patrick.net

My crap shack yields new dividends for that out-of-state migration! I can inflate real estate markets and make them tremble in fear at my California-ness!

My friend in Santa Cruz lives in an expensive dump of a house. He’s not in a great neighborhood either.

He tells me often what “it’s worth.” He also tells me about gym friends who recently bought them.

Today he asked me “How much does my friend pay in property tax?”
“$12,000+ per year, but it’s appreciating so maybe he doesn’t care. But it’s not so easy to get his money out of it, they have taxes just on real estate here.”

Almost nobody is aware of the 3.8% Obamacare tax on real estate gains, and other California taxes.

I said that they are trapped paying for the pension of the sheriffs, county goldbricks, and health care for illegals and homeless, among others.

When the mortgage forbearance ends prices will dump. Not a good time to buy.

There's so darn many add-ons to the property tax bill, what blogger Charles Hugh Smith called "junk fees".

I’ve been shopping but think I should stop and wait for post election and post mortgage forbearance.

It’s crazy out there right now. I haven’t seen this since 2007

By the way, 20% increase YoY in median? Huh? That can’t be right??

A Bay Area home is not selling for 20% more than it did a year ago, so what is that article saying?

BayArea says

I’ve been shopping

Did you change your minds about checking out Boise?

I still contend a lot if this is about burn rate. If VCs continue to drop $12-15 billion dollars a quarter in the Bay Area (as they currently are), home prices will continue feeling the effects of excess investment monies sloshing around in the the wider community.

I don't believe the inflated increases either. My crap shack in Santa Cruz has maybe gone up by 10 percent recently due to fire and work at home refugees, but the other place's value has been pretty stable over the last year or two.

B.A.C.A.H. says

BayArea says

I’ve been shopping

Did you change your minds about checking out Boise?

Decided to avoid leaving family.

Also, Boise real estate is bananas too!

Ceffer says

I don't believe the inflated increases either.

They're reporting medians, which definitely is affected by the mix. An Ess Eff exodus means money flowing into higher end homes.

So this article is saying some combination of

a.) home values are increasing.
b.) homes that are selling are higher priced than they were at this time last year.

Agree?

With interest rates so low, mortgages are now inflation hedges, as well as leveraged bets, as long as housing prices don't nose dive.

I wouldn't say it augurs all that well, though, because with rock bottom mortgage rates and the Covid economy yet to digest its way through the economy, I wouldn't bet on prices going up or not collapsing at some point.

I still remember more than one period where houses in my neighborhood didn't sell for two years. Yeah, it can happen again.

BayArea says

a.) home values are increasing.
b.) homes that are selling are higher priced than they were at this time last year.

Well, up is up (unless you're a condo, in which case you're down). To make your case, you need the S&P 500 Case-Shiller Index. And that just hit an all time high after experiencing what looks like a COVID related dip in Ess Eff. The Case-Shiller Index does lag so...

No one should ever believe any statistics reported by Realtors.

If work-from-home becomes the high-tech norm, I think Bay Area prices will have to crash. I just don't see any other reason someone would want to live here instead of, at the very least, any place on the California coast (particularly south) that is 1/2 the price and 2x as nice. That's not even counting the many benefits of fleeing California.

I'd love to see a correlation (inverse correlation) between prices and interest rates. That's another avenue for a crash, although it seems the government will continually punish savers and bondholders for the benefits of banksters™ and ability to keep running enormous deficits.

SunnyvaleCA says

I'd love to see a correlation (inverse correlation) between prices and interest rates.

Had that same thought myself years ago, and found a graph somewhere showing that they move in tandem, which is counter-intuitive.

I think it's because when the economy is booming, salaries get inflated, but the Fed is also busy raising interest rates to cool off inflation at the same time.

When the economy is in trouble, people lose their jobs and housing falls, but then the Fed also decreases interest rates.

During 'normal' times there is a correlation between interest rates and house prices. I've seen it argued here that this is not true and I've seen the charts. I think those charts are misleading because there is somewhat of a delay.

Apparently there is some sort of rule of thumb that for every 1% increase/decrease in interest rates you get a corresponding 10% increase/decrease in house prices. Because assholes buy the payment and not the house.

Patrick says

SunnyvaleCA says

I'd love to see a correlation (inverse correlation) between prices and interest rates.

Had that same thought myself years ago, and found a graph somewhere showing that they move in tandem, which is counter-intuitive.

I think it's because when the economy is booming, salaries get inflated, but the Fed is also busy raising interest rates to cool off inflation at the same time.

When the economy is in trouble, people lose their jobs and housing falls, but then the Fed also decreases interest rates.

