patrick.net

The message I take from this article is that it is horrible time to buy a home but a great time to sell one if you live in the Bay Area.

"At the same time, Portola Valley, Atherton and Palo Alto - with million-dollar-plus median values that now exceed their boom-time heights - should see appreciation above 12 percent, Zillow said."

Well, didn't I mention this in the other thread? It's all about location, location, location. @Patrick just keeps saying look at your rent vs. buy ratio, but doesn't factor in the appreciation these Fortress markets have been enjoying for decades. Had Patrick bought in 1998, he would have been sitting pretty now instead of creating this website for us to chat, argue and whine.

SFace says

contrary to popular belief. (The expensive areas have ways to fall back in 2010/2011)

The takeaway is zip codes that are the last to fall are the first to rise. This is always the case in any corner of the world.

I fought Patrick for years to not let the buy/rent calculator dictate your decision as it is useless. The calculator says buy in the Ghetto and don't buy in prime, that's it. It gives the wrong/opposite signals. Here is the proof why.

This is generally true but expensive areas can fall back more on nominal values (not percentage.) If you can afford it, expensive areas always have higher ceiling. Theoretically, a rent vs. buy calculator can work but the appreciation/depreciation part is anybody's guess.

robertoaribas says

evilmonkeyboy says

The message I take from this article is that it is horrible time to buy a home but a great time to sell one if you live in the Bay Area.

bad logic on your part.. .why sell today, if the price will be surging much higher over the next six months? don't be like @underwaterman who sold last year and left a fortune on the table!

I agree with the first part of evilmonkeyboy's comment (it's a horrible time to buy in SF Bay Area), but Roberto is right about the near future. One of Roberto's comments put it very well: the time to sell is when more listings start showing up, then underprice the market by a little bit. Right now, there aren't enough listings to keep up with demand, and there isn't enough construction to change that in the near future. If SF Bay Area allowed more construction in areas that are already built up (i.e. not parks), this kind of bubble wouldn't get so big, but the law isn't changing any time soon and construction doesn't happen overnight - yet.

In what direction? Down is the only one I'll believe, and I don't even live in the Bay Area. I hear you need to be a millionaire to buy a condo out there already, doubt there will be a price increase, market fundamentals look weak.

FortWayne says

I hear you need to be a millionaire to buy a condo out there already...

Nah - just sign on the dotted line, finance 97% with a loan that Fannie or Freddie will buy and Bubbles Ben will add it to the Fed's balance sheet. Red is the new black, i.e. debt is the new "wealth".

Yes. Our state is fixed!

http://www.zerohedge.com/news/2013-02-19/californias-budget-miracle-mirage-after-all

At least that's what the government says...

robertoaribas says

evilmonkeyboy says

The message I take from this article is that it is horrible time to buy a home but a great time to sell one if you live in the Bay Area.

bad logic on your part.. .why sell today, if the price will be surging much higher over the next six months? don't be like @underwaterman who sold last year and left a fortune on the table!

I don't own property in the Bay Area, but if I did I would cash out this summer. There are to many investors in this market, the 20% down buyers are gone (not many people can save up 140K) and FHA loans are getting a lot more expensive this year.
With price up 30% year over year in Santa Clara Co. and homeowners not buying houses it is not going to be pretty when the bubble pops.
You may be right, maybe the Bay Area will just keep going up in 2013 but to me it is not worth the risk.

curious2 says

I agree with the first part of evilmonkeyboy's comment (it's a horrible time to buy in SF Bay Area), but Roberto is right about the near future. One of Roberto's comments put it very well: the time to sell is when more listings start showing up, then underprice the market by a little bit. Right now, there aren't enough listings to keep up with demand, and there isn't enough construction to change that in the near future. If SF Bay Area allowed more construction in areas that are already built up (i.e. not parks), this kind of bubble wouldn't get so big, but the law isn't changing any time soon and construction doesn't happen overnight - yet.

I agree with what you and Roberto are saying it just that underpricing the market by a little bit in the Bay Area dropping 100k off the price. I would rather get out an invest that money in a market that isn't so bubblisious.

Meanwhile rental inventory is surging in the SFBA. Good luck with your price increases. If I owned I would sell. Just sold my two condos in overheated markets elsewhere. Good luck to all owners.

E-man says

@Patrick just keeps saying look at your rent vs. buy ratio, but doesn't factor
in the appreciation these Fortress markets have been enjoying for decades. Had
Patrick bought in 1998, he would have been sitting pretty now instead of
creating this website for us to chat, argue and whine.

Agreed. Unfortunately, that advice has been extremely harmful to my sister in law, a former patnet adherent who introduced me to this site.

For years, she continued to "wait" because Patrick continued to advocate price/rent, not as if it was some idealized metric that would be nice to see, but instead as if it was some axiomatic kernel of truth that would come true if only she waited juuuuuuust a little longer.

As it turned out, here in DC 2009 was not just the beginning of the bottom, but a hard bottom, with prices that havent been seen since. Coupled with the fact that her rent has gone up +20%, she is absolutely livid for ever having believed that waiting on rental parity would be in her best interest.

robertoaribas says

don't be like @underwaterman

Just FYI - like a few other excitable bears before him, it appears he has rolled up shop, deleted his account & posts, and left the site.

evilmonkeyboy says

I don't own property in the Bay Area, but if I did I would cash out this summer.

