patrick.net

Sweeb,

You are exactly correct. I noticed bitched a lot when I did not have the money to own in 07. I bitched more in 08 when prices went down but not enough to where I could buy. In 09 and 10 I bitched because prices were moving up and getting away from me. In 11 and 12 prices dropped again. They were far below rental parity, and I made a huge down payment on a place and now pay $800 or so less out of pocket each month than I would renting a place that is worse than what I own (but also the most I would ever pay for rent). As it turns out that is a 6 percent tax free return on my down payment.

I don't bitch anymore, and as a result I see the ridiculous bitching much more.

Swebb,

So true. People want a decent house in a decent neighborhood with decent schools. The fact is that there is a fixed supply in these neighborhoods. As more and more people want to move into these neighborhoods, the wealthier folks start to push out the less wealthy folks.

Here in the Bay Area, the folks that cannot afford Palo Alto would have to settle for Mountain View. Cannot afford Mountain View? Well, you'd have to buy in Sunnyvale, Santa Clara or San Jose.

Of course, there will be bitterness with the folks that got priced out of their preferred neighborhoods.

No. It's not an issue of affordability. I can afford to buy, I just feel the value is not there. People are still overpaying and stretching themselves financially, so it is hard to compete with people who behave irrationally (in my opinion).

Granted, I am in unique situation where I enjoy a rental that offers exceptionally good value at a cost of 15% of my monthly net income. Impossible to recreate by buying in my area.

I wasn't able to afford for 11 years while waited the bubble out.
Eventually it became an affordability issue, and that's why I bought.
I could have squeezed another 20-40K out of the market before I bought. But with the BS going on from Washington to NAR, to City officials doing all they could to re-inflate the market. Wasn't worth the head ache of watching, griping and worrying about what the market was or wasn't doing between the time I bought to where I would have liked it. My sanity was worth that extra 40K. And I consider it the best 40K I ever spent.

I've kept an eye on the market, and to be honest. In the 2 1/2 years since I made the contract on this house. I haven't seen one house, that I wished I had held out for.

Mine is closer to uncle mat. I could get a house in my market, but I don't see the value. I also don't think I am an angry bear. I am more of an incredulous bear. Look at what people are doing? I wonder what they are thinking. Me? I don't think I will do that.

What do you mean by afford-the monthly payment or the whole enchiliada??

I don't think I'm a housing bear; maybe more of a rebelling against the branded "American Dream" type.

Sure, I have enough cash to purchase a house by simply writing a check; but that's not appealing to me. Why be tied down to one place when there is so much to do, and so many places to see? Why be a slave to the home as the owner, when I can be the master as a renter?

No shoveling snow in the winter, or cutting grass in the spring and summer; raking leaves in the fall is nonexistent, and maintenance is just a phone call away for any problems. No more long commutes to work; just a mere 3 miles down the road, and I'm in walking distance to grocery stores, retail shops, restaurants, and bars. Any future problems, and it's 30 days notice and I'm gone to somewhere more suited to my liking.

Whether a property appreciates a little, or doesn't, or loses value is inconsequential to me. I have other avenues for "investments".

E-man says

Bought 5 more in 2011 and 2012. Just closed one last week. Should close another one in the next two weeks, and one more in 3-4 weeks. As of now, some of the properties have appreciated almost 100%. That's a boatload of money for properties in the Bay Area.

Wow, your shit don't stink.

People would take you more seriously if you actually responded to the original post rather than trying to convince folks that you are the smartest guy in the room.

Good question, and it's probably a valid hypothesis for some.

It is frustrating for folks in the Bay Area who got the right degree(s) from the right schools and work for a prestigious tech firm - - - only to have a substantially lower standard of living than their slacker high school buddies with 2 year associates degrees who have ho-hum jobs in flyover states.

I wouldn't consider myself a super-negative bear. But maybe that's because I could afford to buy a $1M+ house on the peninsula. Between moving for work, paying for advanced degrees, and the bubble a few years ago, the timing has never been good. And I have a pretty sweet rental deal right now.

