patrick.net

CDon says

@JFP - for what its worth, I found an updated version of Thomas chart. As you can see, its "predictive" value turned out pretty much the way we thought - which is to say, it has no value at all.

http://www.fhfa.gov/default.aspx?Page=86&Area=MSA&AreaID=41940&PurchaseQtr=1991Q1&ValuationQtr=2013Q2&Price=$250,000

In sum, prices bottomed 4 years ago, have risen 40% and are pretty much back at peak prices once again. If I had been acting on Thomas' chart, while I would be somewhat irked by missing out on the appreciation, and the likely 100K of rent paid in the interim - the thing that would absolutely kill me is 4 years have gone by - roughly 1/10 of my useful adult life spent on the sidelines, and I was no closer to my goal than I was before.

your chart is correct.. and only shows that we are still in a bubble. I know of no rational market which will leap in a matter of 40% in such of short period of time.. it took the SFBA some 15 years from 1980 to mid 1990s to double in price and that was under better circumstances plus high inflation rates compared to today.

that being said we find affordability index is now

SF and SM 17% down from 24%
SC 24% down from 32%

http://www.car.org/marketdata/data/haitraditional/

.
.
.
.Lets face facts.. the govt has stepped into the market back in 2009 to prop prices up...lower rates and modiciations.
.The market was not allowed to correct by itself..and the media has been all to willing to play along, except a few like below. You are actually spending 1/10 of your life keeping the homeowner afloat and in their house who over bid and over borrowed without any regard to normal long term pricing of homes.. Your were good enough to pay higher taxes so the homeowner keeps his home. You should be thrilled with all this.

.
http://www.jiCOb49vVVM

swebb says

House prices in terms of average earnings is not some uber-metric...it's just a number, and it give a rough sense of the market conditions...but it seems inadequate as a general housing bubble barometer.

it is a common benchmark regarding lenders.. as borrowers income to cover the debt repayment.
else defaults would skyrocket with absence of good governance and proper risk management.

swebb says

First, wouldn't you expect the number to be higher in highly developed, desirable areas (such as London and other world class cities)? Who owns the houses in London? I'd guess that it's skewed toward the wealthier end of the spectrum compared to other places, so already the multiplier will be higher. Also, rich people can afford to spend more (as a percentage) of their income on housing,

London is London as Berlin Tokyo and other major cities go humming along.. since they
are Political/Economic centers of powers.. The rich live as they have always lived since the Shogunate
and Lords of the Manor. SFBA is as they say -- is different.. things change overnight, jobs are created and lost at the turn of a dime. It is impossible to predict for anyone their long term plans staying in the Bay Area.. today, if you
save flexible skills and bought a home at a very low cost, you might survive "the Jungle". Why else as
so many leaving because the stress over the rat race.

jvolstad says

So what are the property taxes like in PA on a $2.8M house? I guess if you spend that much for a house, it doesn't matter.

http://www.deleonrealty.com/contact-us/ken/

The Realtor looks like a real fruit.

factor in some 1.5% property tax.. or what can you do with 40-45K other than pay for property taxes. the people who are spending that much have a loose screw in their heads. I dont have the the link but Stanford provides a shit load of loans to staff to buy homes near campus. Must be several 100 Million by now in Loan Receivables.

Universities Pile on Faculty Perks as Student Costs Grow

http://www.businessweek.com/news/2013-03-12/universities-pile-on-faculty-perks-as-student-costs-grow

Congress is taking a look at such payments following disclosures that Jacob Lew, the new U.S. Treasury secretary, received a $685,000 bonus when he left New York University and had $1.5 million in housing loans from the school.

Harvard and Stanford universities also offer real-estate loans with sweet terms, records show. While the amounts are small relative to university budgets, the perks insulate faculty and administrators from the costs upsetting many middle-class families, said Jonathan Robe, a research fellow at the Center for College Affordability and Productivity in Washington.

BLOG: Florida International's B-School Dean Faces a Faculty Revolt
“It certainly gives the public a clear example of how out of touch some universities are,” Robe said. “Parents will think, ‘Here I am scraping by, raiding my retirement plan to pay for college. Why are they making me do this just to enrich these executives?’"

Congress and President Barack Obama have been pushing colleges to control tuition and other costs, which can exceed $60,000 a year at a private school. In a weak job market, students are struggling to pay off $1 trillion in education loans.

A 0.166 acre lot with a crappy, albeit large, house is barely worth $250,000. Only a fool would pay $3 million for it.

What exactly is the breakdown between the "value of the house" and the "value of the land"?

