patrick.net

I wonder if FHA loans are still involved in most home purchases...

If you're paying cash for most houses in the BA, you'll have to be a millionaire (i.e. have at least $1m in investable assets). There are about 200-250k millionaires in the BA.

On average, a person buys a new home every 7 years.

1/7th of 250,000 is about 36,000 millionaires buying a new home every year (not counting investors), or about 3,000 per month.

Assuming that at least half of millionaires pay cash (though, given how CHEAP money is right now, I don't see why you would), upwards of 20% of all purchases would be cash (based on the 8-10k monthly sales figure).

There are also wealthy people buying investment properties, not just to live in, but you're still limited to what the millionaires can buy.

Historically low inventories, other investment venues are either too risky or being made off-limits by the Fed. Housing to the moon! I hope this keeps up and REALLY blows this area up. I mean, like make 2006 look like a screaming deal. When the middle class is entirely dead and companies just can't afford to do business here, only then will it become clear to everyone that these boom-and-bust cycles are a very bad thing. Only then can the process of fixing the fundamental problems with CA begin. There has not been nearly enough pain to get anyone to do anything differently. It has just been an annoyingly slow slide down the standards-ladder, slow enough that the proletariat doesn't take any real notice or find ways to rationalize it. The only other way that it could happen (other than astronomical living costs) is if the free-debt gravy train stops rolling, but I am not about to hold my breath for that.

And then again, maybe it will blow up and never return to a sane level by historical standards. All of the people living in shit-hole China and India would kill a room full of people to have a chance to move here. Compared to the shit they have to deal with in daily life, going into a lifetime of debt and overpaying for a house in an area with a population density less than 25,000 people per square mile is basically their definition of paradise. Americans are spoiled by what we have and don't understand that the things that we think are terrible are worth murdering for in much of the rest of the world. We will lose these things. Globalization, bitchezzzz! It's all fun and games when the poor mud people stay in their own hell-on-earth and sell us the cheap crap that we all crave, but eventually we will have given them enough money that they can buy us out of our country. We are at that point.

Thanks SFAce.

bmwman91 says

Historically low inventories, other investment venues are either too risky or being made off-limits by the Fed. Housing to the moon! I hope this keeps up and REALLY blows this area up. I mean, like make 2006 look like a screaming deal. When the middle class is entirely dead and companies just can't afford to do business here, only then will it become clear to everyone that these boom-and-bust cycles are a very bad thing. Only then can the process of fixing the fundamental problems with CA begin. There has not been nearly enough pain to get anyone to do anything differently. It has just been an annoyingly slow slide down the standards-ladder, slow enough that the proletariat doesn't take any real notice or find ways to rationalize it. The only other way that it could happen (other than astronomical living costs) is if the free-debt gravy train stops rolling, but I am not about to hold my breath for that.

I'm not sure you or I would survive here to see that day, unless you are willing to suffer along with the rest. If not, BUY NOW OR BE PRICED OUT at least until the crash.

SFace says

most of my colleagues don't use 30 years fixed rate, they tend to use 1-5 years fixed @ 2%-2.75%. 20% down is the norm to get the best interest possible for primary residence.

50%-100% cash offer are common, but in every case, it was refinanced back to a 2% floating anyway within days. There's not really a lot of true cash offers as no one with 500K-1M will tie it up like that when the cost of money is 2% net of tax.

Just to clarify that kind of refi is recourse here in CA is it not?

Kevin says

If you're paying cash for most houses in the BA, you'll have to be a millionaire (i.e. have at least $1m in investable assets). There are about 200-250k millionaires in the BA.

On average, a person buys a new home every 7 years.

1/7th of 250,000 is about 36,000 millionaires buying a new home every year (not counting investors), or about 3,000 per month.

Assuming that at least half of millionaires pay cash (though, given how CHEAP money is right now, I don't see why you would), upwards of 20% of all purchases would be cash (based on the 8-10k monthly sales figure).

There are also wealthy people buying investment properties, not just to live in, but you're still limited to what the millionaires can buy.

This is a very flawed analysis.

Most millionaires in the Bay Area (and California for that matter) are only millionaires courtesy the value of their houses. If you think these folks are selling their (low tax basis) houses every 7 years, you are sorely mistaken.

I'm more curious about who is buying single family homes on the peninsula than how those purchases are being financed. For example, institutional investors versus individual rental property owners vs. live-in owners.

ducsingle5313 says

I'm more curious about who is buying single family homes on the peninsula than how those purchases are being financed. For example, institutional investors versus individual rental property owners vs. live-in owners.

In Palo Alto, it's all live-in owners.

JFP says

In Palo Alto, it's all live-in owners.

Not surprising. At current prices it would be difficult to purchase a rental SFH in Palo Alto and have the rent cover the mortgage + taxes, even with a 20% down payment.

@ducsingle5313

>I'm more curious about who is buying single family homes on the peninsula than how those purchases are being financed.

Another very good question.

>If you think these folks are selling their (low tax basis) houses every 7 years, you are sorely mistaken.

Ah the wonders of Proposition 13!

Looks like FHA home loaners are still a large %, but cash buyers have been on the increase.

American in Japan says

Looks like FHA home loaners are still a large %, but cash buyers have been on the increase.

That's interesting as it seems like they are at opposite end of the buying spectrum. I wonder what's going on in the middle?