I think many of the bears are technical types who look at current prices from a macro standpoint as being economically unhealthy. For example, the vast transfer of wealth from younger generations to Baby Boomers; the fact the typing up a crapload of money in residential housing is counterproductive to long term economic growth because that money isn't available for more productive pursuits; how society has been rewarding bad behavior with bank bailouts tied to silly residential real estate speculation, etc.

It's amusing that the original post decries the negative bear's emotional reaction to high prices in a highly emotional way (e.g., "who the fuck cares if these people are so wrong for getting into an overpriced home"). You are both doing the exact same thing from opposite perspectives.

swebb says

the thing is, the strong feelings these people have is evidence that owning a home is worth more than just the rent replacement value to some people (including the big bears)...so, pony up or shut up...Again, if you didn't really care and were confident in your position, you'd just rent...but-you-really-want-that-house-so-bad-that-you-have-to make-up-reasons-why-the-market-is-broken...

First, there is the question of whether it is the pot or the kettle that is black. Strong feelings abound on both sides, but the value buyers bring more compelling analyses and data, no doubt about it.

Second, we are all in the middle of the Great Recession, which was directly caused by (EDIT: add greedy sellers) greedy and imprudent buyers, sleazy agents and criminal banksters. So yeah, people who are anti-bubble have LOTS of GOOD (and moral) reasons for being anti-bubble. I see no reason to assign them questionable motives, nor to question their financial status.

ducsingle5313 says

It's amusing that the original post decries the negative bear's emotional reaction to high prices in a highly emotional way (e.g., "who the fuck cares if these people are so wrong for getting into an overpriced home"). You are both doing the exact same thing from opposite perspectives.

Good point, I hadn't realized that. I think there is a difference, though. They are strongly complaining about how the prices are high because so many people are making irrational decisions (overpaying for a house) which prices them out. Often they have some list of arguments about why a house isn't worth more than the rental replacement value (transaction costs on the buy and sell side, high taxes, maintenance, etc), but at the same time are really frustrated and angry because they can't afford the house...What I'm pointing out is that the frustration comes from them wanting the house for some other reason beyond a place to live...they want to be a homeowner, and rational or not, that drives up prices. It is their very desire (mirrored on other people) to own a home for reasons other than the practical ones that makes the home more valuable to others...And their very desire to own the home for reasons other than practical is what makes them so pissed off. You can't have it both ways.

The thing I'm bitching about is that I have to read posts like that so often. It's tiring.

swebb says

The thing I'm bitching about is that I have to read posts like that so often. It's tiring.

This isn't intended as a snarky response - - - isn't there an "ignore" feature that could filter those folks?

John Bailo says

Buying a house is like getting married. The "married people" (Owners) tell the single people (Renters) how great it is and then go home and fight.

I like this analogy, but I would expand it a little differently.

The married people (owners) tell the single people (renters) how great it is. But half of the married people wind up cheating on their spouses, and half the marriages end in divorce.

The single people (renters) tell the married people (owners) how great it is to have a swinging single lifestyle. But half the single people are lonely and wish they were married.

Happiness probably lies somewhere in between.

donjumpsuit says

because property should be accessible to all

Property has never been, and will never be, accessible to all - - - absent a major plague wiping out a vast percentage of the human population.

ducsingle5313 says

donjumpsuit says

because property should be accessible to all

Property has never been, and will never be, accessible to all - - - absent a major plague wiping out a vast percentage of the human population.

There's a difference to property not being accessible to a strawberry picker vs. not accessible to a mid-career white collar professional.

Call it Crazy says

When I look at the big picture of the economy with the US economy, unemployment rate, the number of people who continue to be added to the food stamp rolls and the general business environment, I doesn't make me think I have to move urgently to be a debt slave to the bank. It's nice to be totally debt free with a bunch of money in the bank.

I agree its nice having money in the bank - except knowing the purchasing power of that money is evaporating.

We recently went through the biggest housing bubble ever witnessed in America, so expect some people to be a bit jaded about housing. I couldn't afford to buy a house outright here, but I could easily get a loan and afford a mortgage. I won't because I don't like to leverage, although I see how some people have made it work wonders for them, it is also a huge gamble that you can lose your shirt on if the market flips. I am happy doing things my way and have no problems with housing bulls.

ducsingle5313 says

This isn't intended as a snarky response - - - isn't there an "ignore" feature that could filter those folks?

