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Ten Reasons It's A Terrible Time To Buy An Expensive House


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2015 Jul 11, 12:58pm   928,348 views  448 comments

by Patrick   ➕follow (59)   💰tip   ignore  



  1. Because house prices in expensive areas still dangerously high compared to incomes and rents. Banks say a safe mortgage is a maximum of 3 times the buyer's annual income with a 20% downpayment. Landlords say a safe price is set by the rental market; annual rent should be at least 9% of the purchase price, or else the price is just too high. Yet in affluent areas, both those safety rules are still being violated. Buyers are still borrowing 6 times their income with tiny downpayments, and gross rents are still only 3% of purchase price. Renting is a cash business that proves what people can really pay based on their salary, not how much they can borrow. Salaries and rents prove that affluent neighborhoods are still in a huge housing bubble, and that bubble seems to be getting more dangerous by the day.


    2. On the other hand, in some poor neighborhoods, prices are now so low that gross rents may exceed 10% of price. Housing is a bargain for buyers there. Prices there could still fall yet more if unemployment rises or interest rates go up, but those neighborhoods have no bubble anymore.

  2. Because it's usually still much cheaper to rent than to own the same size and quality house, in the same school district. In rich neighborhoods, annual rents are typically only 3% of purchase price while mortgage rates are 4% with fees, so it costs more to borrow the money as it does to borrow the house. Renters win and owners lose! Worse, total owner costs including taxes, maintenance, and insurance come to about 8% of purchase price, which is more than twice the cost of renting and wipes out any income tax benefit.

    The only true sign of a bottom is a price low enough so that you could rent out the house and make a profit. Then you'll know it's pretty safe to buy for yourself because then rent could cover the mortgage and ownership expenses if necessary, eliminating most of your risk. The basic buying safety rule is to divide annual rent by the purchase price for the house:

    annual rent / purchase price = 3% means do not buy, prices are too high

    annual rent / purchase price = 6% means borderline

    annual rent / purchase price = 9% means ok to buy, prices are reasonable

    So for example, it's borderline to pay $200,000 for a house that would cost you $1,000 per month to rent. That's $12,000 per year in rent. If you buy it with a 6% mortgage, that's $12,000 per year in interest instead, so it works out about the same. Owners can pay interest with pre-tax money, but that benefit gets wiped out by the eternal debts of repairs and property tax, equalizing things. It is foolish to pay $400,000 for that same house, because renting it would cost only half as much per year, and renters are completely safe from falling housing prices. Subtract HOA from rent before doing the calculation for condos.

    Although there is no way to be sure that rents won't fall, comparing the local employment rate (demand) to the current local supply of available homes for rent or sale (supply) should help you figure out whether a big fall in rents could happen. Checking these factors minimizizes your risk.


  3. Because it's a terrible time to buy when interest rates are low, like now. House prices rose as interest rates fell, and house prices will fall if interest rates rise without a strong increase in jobs, because a fixed monthly payment covers a smaller mortgage at a higher interest rate. Since interest rates have nowhere to go but up, prices have nowhere to go but down. When housing falls, you lose your equity, but not your debt.

    The way to win the game is to have cash on hand to buy outright at a low price when others cannot borrow very much because of high interest rates. Then you get a low price, and you get capital appreciation caused by future interest rate declines. To buy an expensive house at a time of low interest rates and high prices like now is a mistake.

    It is far better to pay a low price with a high interest rate than a high price with a low interest rate, even if the mortgage payment is the same either way.



    • A low price lets you pay it all off instead of being a debt-slave for the rest of your life.


    • As interest rates fall, real estate prices generally rise.


    • Your property taxes will be lower with a low purchase price.


    • Paying a high price now may trap you "under water", meaning you'll have a mortgage debt larger than the value of the house. Then you will not be able to refinance because then you'll have no equity, and will not be able to sell without a loss. Even if you get a long-term fixed rate mortgage, when rates inevitably go up the value of your property will go down. Paying a low price minimizes your damage.


    • You can refinance when you buy at a higher interest rate and rates fall, but current buyers will never be able to refinance for a lower interest rate in the future. Rates are already as low as they can go.