Mark D says

Worst photochop job ever!

That guy's face isn't even the same race as his arms.

JFP says

If the house cost $500 square foot, then it would cost ~$1,000,000 to build. Add in any loan costs, etc, and you can see how they go to that price, but it's still out of whack with the rest of the neighborhood.

If they paid $500/sqft they are almost as great a fool as the fool who bought that place.

/?p=1230048

As I outlined in my own thread (above) my family recently completed a complete tear down and rebuild of a similarly sized home in San Jose, less than 25 miles from this place. Once all was said and done I calculated the cost of the rebuild between $215/sqft for the portion over the original foundation and $259/sqft of the portion over the new foundation.

Its possible these people could have spent $500/sqft on the construction in the same manner one can spend extra $$$ on a Lexus badged Camary. Spending more does not mean its a better house.

Based on my numbers I'd guess that house cost $700k to build.

Dan8267 says

A 0.166 acre lot with a crappy, albeit large, house is barely worth $250,000. Only a fool would pay $3 million for it.

What exactly is the breakdown between the "value of the house" and the "value of the land"?

I also addressed the issue of BA land costs in the same thread. Land costs swing wildly depending on zoning, location, schools, basically whatever the seller can use to convince the buyer to spend millions more on his lot than a similar lot a short distance away.

Take that same house and stick it in EAST Palo Alto and that $3M suddenly goes to $1M. Still overpriced but a bargain by Bay Area standards

Land or house its whatever the greater fool will pay

New Renter says

If they paid $500/sqft they are almost as great a fool as the fool who bought that place.

/?p=1230048

As I outlined in my own thread (above) my family recently completed a complete tear down and rebuild of a similarly sized home in San Jose, less than 25 miles from this place. Once all was said and done I calculated the cost of the rebuild between $215/sqft for the portion over the original foundation and $259/sqft of the portion over the new foundation.

Its possible these people could have spent $500/sqft on the construction in the same manner one can spend extra $$$ on a Lexus badged Camary. Spending more does not mean its a better house.

Based on my numbers I'd guess that house cost $700k to build.

I upped the number based on the cost of doing business in Palo Alto and some of the interior finished, but you could easily be right. Let's say it cost $750K to build. Unfinished lots (or lots with a teardown) go for at least $1 million, so even at your cost, they are probably in for $1.7 plus carrying costs.

I also have to say that since I started this thread, the price of houses in this neighborhood have gone up by another $250,000, so even the older houses are now selling north of $1.5 million.

New Renter says

I also addressed the issue of BA land costs in the same thread. Land costs swing wildly depending on zoning, location, schools, basically whatever the seller can use to convince the buyer to spend millions more on his lot than a similar lot a short distance away.

Take that same house and stick it in EAST Palo Alto and that $3M suddenly goes to $1M. Still overpriced but a bargain by Bay Area standards

Land or house its whatever the greater fool will pay

There are three things driving the cost of housing in South Palo Alto:
1. Proximity to Google, Apple, Facebook, and the startups founded by their ex-employees
2. The stellar reputation of Gunn High School, particularly among the Asian community
3. Foreign, again particularly Asian, money.

The people buying houses here are very disconnected from the "normal" economy

Dan8267 says

A 0.166 acre lot with a crappy, albeit large, house is barely worth $250,000. Only a fool would pay $3 million for it.

What exactly is the breakdown between the "value of the house" and the "value of the land"?

In South Palo Alto, and unfinished lot is at least $1 million.

thomaswong.1986 says

London is London as Berlin Tokyo and other major cities go humming along.. since they

are Political/Economic centers of powers.. The rich live as they have always lived since the Shogunate

and Lords of the Manor. SFBA is as they say -- is different.. things change overnight, jobs are created and lost at the turn of a dime. It is impossible to predict for anyone their long term plans staying in the Bay Area.. today, if you

save flexible skills and bought a home at a very low cost, you might survive "the Jungle". Why else as

so many leaving because the stress over the rat race.

We are seeing the same thing in SF and the Peninsula that you see in London: the natives are leaving and being replaced by immigrants.

If you JFP says

the natives are leaving and being replaced by immigrants.

Most of the people I grew up with have left for TX, NC, So and central CA. Where do you see the natives you know leaving to?

New Renter says

If you JFP says

the natives are leaving and being replaced by immigrants.

Most of the people I grew up with have left for TX, NC, So and central CA. Where do you see the natives you know leaving to?

That's where most of them go. I see a few moving to Colorado or Idaho.