Yes, and I use it judiciously...A lot of the folks that I'm referring to, though, have input that is worthwhile sometimes, so I don't really want to ban them. I guess at the end of the day I'm just bitching.

Call it Crazy says

New Renter says

I agree its nice having money in the bank - except knowing the purchasing power of that money is evaporating.

True... but the question is, is better to watch it "evaporate" 10% per year sitting in a house, or have it sit in the bank earning basically nothing. Or, take even a bigger gamble and stick it in the casino known as the stock market and take your chances...

Life's about decisions and I can afford to sit on the sidelines until the right deal comes around.

Good question. At least in a bank you don't need to pay a few percent each time you make a withdrawal or deposit. Not yet anyway.

swebb says

complaining about how the prices are high because so many people are making irrational decisions (overpaying for a house)

If the majority are happy to "overpay" for a house, does that make it irrational, or does that just make it "the market"? In this way, it's not overpaying at all.

We said eff it. We are happy to rent and save and GTFO of LA in a couple years. Put up or shut up, folks.

Yeah, the market, sure. But it relies on the assumption that the market will continue as is. Between the lackluster economy, falling wages, and cohorts of Baby Boomers readying to retire, not sure this will be the market in 5 to 10 years.

And, oh, does everyone believe 30 year mortgage interest rates will stay at current levels forever?

Because something tells me that even a modest 1% increase of the rates crushes the "market"... unless there is a corresponding wage inflation across the board to compensate for the higher debt servicing costs.

Anyhow, there are places where buying makes sense despite the risks. There are places where the risk is too high.

Hmmm. Phoenix is up, the whole country is out of the hole?

ducsingle5313 says

It is frustrating for folks in the Bay Area who got the right degree(s) from the right schools and work for a prestigious tech firm - - - only to have a substantially lower standard of living than their slacker high school buddies with 2 year associates degrees who have ho-hum jobs in flyover states.

when i started to work in Tech firms 30 years ago.. there was NO such thing as ...
1) right degree
2) right school
3) prestigious tech firm

we all knew it could easy turn and end .. as many actually did!

that is the reason we have a bubble today.. and not in prior decades...
it was a gamble ... too risky.. as its risky today, but new people
working in SV think there is no risk..

Call it Crazy says

Otherwise he stands to lose his shirt if Phoenix heads back to where it was a year or two ago...

I doubt that. IT's only a question of how comfortable he is. He would still be fine with the rental income. Rents aren't going to drop a lot.

E-man says

I don't know about your neck of the woods. Here in San Jose, I see people keep comparing apple to orange. They compare renting a 2 or 3 bedrooms condo/apartment to the cost of owning a house. When I run the numbers using what I call the "right" formula, people would be like "WOW."

I am definitely comparing apples to oranges. I wouldn't buy a place as small as the place we rent. No way> No how. what it the point?

E-man says

ran the numbers and bought 5 rentals in San Jose in 2009. My friends and some of wife's family members said I would lose my shirt at that time.

I started seriously considering buying rentals, but I was too slow. I will be better prepared next time around anyway. I continue to save the money I am not spending on a house.

I like your arrangement with your family. I would love to be the landlord mommy in my family instead of the worker bee that I am.

Well, I own my home in western MA, one hour from Rte 495. For MA, it's affordable.

I refuse to live into metro Boston, with those $650K to $850K homes, in overrated school districts which cannot guarantee one's kids admissions to a northeast Ivy League college or a near full scholarship to a southern school, like Emory, or Vanderbilt.

You see, that's been the lure for many of my friends and colleagues. They seem to think that these elite Boston suburbs have some direct pipeline to Yale or Harvard admissions when they don't. Pretty much, if your family isn't alumni (or an important donor), it's a crap shoot, whether you live in a posh Boston suburb or some rural town in upstate NY.

Well, I live in metro Boston in one of the "elite" suburbs :) But I rent cheap. I wish there was a $650K home I'd like, I'd perhaps even buy.