  4. Because buyers already borrowed too much money and cannot pay it back. They spent it on houses that are now worth less than the loans. This means most banks are still actually bankrupt. But since the banks have friends in Washington, they get special treatment that you do not. The Federal Reserve prints up bales of new money to buy worthless mortgages from irresponsible banks, slowing down the buyer-friendly deflation in housing prices and socializing bank losses.

    The Fed exists to protect big banks from the free market, at your expense. Banks get to keep any profits they make, but bank losses just get passed on to you as extra cost added on to the price of a house, when the Fed prints up money and buys their bad mortgages. If the Fed did not prevent the free market from working, you would be able to buy a house much more cheaply.

    As if that were not enough corruption, Congress authorized vast amounts of TARP bailout cash taken from taxpayers to be loaned directly to the worst-run banks, those that already gambled on mortgages and lost. The Fed and Congress are letting the banks "extend and pretend" that their mortgage loans will get

    paid back.

    And of course the banks can simply sell millions of bad loans to Fannie and Freddie at full price, putting taxpayers on the hook for the banks' gambling losses. Heads they win, tails you lose.

    It is necessary that YOU be forced deeply into debt, and therefore forced into slavery, for the banks to make a profit. If you pay a low price for a house and manage to avoid debt, the banks lose control over you. Unacceptable to them. It's all a filthy battle for control over your labor.

    This is why you will never hear the president or anyone else in power say that we need lower house prices. They always talk about "affordability" but what they always mean is debt-slavery.


  5. Because buyers used too much leverage. Leverage means using debt to amplify gain. Most people forget that debt amplifies losses as well. If a buyer puts 10% down and the house goes down 10%, he has lost 100% of his money on paper. If he has to sell due to job loss or a mortgage rate adjustment, he lost 100% in the real world.

    The simple fact is that the renter - if willing and able to save his money - can buy a house outright in half the time that a conventional buyer can pay off a mortgage. Interest generally accounts for more than half of the cost of a house. The saver/renter not only pays no interest, he also gets interest on his savings, even if just a little. Leveraged housing appreciation, usually presented as the "secret" to wealth, cannot be counted on, and can just as easily work against the buyer. In fact, that leverage is the danger that got current buyers into trouble.

    The higher-end housing market is now set up for a huge crash in prices, since there is no more fake paper equity from the sale of a previously overvalued property and because the market for securitized jumbo loans is dead. Without that fake equity, most people don't have the money needed for a down payment on an expensive house. It takes a very long time indeed to save up for a 20% downpayment when you're still making mortgage payments on an underwater house.

    It's worse than that. House prices do not even have to fall to cause big losses. The cost of selling a house is kept unfairly high because of the Realtor® lobby's corruption of US legislators. On a $300,000 house, 6% is $18,000 lost even if housing prices just stay flat. So a 4% decline in housing prices bankrupts all those with 10% equity or less.


  6. Because the housing bubble was not driven by supply and demand. There is huge supply because of overbuilding, and there is less demand now that the baby boomers are retiring and selling. Prices in the housing market, even now, are entirely a function of how much the banks are willing and able to lend. Most people will borrow as much as they possibly can, amounts that are completely disconnected from their salaries or from the rental value of the property. Banks have been willing to accomodate crazy borrowers because banker control of the US government means that banks do not yet have to acknowledge their losses, or can push losses onto taxpayers through government housing agencies like the FHA.


  7. Because there is still a massive backlog of latent foreclosures. Millions of owners stopped paying their mortgages, and the banks are still not forclosing on all of them, letting the owner live in the house for free. If a bank forecloses and takes possession of a house, that means the bank is responsible for property taxes and maintenance. Banks don't like those costs. If a bank then sells the foreclosure at current prices, the bank has to admit a loss on the loan. Banks like that cost even less. So there is a tsunami of foreclosures on the way that the banks are ignoring, for now. To prevent a justified foreclosure is also to prevent a deserving family from buying that house at a low price. Right now, those foreclosures will wash over the landscape, decimating prices, and benefitting millions of families which will be able to buy a house without a suicidal level of debt, and maybe without any debt at all!


