns ... not what some Landlord or Realtor has some delusions about.

Just look at any Career page for a SV company... its pretty obvious.

hrhjuliet says

Thank you, but I own a home in the Bay Area, and if we would curb foreign investors and invest in our own country and community then we would all have a better quality of life. I find it disturbing that almost every hard working family I know of in the Valley has no hope of owning in this grossly inflated market and are paying outrageous rental costs. It is sickening,

Huckers and Scammers have come to the valley and twisted our economic success for their own benefit... there are not interested in any balance in this market. Ask your local realtor how long they been here ?

pkennedy says

Housing is simply following inflation, and inflation in the bay area runs higher than the country side, like all big cities. That's why e-man said that housing will get more expensive after each cycle -- it will

Inflation is a national statistic and there is no evidence that prices increase faster in the bay area - except housing.

But housing prices have increased faster than inflation nation wide since the 80's. People who think this is a normal and permanent trend don't make any sense. Wages are increasing slower than inflation, but housing will permanently increase faster? This doesn't make sense. What we are seeing is an historical anomaly due to macro trends, that will change eventually. In this context, a 2 years jump in prices means absolutely nothing.

People who think the bay area is so rich that housing can permanently stay at prices that are now above the top of the housing bubble, are suffering from short term bias. The region is simply under the money tap. It is disproportionally impacted by larger policies. And this too will change in time.