I own a house here and have no intention of selling. I bought a house to live in and if the value goes up and down, I don't care.

CDon says

Coupled with the fact that her rent has gone up +20%, she is absolutely livid for ever having believed that waiting on rental parity would be in her best interest.

If someone jacked up my rent by 20% I would just move. Easy solution. People make such a big deal out of moving, like it is the end of the world. It takes about a weekend of work. Cost about a 1/2 month rent and is a great time to clean up your crap.

Also, don't blame Patrick for your sisters ordeal. Blaming someone that has actually brought together globs of information about real-estate for your troubles is a total cop out. You are the owner of your destiny. If you always seek to throw the responsibility to others then you will always be in trouble IMHO.

I have screwed up royally sometimes. They are my problems though and I hope I learn from them. I could have easily blamed others, blamed my parents, my manager, my broker, my neighbour, etc. The only person to really blame is life itself and pick yourself up and move on. Good luck to you and your sister.

edvard2 says

evilmonkeyboy says

I don't own property in the Bay Area, but if I did I would cash out this summer.

I own a house here and have no intention of selling. I bought a house to live in and if the value goes up and down, I don't care.

How great the real estate market would be if this was everyone's thinking. Imagine, buying a house to live in. How surreal.

I don't believe that buy vs rent ratios analysis are necessarily wrong and I am a homeowner. The problem occurs when these ratios are analyzed in a static manner and don't take rent increases into account. You can't simply do buy vs rent and analyze it in year 1 only as that prevents you from properly analyzing lifetime housing costs for apples to apples properties.

donjumpsuit says

Your only opportunity to lower housing costs is to refinance. Now that interest rates are bottomed out, tough luck using that to lower your housing cost.

Now all thats left is debasing the currency. Oh, wait. They are doing that.

dublin hillz says

I don't believe that buy vs rent ratios analysis are necessarily wrong and I am a homeowner. The problem occurs when these ratios are analyzed in a static manner and don't take rent increases into account. You can't simply do buy vs rent and analyze it in year 1 only as that prevents you from properly analyzing lifetime housing costs for apples to apples properties.

I have rented in the SFBA for over 15 years now and only once was presented a rent increase by a landlord. It was in the end of 1999 during the dot com days. I got the letter in the morning on my way out the door, and that evening presented him with a letter saying we were leaving. We rented a cheaper place down the road and watched the house sit idle for 6 months while the dot com crash happened. I'd say if the landlord learned his lesson and didn't repeat his mistake then his losses are probably finally recouped by now. ;)

Good luck to all slimy landlords. May the buck be your driving force in life.

donjumpsuit says

Rent increases?

I have lived in the Bay Area since 2000. There has been no substantial rent increases. By moving from city to city, neighborhood to neighborhood, I can pay $1500 for a 3bd/2bath or $4500.

If my landlord increases rent by $100, I move to a place that is affordable. If there are no places that are affordable, I find a roommate, or become a roommate, perhaps family or friends (I'd never do that, but 50% of everyone else find this a more preferable situation). I think the rent expectation in the bay area has always been $500-750 per room.

So your argument is that there have been no substantial rent increases because you are able to lower the quality of your rentals so as to maintain the same rent you were previously paying?

We rented for over a decade. From late 2000-all the way to around 2008-2009 rents were fairly low and stable. At least for us rent never increased. We paid $1,600 to rent a 4 bedroom house. But- had we decided to move, that same house would have been $2,500-$3,000 a month. I think that's what got the ball rolling on buying because as of now the mortgage is about the same as we were paying in rent. So it made financial sense. Back in 2003-2007- no way in hell. Rents were dirt-cheap and home prices were sky-high.

CDon says

Coupled with the fact that her rent has gone up +20%, she is absolutely livid for ever having believed that waiting on rental parity would be in her best interest.

The same thing happened to me last summer, my rent went from $2100 to $2300 (10% increase). So I got on the housing maps and found a condo being rented out in a much nice area closer to my work and it has a garage (something my apartment didn't have). Oh and the price tag is $1800 a month (new place also includes trash pick). When I gave my notice the apartment manager offered to keep my rent at $2100 but it was to late because the new place is way nicer.

Moving cost me about $100 bucks for a uhaul +gas.

Rents only went up on people that don't know how to negotiate or don't realize their options.

I think its entirely possible to pay too much in rent too. I have known my fair share of people who paid as much as 50% more than we ever paid. As in some of the small cramped apartments in SF cost a LOT More than the house we rented. That and people who rent on the Peninsula also tend to pay a crapload more in rent.

Money is money. If you spend too much on rent, its not really that different than paying too much on real estate.

RentingForHalfTheCost says

If someone jacked up my rent by 20% I would just move. Easy solution. People make such a big deal out of moving, like it is the end of the world. It takes about a weekend of work. Cost about a 1/2 month rent and is a great time to clean up your crap.

Clearly you don't have kids, if you think moving is not a big deal

Bigsby says

So your argument is that there have been no substantial rent increases because you are able to lower the quality of your rentals so as to maintain the same rent you were previously paying?

I have never had to do this in the SFBA, but knowing I have that option is comforting. Renting=flexibility.