  8. Because first-time buyers have all been ruthlessly exploited and the supply of new victims is very low.

    From The Herald:

    "We were all corrupted by the housing boom, to some extent. People talked endlessly about how their houses were earning more than they did, never asking where all this free money was coming from. Well the truth is that it was being stolen from the next generation. Houses price increases don't produce wealth, they merely transfer it from the young to the old - from the coming generation of families who have to burden themselves with colossal debts if they want to own, to the baby boomers who are about to retire and live on the cash they make when they downsize."

    House price inflation has been very unfair to new families, especially those with children. It is foolish for them to buy at current high prices, yet government leaders never talk about how lower house prices are good for American families, instead preferring to sacrifice the young and poor to benefit the old and rich, and to make sure bankers have plenty of debt to earn interest on. Your debt is their wealth. Every "affordability" program drives prices higher by pushing buyers deeper into debt. Increased debt is not affordability, it's just pushing the reckoning into the future. To really help Americans, Fannie Mae and Freddie Mac and the FHA should be completely eliminated. Even more important is eliminating the mortgage-interest deduction, which costs the government $400 billion per year in tax revenue. The mortgage interest deduction directly harms all buyers by keeping prices higher than they would otherwise be, costing buyers more in extra purchase cost than they save on taxes. The $8,000 buyer tax credit cost each buyer in Massachusetts an extra $39,000 in purchase price. Subsidies just make the subsidized item more expensive. Buyers should be rioting in the streets, demanding an end to all mortgage subsidies. Canada and Australia have no mortgage-interest deduction for owner-occupied housing. It can be done.

    The government pretends to be interested in affordable housing, but now that housing is becoming truly affordable via falling prices, they want to stop it? Their actions speak louder than their words.



  9. Because boomers are retiring. There are 70 million Americans born between 1945-1960. One-third have zero retirement savings. The oldest are 66. The only money they have is equity in a house, so they must sell. This will add yet another flood of houses to the market, driving prices down even more.


  10. Because there is a huge glut of empty new houses. Builders are being forced to drop prices even faster than owners, because builders must sell to keep their business going. They need the money now. Builders have huge excess inventory that they cannot sell at current prices, and more houses are completed each day, making the housing slump worse.




Next Page: Eight groups who lie about the housing market »



The Housing Trap

You're being set up to spend your life paying off a debt you don't need to take on, for a house that costs far more than it should. The conspirators are all around you, smiling to lure you in, carefully choosing their words and watching your reactions as they push your buttons, anxiously waiting for the moment when you sign the papers that will trap you and guarantee their payoff. Don't be just another victim of the housing market. Use this book to defend your freedom and defeat their schemes. You can win the game, but first you have to learn how to play it.

115 pages, $12.50Kindle version available

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110   Tough   2016 Jan 8, 12:16pm  

Why has there not been a buying activity for the Market? For the past year, anytime there has been a correction in the market, there is a buying opportunity followed. Since Monday, there have been 3 severe declines totaling more than -1000 points for the Dow. Even when job reports come out, and it's "good" the down goes further in the red today. There is only one time that I know of when this happened and that was the first quarter 2008? Can housing be tied to any of this?

111   Tough   2016 Jan 8, 2:23pm  

TOL is down 12% as of Monday
LEN is down 11%
XHB is down 8%

TOL exec sells 41000 shares, Lumber prices decline, seems to foretell, about 12 months in advance, changes in the rate of new home sales. It is another sign of economic troubles about to befall not only the lumber market but also the rest of the economy. Sam Zell, chairman of apartment mega-landlord Equity Residential, said, “There is a high probability that we are looking at a recession in the next 12 months.” But he said this only after he’d unloaded a ton of commercial real estate: in total 23,262 apartments in five states. The deal was announced at the end of October 2015. Another 4,728 apartments are to be dumped next year. Housing and Rates are inverse.

It's all there

112   Perplexed   2016 Jan 9, 10:09pm  

Interest rates go up, cost of borrowing goes up, ergo, you have less purchasing power. This creates a ripple effect and your upper range, for example, that was 300k is now 275k and less the higher the interest rates go. With less demand for that 300k home, the prices will have to adjust down in order to sell. So anyone who bought in the low interest rate environment with minimal down payment, ie over leveraged, will experience 2008 all over again. Interest rates ARE going up, do the math. The only way to weather this is to get a great deal with good portion equity down. Look at the $/per SQFT and comps. Get a neglected property at a steep discount and DIY some sweat equity.