Moving in tandem is an amazing finding. I suppose another aspect may be that when rates are rising people may be willing to overpay to close a deal so that they lock in a rate before rates move even higher.

All through my youth my parents had an "amazing" 4.5% 30-year fixed. We kids all thought that was amazingly low, especially in the late 1970s with those 15% rates. The funny thing is that my parents just missed the 4.25% rate when they bought in 1965. Now, 55 years later, we're even lower than that; and if you count real rates (rate - inflation) then we're much lower than ever.

If I use 0.1% of my wealth to buy a home, versus 50%, what do I care about fluctuations in the price?

The property tax bill on a million dollar sh*tshack in the Bay Area will be roughly $220k over the duration of a 15 year mortgage and about $0.5 M for 30 years.

That's $220k - $0.5 M that will go to public employees' pensions and retirement medical, but won't go for kids' preschool, private lessons, private school tuition (if you go that route). $220k - $0.5 M that won't go for cars and other toys, home improvements that are always needed. Won't go for medical bills or premiums, or glamorous vacations. Not for investing in stock market or small business or whatever, and not for retirement savings.

Moreover due to recent changes in federal income tax law, much of that $220k - $0.5 M deduction has been lost. If the democrats sweep to power, maybe that will change. Maybe it won't.

Like Al said, a purchase of a coveted home in these parts is only for the Super Rich with "F*ck You" kind of money.

Al_Sharpton_for_President says

If I use 0.1% of my wealth to buy a home, versus 50%, what do I care about fluctuations in the price?

SunnyvaleCA says

especially in the late 1970s with those 15% rates.

I considered myself lucky to get a 12-3/4% fixed rate on my condo at the end of 1980, they were virtually unheard of. Most had to start with a moderate rate, but it quickly escalated after five years. I did finance it for 20 years instead of 30 and the payment was less than $20 a month difference due to the interest saving which amounted to something like $20K over the life of the mortgage.

Al_Sharpton_for_President says

If I use 0.1% of my wealth to buy a home, versus 50%, what do I care about fluctuations in the price?

So if I put down 20% on a $1 million home, and use paper money - stock options that are in the money - for the down payment, I am only putting up the strike price, which can be a small fraction of the down payment. I can always get a loan to pay this, if necessary, as the options are in the money

Example, I have vested 30,000 shares in my employer, TechToch's stock. The share price is $1000/share. My strike price is $1/share. My total vested value is 30,000 x $100 = $30 million. But I cash in $200,000/$100 = 2,000 shares, which is only 0.7% of my total shares in TechToch. And much less of a precent of my total wealth if I have additonal investment accounts, money in the bank, etc.

You may ask why I am not buying a $10 million dollar house, but one look at my perforated nasal septum, constant sniffles, solvent dissolved teeth, would answer that.

Al_Sharpton_for_President says

You may ask why I am not buying a $10 million dollar house, but one look at my perforated nasal septum, constant sniffles, solvent disolved teeth, would answer that.

Solvent dissolved teeth don't shed hooker pubes very well, either.

Al_Sharpton_for_President says

Example, I have vested 30,000 shares in my employer

Guys Folks like you are who the coveted Bay Area SFH market are for, where your tax bill is a rounding error.

In Ess Eff proper, it looks like mix (that is more, larger homes selling) is affecting the median home price.
Per Compass report: In San Francisco, the average size of houses sold in Q3 jumped almost 6% year over year.

Patrick says

No one should ever believe any statistics reported by Realtors.

So cynical -- but that is why you're our fearless leader. I did finally figure out where the Used Home Salemenship was kicking in. The headline, which is taken from the Relitter quote (“Buyer demand remains robust. We see that in the mortgage applications, we see that in the price numbers for the Bay Area, in the unsold inventory numbers which declined.") is where the hocus pocus it taking place. Ess Eff has a record high (over two decades) inventory. Inventory typically declines this time of year. Sales numbers are solid and we'd be in real trouble if inventories continued to rise off the record high. Buy now or be priced out forever.

Here's another one who won't be paying state income taxes for our civil servants' pensions and retirement medical. He's moving to a state with no state income tax. Good for him.

The WSJ article said he paid $1 million for the mansion in the 1980's and has it listed for north of $20 million. It means his prop-13 tax bill is on an assessment based on the 1980's $1 million purchase.

No doubt, local civil servant unions in that county are licking their chops for the increased revenue from the new Greater Fool who will buy.

The higher property tax revenue that the Greater Fool will pay, will go to local government (pensions and retirement medical), not to Sacramento.

https://www.dailymail.co.uk/tvshowbiz/article-8870641/Gene-Simmons-puts-longtime-Beverly-Hills-mansion-sale-whopping-22M.html