patrick.net

Foreign or not, they are simply speculators.

E-man says

You have had your chance to buy real estate at a discount in the last several years. I guess the discount wasn't close enough for you to jump in. Just remember that if you missed a RE cycle, you'd have to wait 7-10 years. Maybe you'd be ready by the next cycle. :)

Haha, well actually my window was 2002-2007. I was a broke college student and probably could have lied my way into a jumbo loan and then squatted. At that time though, my priorities were mixed between chasing ass and studying for engineering finals! After graduation, I was mostly concerned with paying off student loans.

As for buying RE, well, I am not sure that I can convince my wife to wait 7-10 years. We do have a 20% down payment for a house in an area that we like, but the apartment we rent is still about 50% of the PITI costs (and the ITI are more than rent) and my commute is a 5 minute bike ride (hers is 15 minute drive against traffic). So, we wait, hopeful that things will settle down a little after the election and that the government insanity that props up the market will stop being as effective (nobody is holding their breath for it to stop). I have a friend in the mortgage industry that told me at my wedding last week, "don't do ANYTHING until February, you'll see why." I am pretty skeptical that anything will happen, but I don't see any reason not to wait until then anyway.

You mentioned coming from Eastern Europe where you saw hyperinflation, right? I have a coworker that came here from Romania and admonished me that I needed to buy a house ASAP back in 2010. Being young and naive, I thought that he was nuts and the idea that RE would stop reverting to the mean-line in the SFBA was up there with saying that the sky was purple. Well, like you said, many Americans have a small view of the world and don't understand that the quality of life that we have is an anomaly, while many others have seen the true nature of things and jump at a chance for "cheap" real estate in a place like this. Looks like I missed this boat by not understanding how things can work to my disadvantage, so I can either give up my current lifestyle to bust my back and buy in the near future, or wait for the boat to circle back in the next down cycle.

E-man says

ChrisKolmar says

E-man says

What's the percentage of foreigners buying real estate in San Francisco do you know?

Just pitchin a theory. Here's some data to back it up:

http://www.bizjournals.com/sanfrancisco/morning_call/2012/09/foreign-buyers-shopping-for-bay-area.html

Chris,

Foreigners spent $82.5B in the last 12 months. That's an increase from $66.4B. I guess by knowing the total real estate sale dollar amount in the last 12 months, we can figure out the percentage of the foreigner's purchase.

The market is still over a trillion, so 7-8%. It would be nice if the article defined "foreign" purchase. A lot could be visa holders that will leave and sell in a couple years. A lot could be "foreign" corporations that are actually overseas invest shells owned by wealthy US investors. Raw numbers are worthless.

BMW,

Since investors have been buying almost everything at the steps, and the number of foreclosures have been insignificant, there will be no inventory coming on the market in the next 4 to 6 months. I'm studying and overlaying some data. If history is any indication, there is a good chance that the market will get soft in 2014 and 2015, and that's your last chance before we go into the next bull run.

You might have to sacrifice and consider Sunnyvale or Santa Clara. Think about the sprawl factor in the next 10-15 years. Don't short change your family and your kids. :)

I came from Vietnam where we experienced hyperinflation in the 70's and early 80's. I was too young to fully understand it, but I equated everything to candies at that time.

Say it cost you $1 for a candy before hyperinflation. When we went into hyperinflation, it cost 3 candies for $10; then 2 for $10, then 1 for $10 in a very short period amount of time. Then the government would create a new currency and converted $10 = $1. Basically, $1 of the new money = $10 of the old money.

They did this new money conversion for 2 or 3 times. Imagine your $1M mortgage will become $100,000 mortgage after the 1st currency conversion, then a $10,000 after the 2nd currency conversion. For this reason, the people didn't trust in the currency and hoarded gold every chance they get. No one bought silver though.

ChrisKolmar says

Let's say every rich person in NY, Shanghai, Hong Kong, London, Geneva, and every other crazy rich person in the world wants a home in SF. Then prices might be right as the global demand is much higher than the limited supply of SF housing.

ChrisKolmar says

Just pitchin a theory. Here's some data to back it up:
http://www.bizjournals.com/sanfrancisco/morning_call/2012/09/foreign-buyers-shopping-for-bay-area.html

We had global millionaires and billionaires for decades in and out of the Bay Area long before anyone here even took their first dump in their pampers.. still prices never skyrocketed to such heights in prior decades or seen so much needless hype..