113   Perplexed   2016 Jan 9, 10:16pm  

Different subject, but affecting RE. If 10 million or so illegal, or undocumented, what ever you prefer...are force to leave the country.....what effect will that have on the RE market? They live somewhere and displaced/forced others up the RE ladder. If they are forced to leave, as Ike did back in the 50's....would that not cause a RE collapse in areas where they are predominate? I have wondered if the unabashed influx is not really about helping those less fortunate, but really about propping up RE as well as addressing the declining birth rates of native borns, aka legal working citizens. (Look to Russia, Japan, etc any of the advanced economy's, birth rates are below sustainable rates.)

114   tatupu70   2016 Jan 10, 7:10am  

Perplexed says

Interest rates go up, cost of borrowing goes up, ergo, you have less purchasing power. This creates a ripple effect and your upper range, for example, that was 300k is now 275k and less the higher the interest rates go. With less demand for that 300k home, the prices will have to adjust down in order to sell.

It's a nice narrative that makes intuitive sense, but history shows the real world doesn't work that way. In reality, what happens is that interest rates rise when inflation is rising and wage growth is good. And the effect of wage growth is more powerful than the effect of rising rates---nominal housing prices go up.

115   Perplexed   2016 Jan 10, 9:29am  

tatupu70 says

It's a nice narrative that makes intuitive sense, but history shows the real world doesn't work that way. In reality, what happens is that interest rates rise when inflation is rising and wage growth is good. And the effect of wage growth is more powerful than the effect of rising rates---nominal housing prices go up.

Normally, interest rates go up to cool a heated economy, which includes factors of inflation and wage growth, but wage growth is weak, real unemployment remains high and rate of inflation is practically nil. http://www.usinflationcalculator.com/inflation/current-inflation-rates/

The fed rate is climbing because "Officials said the economy was strong enough to keep growing >with a little less help from the central bank

116   tatupu70   2016 Jan 10, 10:38am  

Perplexed says

Normally, interest rates go up to cool a heated economy, which includes factors of inflation and wage growth, but wage growth is weak, real unemployment remains high and rate of inflation is practically nil. http://www.usinflationcalculator.com/inflation/current-inflation-rates/

The fed rate is climbing because "Officials said the economy was strong enough to keep growing >with a little less help from the central bank

That's correct. And I don't think the 0.25 point change in Fed funds rate off of basically zero constitutes "rising rates". Mortgage rates are still extremely low. There is wage growth, but if it weakens you can be sure that rates will stop rising.

117   _   2016 Jan 10, 11:35am  

Rates can stay low for a very long time when inflation is low

118   Perplexed   2016 Jan 10, 1:05pm  

tatupu70 says

That's correct. And I don't think the 0.25 point change in Fed funds rate off of basically zero constitutes "rising rates". Mortgage rates are still extremely low. There is wage growth, but if it weakens you can be sure that rates will stop rising.

Which gets me back to why I found this thread, trying to determine if buying a home in north-northeast atlanta in the 400k range is a good idea in Q1 of 2016? I am looking at low $/per SQFT, etc to maximize my value, but uncertain.

119   tatupu70   2016 Jan 10, 1:09pm  

Perplexed says

Which gets me back to why I found this thread, trying to determine if buying a home in north-northeast atlanta in the 400k range is a good idea in Q1 of 2016? I am looking at low $/per SQFT, etc to maximize my value, but uncertain.

That's a decision you have to make on your own. How long are you planning on staying there? What is the rent on comparable houses in your preferred area?

120   Tough   2016 Jan 10, 1:11pm  

Can someone help shed some rational on this. Housing has been increasing because:

-Oversees Investors CHINA
-Millennials moving out of their parents house
-Low interest rates
-Strong economy and low unemployment
-Housing starts low.