And while I certainly do not think the schools here are top-tier college "feeders", I am rather pleased with the quality of the education and the school's environment, which I think matters, regardless of where the kids end up going to college. By the way, not all of these elite towns are equal in terms of schools, either.

swebb says

How many bears could actually afford a house in their market..

E-man says

Here in the Bay Area, the folks that cannot afford Palo Alto would have to settle for Mountain View. Cannot afford Mountain View? Well, you'd have to buy in Sunnyvale, Santa Clara or San Jose.

Of course, there will be bitterness with the folks that got priced out of their preferred neighborhoods.

lets go up the "$$ income supply chain" where the money to spend for these homes comes from... what do the employers you pay the incomes say to all these prices...

no bitterness or anger needed..... just the invisible hand at it again. No wonder we keep losing jobs in Silicon Valley.. but you sure done hear complaints from people who inherit our jobs be they in North West, SouthWest, or Overseas... yes all SV tech workers not paying SV home prices...

ON THE RECORD / CARL GUARDINO

You mentioned housing. It probably is the top concern we hear about in Silicon Valley from both CEOs and employees in terms of local issues. Does that have an impact? Let me put a finer point on it.

Hewlett-Packard and Dell are the top two computer-makers in the world. Corporate headquarters for HP are located in Palo Alto and Dell is in Round Rock, Texas. Obviously, they both have people and facilities around the globe.

In those two communities where their corporate headquarters are and where a lot of research and development takes place, the median resale price for a home in Palo Alto is about $1.6 million. In Round Rock, Texas, it's about $180,000, except the home and property are bigger.

We hear from HP all the time that a huge deterrent to the ability to recruit and retain people anywhere near Silicon Valley is the housing issue. We don't hear that from Dell, which is also a member company, about their operations in Round Rock. It does continue to plague us and we will continue to sound the alarm.

Read more: http://www.sfgate.com/business/ontherecord/article/ON-THE-RECORD-CARL-GUARDINO-2574540.php#ixzz2Lmh5OBIb

thomaswong.1986 says

when i started to work in Tech firms 30 years ago.. there was NO such thing as ...

1) right degree

2) right school

3) prestigious tech firm

we all knew it could easy turn and end .. as many actually did!

Very good point!

IMHO, the so-called "right degree" "right school" "prestigious tech firm" that do not pay historic return are actually the exact wrong ones: they were right once upon a time according then supply and demand, which was drastically different from today's.

it was then and still today all about being at the right place the right time...by Accident.

thomaswong.1986 says

when i started to work in Tech firms 30 years ago.. there was NO such thing as ...

1) right degree

2) right school

3) prestigious tech firm

You don't think an engineering degree from MIT, Stanford, Berkeley, or Cal Tech made a difference in career prospects? You don't think IBM or HP were considered prestige tech firms?

You must have been doing a lot of blow in the early 80's.

Rin says

They seem to think that these elite Boston suburbs have some direct pipeline to Yale or Harvard admissions when they don't. Pretty much, if your family isn't alumni (or an important donor), it's a crap shoot, whether you live in a posh Boston suburb or some rural town in upstate NY.

Admissions into a highly selective university is always a crap shoot. And a tiny bit of research on legacy admissions would show you that your statement above is way off base.

ducsingle5313 says

Rin says

They seem to think that these elite Boston suburbs have some direct pipeline to Yale or Harvard admissions when they don't. Pretty much, if your family isn't alumni (or an important donor), it's a crap shoot, whether you live in a posh Boston suburb or some rural town in upstate NY.

Admissions into a highly selective university is always a crap shoot. And a tiny bit of research on legacy admissions would show you that your statement above is way off base.

Yes, but that's a part of the point. Legacy [family members being alumni] admissions is the reason why some people point to Boston suburb 'A', as a big feeder to Harvard/Yale/Pton but forget to mention that the parents had also gone there as well.

Thus, you have folks who spend a fortune to move to suburb A, but then find that their kids don't gain admissions to the Ivies, 10 years later, but then, as a result of the fact that everyone there does the same exact thing, are not high enough in class ranking, to win that scholarship to a Vanderbilt or Rice, since those places basically give money to only top 1-5 of any high school.