Frankly, its only an hour flight but have you seen any Hollywood UBER rich wealthy , film stars, music rock stars, or Sports stars own mansions in SFBA.

Where is Mick Jaggers or Rod Stewards home in the Bay Area ?

"Foreign buyers spent $82.5 billion on homes in the U.S. during the 12 months ending in March, an increase of $66.4 billion a year earlier, according to the National Association of Realtors."

One needs a greater breakdown on such purchases.. purchase what ? .. Apartments by some fund, i doubt it was entirely SFH by individuals and you need greater data to back up that claim.

E-man says

You might have to sacrifice and consider Sunnyvale or Santa Clara. Think about the sprawl factor in the next 10-15 years. Don't short change your family and your kids. :)

I have no problem with either of those places. Actually, I like the Cambrian area of San Jose. Mountain View is only attractive because I can rent 5 minutes from my employer (not Google BTW). I would never want to spend $800k+ on a dumpy shack here. The city has no character and seems to be getting infected with the Palo Alto monied-liberal idiocy.

I'm not sure that moving elsewhere would be short-changing my kids or family. There are plenty of nice places in the US where one can raise well-balanced kids. Heck, looking around the SFBA, it seems like it is tricky to raise well-balanced ones...you really need to ignore everyone else to do a good job of it! I'll admit that I am just talking out of my ass though...talking about raising kids when you don't have them seems like one of those silly things that you look back on & chuckle about how naive you were.

Anyway, I just got married last weekend and am about to go to Maui for 2 weeks to chill out. The house can wait...at least for now, we can save money faster than prices are going up. I think that it will be worthwhile to see what happens after the election/inauguration as far as house owner subsidies, foreclosures and the fiscal cliff.

My friend in the mortgage industry says that banks have really dialed back the foreclosures this year because of the election. They want to lay low and not cause any problems so that (whoever) wins won't be pissed at them for causing unrest during their campaign. He claims that the foreclosure mill will begin operating again in mid-February. The Fed buying MBSs also frees them up to sell foreclosures since their loses were bought-off and they will get free Fed money PLUS proceeds from a sale. I sort of doubt that it will happen, but who knows. Stranger things have happened.

BMWman,

Congrats on your wedding. Maui was also our honeymoon destination. I got marry when I was 28. Pretty close to your age. :)

If what your friend said is true, we should see more short sales on the market in March & April. REOs won't hit the market till 3rd & 4th quarters of next year. I hope it will happen next year to get this housing correction behind us. Hey, maybe my prediction for price softness in 2014 to 2015 will come true.

There are some really nice pockets in San Jose if you know where to look.

Again congrats.

This has nothing to do with external demand. Sure, the dollar has depreciated and if it continues to debase it might become somewhat "cheaper" for foreigners given that their currency is not in shambles as well, but for now this had been solely fueled by ZIRP. Having manipulated ultra-low (zero!) interest rates for an extended time has never turned out well, so this is a dead-end ultimately. Look for the lost decade(s).

E-man says

BMWman,

Congrats on your wedding. Maui was also our honeymoon destination. I got marry when I was 28. Pretty close to your age. :)

If what your friend said is true, we should see more short sales on the market in March & April. REOs won't hit the market till 3rd & 4th quarters of next year. I hope it will happen next year to get this housing correction behind us. Hey, maybe my prediction for price softness in 2014 to 2015 will come true.

There are some really nice pockets in San Jose if you know where to look.

Again congrats.

Thanks! It's easy to get super negative when looking at RE in the SFBA, but life's damn good overall.

I'm 28 right now too actually (the "91" references the car's age). A good age to get married!

So a friend of mine works for Apple and gets ~80 nights per year in the Hyatt hotel system. He hooked us up with a free upgrade to a king suite at the Hyatt Regency in Lahaina. Then for the second week we are staying in a vacation condo...I think I'll need a break from restaurants lol.

Quiet & boring...sort of what we need. I fully intend to do a lot of hiking, boogie boarding, parasailing, helicopter volcano tours, snorkeling & cliff diving. Bringing some rock climbing gear too. My wife & I are not big on crowded vacation venues, so having it be the "quiet" season is a big plus. Past vacations have been to Hong Kong & other busy places, plus a trip to watch the STS-133 launch (scrapped). This will be a nice change of pace.

bmwman91 says

Anyway, I just got married last weekend and am about to go to Maui for 2 weeks to chill out.

enjoy your time in Maui...