BUT:

-China is pulling back from US Housing according to the (WSJ)
http://www.wsj.com/articles/chinese-pull-back-from-u-s-property-investments-1448649226

-Millennials have too much student debt, and no down payment, let alone a full time job (FORTUNE)
http://fortune.com/2014/07/08/millennials-home-ownership-renting/

-Mortgage applications plunge after rate hike (CNBC)
http://www.cnbc.com/2016/01/06/mortgage-applications-fall-27-after-earlier-rate-hike-rush.html

-China slowing economy is pulling down the US economy (BOSTON GLOBE)
https://www.bostonglobe.com/news/politics/2016/01/07/will-stock-crash-china-take-down-economy/mmMmUEED8a6BH5EsCzi3wJ/story.html

-Housing Demand and Housing Starts are surging today, Housing Demand and Starts surged from 2003-2006 then crashed (BROOKINGS / NY TIMES)
http://www.brookings.edu/~/media/Projects/BPEA/Fall-2003/2003b_bpea_caseshiller.PDF
http://www.nytimes.com/2015/07/26/upshot/the-housing-market-still-isnt-rational.html

The only difference is Subprime Mortgages and Mortgage backed Securities. Homes are being bought with PMI and 3% down, and speculation will allow them to refinance out of the PMI, only if values continue. But even today, HELOC's are starting to reset for people who bought and held during the Bubble 1 and this is added debt to an already stretched family who held onto their home, 56% are potentially resetting with higher, fully amortizing monthly payment.

http://www.housingwire.com/articles/33535-trouble-ahead-tidal-wave-of-heloc-resets-about-to-hit

121   Patrick   2016 Jan 10, 1:12pm  

anyone have a graph of mortgage rates before and after the fed's interest rate hike on dec 20th?

i want to see if any correlation is visible, but cannot find december mortgage rate graphs anywhere.

123   Strategist   2016 Jan 10, 1:17pm  


anyone have a graph of mortgage rates before and after the fed's interest rate hike on dec 20th?

i want to see if any correlation is visible, but cannot find december mortgage rate graphs anywhere.

Just go by the 10 year T Bonds. Mortgages are highly correlated with that.
There is little or no correlation as the Bonds had already factored in the Fed move.
http://finance.yahoo.com/echarts?s=%5ETNX+Interactive#{"range":"1mo","allowChartStacking":true}

124   _   2016 Jan 10, 1:38pm  


anyone have a graph of mortgage rates before and after the fed's interest rate hike on dec 20th?

i want to see if any correlation is visible, but cannot find december mortgage rate graphs anywhere.

Yields fell ... then they rose and now they're back down again

In mortgage land 1/8th down, back up again 1/8th and now back down again 1/8th

125   Perplexed   2016 Jan 10, 2:02pm  

Here is a good place to download all that data: https://research.stlouisfed.org/fred2/series/MORTG/downloaddata

126   Perplexed   2016 Jan 10, 2:08pm  

Anyone know where I can download recent sales info for a given area? I can get that from Zillow, Realtor, etc one by one and type into a spreadsheet, but would much easier if I could download the stats. Sales data is publicly available, BUT....made very painful to aggregate meaningful information. I want to see overall $/Per SQFT, lot size, age.

128   mell   2016 Jan 10, 4:57pm  

Logan Mohtashami says


anyone have a graph of mortgage rates before and after the fed's interest rate hike on dec 20th?

i want to see if any correlation is visible, but cannot find december mortgage rate graphs anywhere.

Yields fell ... then they rose and now they're back down again

In mortgage land 1/8th down, back up again 1/8th and now back down again 1/8th

0.25% is a token raise doing close to nothing to long term yields. "Normal" fed rates around 5% would tell a different story, but maybe we might see a trend when approaching 1% or more.

129   _   2016 Jan 10, 5:24pm  

mell says

"Normal" fed rates around 5% would tell a different story, but maybe we might see a trend when approaching 1% or more

130   tatupu70   2016 Jan 10, 5:47pm  

mell says

0.25% is a token raise doing close to nothing to long term yields. "Normal" fed rates around 5% would tell a different story, but maybe we might see a trend when approaching 1% or more.

"Normal" wage growth might tell a different story too.

131   _   2016 Jan 11, 7:51am  

132   conservativethinker   2016 Jan 13, 1:53pm  

So what does the downward stock market of 2016 mean for housing?

- Will people get concerned and hold back? Even in hot areas like the Bay Area?
- Will people continue to feel like if they don't buy now, they will be priced out forever?

Seems like the few properties that have come on in south bay for 2016 so far all have been getting multiple offers still. Will be interesting to see what happens over the next 1-2 months... more properties seem to be coming on to the market here.