Therefore, it's better if that kid went to some HS in upstate NY, graduated in the top 5, and found himself with some money to attend Vandy on a 70-100% scholarship.

lostand confused says

What do you mean by afford-the monthly payment or the whole enchiliada??

The whole enchilada. I have money for a down payment and can afford the monthly payments. I would never buy a house based on the payment alone. If you are asking if I can pay cash for the whole thing, then no. But I am a 20% down buyer. I would like a 15 year mortgage better than a 30 year. That might be a stretch on a 600K house. 30 year? No problem.

The thing is that I don't think is make sense to buy in this market. I will wait for this current mini-bubble to deflate and then likely buy at least a rental property. If I rent and save forever, I don't consider that a terrible turn of events.

What's the secret for getting deals below FMV? :)

Call it Crazy says

unclemat says

What's the secret for getting deals below FMV? :)

Sleep with the realtor....

Bribes

donjumpsuit says

If homes were priced in the region where 25-50% of primary owners could buy them without a loan, then that would be healthy. Instead only the 1% can outright buy, and they are doing so, to loan the shelter to others. This more or less sounds like a payday lender.

I don't think it's reasonable to expect 25-50% of the population to be able to buy in cash. Even if the land were free, the cost of construction will be prohibitive for most people. For 25-50% of the people to be able to afford to buy in cash, new homes would have to be be dramatically downsized and downgraded...

The comparison to payday lenders is ridiculous.

Rin says

Thus, you have folks who spend a fortune to move to suburb A, but then find that their kids don't gain admissions to the Ivies, 10 years later, but then, as a result of the fact that everyone there does the same exact thing, are not high enough in class ranking, to win that scholarship to a Vanderbilt or Rice, since those places basically give money to only top 1-5 of any high school.

Therefore, it's better if that kid went to some HS in upstate NY, graduated in the top 5, and found himself with some money to attend Vandy on a 70-100% scholarship.

Most top universities only offer *need based* scholarships. They don't have any problem filling their freshman class with top students whose parents are willing and able to pay full tuition. And a family that can afford to live in an affluent suburb probably isn't going to qualify for a need based scholarship. Some schools might offer token scholarships for National Merit Finalists, etc., but the $$$ is so low it's essentially beer money.

It is, however, easier for students from less populous states and/or rural areas to gain admission to elite universities. For example, if MIT receives applications from two equivalent students from North Dakota and California, the North Dakota applicant has a significant edge over the California applicant.

ducsingle5313 says

You don't think an engineering degree from MIT, Stanford, Berkeley, or Cal Tech made a difference in career prospects? You don't think IBM or HP were considered prestige tech firms?

You must have been doing a lot of blow in the early 80's.

IBM collapsed by 1991.. along with the mainframe business DEC Sperry and others... HP which was a great company focused more along the lines of measuring equipment (agilent), mainframes, and mini-computers... frankly HP died by 1999-2000.

But there were others who did far better .. like Sun or Tandem or ASK systems. Names all lost.. Many of these found it hard to recruit so have some classes without a full degree got you in... The point is back in 1970s and 80s what these companies were doing ... wasnt being taught in your Universities... and frankly there was a shortage... so having some classes actually got you in... after all some founders never had a degree either.

at what point did Cisco (Founded in 1984) become a prestigious tech company..or Intel.. by the time many heard of Cisco or Intel.. the original employees already had established them self far higher than most recent grads.

E-man says

You sound bitter in some of your posts. Could it be the right schools and right degrees didn't get you what you want in life? Could it be your "right" attitude that leaves you single till now? Look at the dude in the mirror. He's the problem, not others.

Nope, I'm pretty happy with my life. Maybe you misinterpreted my earlier posts because English is a second language for you. And it's pretty weird that you seem to have done a search of my earlier posts in other threads before you responded to this. I must have struck a nerve.

Please continue with your FOBy posts. It's entertaining to see someone brag thinking it will garner them more respect when actually the opposite is true.