133   Tough   2016 Jan 13, 2:53pm  

Conservative....

Ponder this, Who is buying Bay Area Housing? China? Soros? Facebook? Maybe a combination of each but maybe, just maybe its a speculator millennial who is working in the tech sector. Imagine you are a Harvard Grad, just completed an intern at Google, now looking for a tech startup. You receive an offer from SnapChat, $150-200K and Stock worth $400K, but you need a place to live and no your not going to commute from Livermore. So you get a mortgage based on your education, your employment and your potential asset of $400K. But something happens, there are valuation concerns and over the next 2 years, the tech sector looses it's luster and even the owner of SnapChat goes in-front of the camera stating his company is "over valued", next thing is that employment ebola sets in and people start loosing their jobs. Now that grad is working at Sneaker Shack or Home Depot just trying to put grub in the refer. Hopefully they can refinance and live off the equity until that next awesome tech job comes calling, maybe they can dump the home for 30% over sale price and live off the diff in a cottage on the ivory coast while consulting through dial-up? Bottom line is that when the lights go out in these million $ crap shaks throughout SF, many techies are reaching for a shot NyQuil just to sleep, because being highly leveraged in a fight or flight industry isn't bliss. Add to it a 2016 10% drop in NASDAQ and it's a double shot. I bet you, they are thinking exactly what you are writing.

134   wave9x   2016 Jan 13, 3:09pm  

SnapChat is in LA, just sayin'...

135   conservativethinker   2016 Jan 13, 3:50pm  

Here's the interesting thing with the tech industry:

- 1996-2000: internet was new and there was a lot of promise but lot of other things weren't in place yet (broadband, user adoption, mobile etc). So the hype was early. Hence the crash

- 2005 - Present: the whole world is practically connected, mobile devices are everywhere and software is at the center of everything (communication, transportation, appliances, etc)

- Silicon Valley will always be the center of innovation, that is not going to change. No other part of the world is going to replace or come close to us here.

- The 1000s of startups that have come up in the last 5 yrs will probably not be around, so there is a chance of a crash there. However, it's not like the innovation and technology will crash, it will keep moving to other things... so startups doing dating apps and social networks will become startups or big companies that do AI, robotics, IoT, etc...

- Technology is going to continue to advance and silicon valley will be the hub... whether it's 1000s of startups or the Apples, Amazons, Facebooks and Googles getting stronger... there will be demand for talent in this field

...This type of thinking is causing people to pay premium for housing in this area. They just know tech will always be around, there will be jobs in this field for the next 10yrs and education will always be a priority among those here. Whether this totally justifies the crazy housing prices or the rate they have increased since 2012 is another story. At some point, a couple with a combined salary of 200-300k will cap off at what they can afford... and there will be ups and downs, but I do wonder if there will ever be a massive crash here. Price corrections, yes, but an all out 30% drop in prices in real estate, probably not.

I've been one of those guys that has just been waiting for the housing market to really crash for the past 8yrs, but I've also been living in premium areas like Santa Monica and Silicon Valley... so my perspective on these markets is slightly changing.

136   indigenous   2016 Jan 13, 4:38pm  

Lewis was saying a while back that a lot of this phenomenon is caused by IPO liquidity to the Bay Area.

The question I have is whether or not the interchange of proximity, as the Bay Area has, be created by telecommuting. By virtue that it has not happened saying that it won't happen?

137   Mick Russom   2016 Jan 13, 5:24pm  

conservativethinker says

- Silicon Valley will always be the center of innovation, that is not going to change. No other part of the world is going to replace or come close to us here.

Its fading, and fading fast. The real nasty issue these days is that even with successful exits 90%+ of the employees get pretty pathetic payouts. I knew several people who exited when VMware bough Nicira. Unless your employee ID number was single digits or you were an investor, you got less than a downpayment for a house. Then.

At this point the kind of downpayments needed here you buy cash or close to it somewhere else and sit on unemployment off and on and you'll have a better quality of life than the SF bay area. Bay area has the highest rates of sleep disorders, low vitamin D, thyroid disorders and in certain places cancer. You are signing up to work to death and get little in return. And if you have kids here, hahahaha, every startup I've ever worked at past 15 years is 80-90% foreign born and natives are almost never from the local area, exceedingly rare. So you are pretty much guaranteed your kids will be raised poorly by living here unless you are loaded and can afford nannies (surrogate parent) and private schools. And good chances then you will get a druggie.

This area is a mind-rape machine. Nothing more. Exploiting the best and brightest not to cure cancer or make super-cheap energy or fix up pollution and figure out how to grow and farm great food super cheap. Nope. They are making new ways to shovel ads in our faces and spy on us.

138   conservativethinker   2016 Jan 13, 6:22pm  

fair enough... but:

- for every 100 crap ideas that get funded and get media attention here, there are also 4 or 5 startups that are focusing on fixing energy, pollution, cancer, etc... these will catch on when the hype around the current batch goes away...

- it's not always about getting exit money... the competitive environment here between tech companies is at least resulting in increased salaries, bonuses, etc for employees here...but it gets negated by rising housing costs... but it also provides an environment for people where they have multiple opportunities and don't have to feel like they are stuck with one company...

- if you look at any big city in the US or the world, you'll find similar high-stress environments (LA: entertainment, NY: finance, DC: politics, SF: tech)... people flock to those cities because they are the best in those industries and that's what gets you excited and motivated and gives you a chance to pursue whatever it is you are after

The one thing that does suck about the bay area is that it's too tech heavy and doesn't have exposure to other industries (unless you combine tech with it... like tech+auto, tech+healthcare, tech+entertainment...)... Compared to LA or NY where you'll see more diverse industries ranging from food, arts, fashion, architecture, space, real small businesses, etc...

139   Tough   2016 Jan 14, 1:27am  

The #1 reason why people are contributing to this discussion is because they want to own a home, make the payments and not loose it!!! For some real bad bad reason, we bought at the peak of 2005. No big deal, but our loan sucked because we did a 5:1 arm. The goal was to sell when opportunity in the job presented it self. Well it did, the house could not sell and the rent we wanted would cover half the mortgage. The dam thing sucked out our cash. Finally short sold the thing, we needed a buyer who's low ball offer would be accepted by the bank. Unbelievable to think that your "house" could drop 35-40% in 6-8 months. We lost the down payment we saved, subsidized mortgage payments, we even contemplated walking away and looking back, we would have saved about $25K if we did. Now we rent and have been renting and saving and renting. Some say, "you'll never see that rent money again", Heck, loosing $200K is much worse. So do we do it all over again, or wait, because our rent is now going beyond what we planned? I think I'm going to give $19.00 to the Wounded Warrior Project and stop my bitching.

140   conservativethinker   2016 Jan 14, 10:26am  

I could have bought in 2009 when prices had dropped, but I thought the prices were going to drop further because interest rates were very low and I thought if they went higher then prices would drop further. But, interest rates stayed low for the 7yrs since. I also didn't have kids and other pressing needs to own a home. My wife and I liked mobility and we weren't sure how long we would stick around in Santa Monica (where we lived at the time). I passed up several opportunities to buy homes, condos, townhouses at low prices (relatively).

Now, I'm in the SF Bay Area, have 2 kids and one of them will start kindergarten soon. Interest rates are still low, prices have skyrocketed for various bogus reasons and all my assumptions, hopes and predictions didn't come true. Now, I have a more deep rooted interest in buying a home as I don't feel like moving around anymore, at least for the time my kids are in school. I'm in the tech industry and all the jobs are here, so I don't know why I'd want to move anywhere else.

I rent a house in Cupertino right now, but I worry that my landlord might decide to sell the house or decide to move into it at any point. I could just keep renting and figure things out later, or I could try to buy something where I probably will have to stretch a little... but I will probably keep the house for 10+yrs.... So, I'm starting to shift from house-for-investment mentality to house-for-ever mentality. Kind of like people put money in stocks and "forget" about it for 10+ yrs. I'm hoping to do the same with housing. If after 10+yrs the house is worth the same, then I'm okay with it.

I basically know that it's a terrible time to buy, but I'm going to do it anyways because I plan to stay there for a long time and I'm hoping that it will end up evening out in the worse case scenario.

141   cory   2016 Jan 14, 1:27pm  

We just bought a home and are closing escrow next week.

It's the house with the lease curb appeal and the smallest in a nice cul de sac neighborhood in the low 400's near San Luis Obispo. We have been looking for over 6 months and the prices are just going up and up. So we are going to fix the place up right away, and then live in it until we feel is the most optimal time to sell and then buy something in San Luis Obispo proper. We feel the area is pretty rock solid minus any minor fluctuations in the market.

I agree the ideal housing situation is to buy based on a "forever" mentality rather then always be questioning if it's the time to sell or not. Causes un needed stress and better to just get what you want and settle down in it as an investment in your family. In order to get that, we felt it would be better to get something smaller now, improve it, sell it in a couple years and potentially make a nice little chunk on the improvements and increase in the market value. Rather then just renting something for two or 3 years for the same or slightly less monthly payment...

All depends on the area you live, and the demand there. You have to just be watching it constantly, but great article to look at all the different points. You just need to be cautious, realistic, get educated and overall things will happen as they happen.

142   dublin hillz   2016 Jan 14, 2:10pm  

steklodelqyc says

Наша контора занимается свыше 10 лет продажей изделий из стекла в городе Минске.Вот основные виды подукции ,которую мы можем предложить вам

Can I please speak with Major Kozlova?

143   MMR   2016 Jan 14, 2:24pm  

Mick Russom says

low vitamin D

spending all day indoors kind of defeats the purpose of living in California

144   Tough   2016 Jan 19, 2:22pm  

Does anyone know what the "Wile Coyote" reference mean. Below is an example, it's mentioned in a number of Economic Blogs. I just didn't watch that many cartoons as a kid. This is from Mark Hanson (who worked for Fannie Mae, Freddie Mac, FHA, VA) .

Already passed the “Wile E. Coyote moment” and simply awaiting gravity, like we are seeing play out right now in Houston, leading-indicating South FL, and several other key regions;

145   Tough   2016 Jan 19, 3:34pm  

Oh! (that's quite a visual)

Thanks

146   B.A.C.A.H.   2016 Jan 20, 10:14am  

Conservative thinker, pissing away your money renting in Cupertino.

And that's not even the worst part of it: you're about to grind your kids into a Giant Psycho-Social Experiment that's been going on for awhile in those parts.

Too much to discuss here.

147   conservativethinker   2016 Jan 20, 10:48am  

B.A.C.A.H. says

And that's not even the worst part of it: you're about to grind your kids into a Giant Psycho-Social Experiment that's been going on for awhile in those parts.

B.A.C.A.H - would love to get more of your thoughts here. I def prefer a more balanced approach to schools, but I also understand that what the school provides is just one part of the overall development of my kids. I'm not even that particular on whether they get the best grades here, as long as they don't lose confidence and feel worthless because they are getting outcompeted on scores.

148   B.A.C.A.H.   2016 Jan 20, 11:12am  

I'm a local kid and was a teaching major at a local college early in my "tech" career. Did student teaching and subbing in the area back in the day. Like me, my kids went K-12 through local schools.
I work in "tech" in a warren of "Cupertino Parents".
I can share my thoughts with you on this matter in a local Starbuck or something like that if you want.
This whole thing is a Major Theme of Patrick's site.
For some background, read up on the dysfunction at West Valley Elementary in Cupertino Union district (in city of Sunnyvale, I think).

149   anonymous   2016 Jan 20, 5:49pm  

isn't tiger-parenting an adequate enough description? best to shy away from UMC behaviorally-homogenous neighborhoods with a distinct whiff of wannabe wealthy types. it's not even about the money, it's the power-trip that makes these families tick. they just want to feel superior relative to their peer group. that's where all the outward projecting comes from (must drive porsche SUV, when any fucking truck-like thing will do). that's why they congregate in certain locales and don't mind the crowding problem one bit. they prefer to wait for a parking spot and grind it out in-store over residing in the less intense areas - because they are desperate to be noticed.

this all just bleeds onto their kids, and that's when you see the competitiveness in school and with private tutoring, etc. they are vicariously living, and their kids' newly formed projection of success feeds the beast.

truly wealthy people are more private, and more social simultaneously. they understand the concept of coalescence (vice competitiveness). and their available schools are top-notch of course. better to reach up into that zone for a house any way you can, and ditch the $200k per year robo-residents.

i believe it is a very good time to buy an expensive house, because lots of other communities are going insane.

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