patrick.net

I have brought up the idea of Boomers moving into senior housing

Davis_renter, you are dangerously close to plagiarism, I came up with the "Autumn of Love" boomer retirement home last year. Picture it, Hendrix at the Fillmore posters everywhere, golf carts that look like 65 Mustangs, daily functions (orgies), boomer medications given in little plastic bags reminiscent of "dime bags". Daily reaffirmation of their greatness. Led Zep 24/7, tie dies, didn't go to Woodstock? Don't worry, at Autumn of Love everyday is your own personal Woodstock. :eek:

I don’t think the people who were standing in line with me at the condo sales offices in SF were median-income. One guy I chatted with there is a partner in a law firm, for example.

Lawyers can be very well off or they can be in serious financial problems. :) I have lawyer friends who happen to be horrible investors.

Why do you assume that a law partner is necessarily wealthy?

My point is that the fact that housing in SF is unaffordable to median-income households doesn’t mean that prices will crash.

This is why I never use affordability in my argument. Rent/price relationship and cap-rate/bond-yield relationship are sufficient.

But affordbility issues do help create the tipping point.

nomadtoons2,

There's no disputing that boomers constitute a huge chunk of the US population, that as a demographic group, they have a major impact on the national economy, and that many of them are rapidly approaching retirement age. These are facts. The rest beyond that is mere speculation.

How do we "know" that Boomers are all heading to FL, CA, AZ, and other warm areas? How do we "know" that the rate of net inflow will increase by 300% over the next 20 years? Regardless of what polls or other data these forecasts are based on, Nobody can project that far into the future with perfect accuracy.

I'd also like to point out that in order to tap all that vast homeowner "wealth" by selling/relocating, the retiring Boomers will need SOMEONE ELSE TO BUY THEIR HOMES. If all the younger buyers are "priced out", how is this supposed to happen? I have an idea: through much lower prices.

As far as Boomers go, well in the case of my parents and many others, older people are simply more healthy and vibrant than they used to be. Thus I would expect soon-to-retire boomers to have at least another 10-15 years of very active lifestyle and the typical demands of the average american. When they finally bite the dust, it could be an opportunity, or it could be a disaster, but this won't happen for a long time.
When I was home last time I saw a LOT of phamplets for retirement communities in FL. Florida will be screwed come the end of the boomer era since there are literally entire cities built t serve retired people going up every year.

"Sounds like I need to remember to bring my passport with me…

Kidding aside, I know it’s a good area, but it can be a tough commute."

You think Dublin to SF/Silicon Valley is brutal? Try Tracy, Manteca and beyond! There are thousands that do it. Makes the Dublin commute seem like a walk in the park ;-) And Dublin even has BART (soon to be 2 stations).

@PS,

I've often heard the reasonable argument that "desirable" areas are less susceptible to nominal price declines during RE busts (Jack makes this point all the time with his "intangibles" posts). Even so, I'm skeptical of any blanket claims to the effect that "my area is immune to price declines because _______(fill in the blank)".

As has been said before so often, none of these areas were completely immune to price drops in prior busts (though I believe NCAL may have fared a little better than SCAL in the early 90's). Nor do I believe any of the above are necessary preconditions for the bubble to burst --though of course they would help.

As Peter P has pointed out time and time again, in a speculative bubble all you need for a bust is for prices to fail to keep rising. When people are already overextended on NAAVLPs on the assumption of forever rising prices, flat prices in and of themselves are a disaster that can trigger a panic sell-off. Since only a small % of the total housing stock actually gets sold each year, and it is this small % (recent comps) that determines prevailing "market price", a relatively small amount of panicked speculators can trigger a relatively big crash, just as these same speculators were able to trigger bidding wars and double-digit price increases on the way up.

Why are any of these things (higher mortgage rates, tighter credit, loss of job-security) so out of the realm of possibility?

I never said they were out of the realm of possibility. I just said that I believe these will be necessary for the desirable parts of Cup/MV/Sc/SV to crash.

PS, all these things lead to one another, and they reinforce the downtrend of one another. All we need was a change of prevailing psychology, then the fundamentals will be changed by the wonderful power of reflexivity.

One clarification: any desirability would have been discounted by the market long ago, so it does not have any "value" advantage in the future.

One may say: but the demand for desirable places will increase when prices "dip"

I would say: do not judge tomorrow's market with today's psychology

But will “tomorrow” ever come? Would you care to predict when I can get my SF condo for less than what I would need to pay now? I’m up for another bet with you…

I will bet a modest sushi meal if you will actually take it. :)

But will “tomorrow” ever come? Would you care to predict when I can get my SF condo for less than what I would need to pay now?

@Face Reality,

Please see the August 2005 thread: FuckedCounty.com
http://patrick.net/wp/?p=55

...I ask everyone to name which CA counties (if any) they believe will see year-to-year nominal price drops by end of June, 2006. Turn in your predictions by 12:00 am, Saturday, August 13, 2005 –after that it won’t count. And no “do-overs”.

Someone mentioned above how that the desireability over value disapated a long time ago. Figuratively, perhaps. But as someone from one of the "Red" states, there exsists a certain type of fear and psychology that intertwines in the political mindset of many hardcore californians I've met here. A fear of these flyover regions that they've read about and seen movies, made by hollywood, that portray southerners in particualar as backwards Haysees. Sounds ridiculous? well the number of insane comments I hear from sound minded people who have mdae comments to me like:" We're the good guys here, those people in the rest of the country are about 10 years behind." Seriously. One of my co-workers made this comment. It is this common underlying perception that keeps people here and with a certain degree of fear that IF they do not buy, then they might have to consider other areas where perhaps some people might not agree with their political and long grounded foundations of right and wrong. trust me. There are TONS of people in these overpriced areas that will cut off their arm rather than think of living or visiting an out-there region. Sound silly? Well NYC has some of the nastiest weather in ther country, yet the real estate is the highest on record.. so perhaps the weather isn't a factor. Secondly, are there ANY tradionally liberal areas that ARE NOT overpriced? Not a single one. nada. zero. So that aught to tell you something. Ad to the fact that prices acclerated the fastest after the election and bingo- The red state blue state invention did it's trick to rekindle old hostilities and further strike fear into the inhabitants of the overpriced areas.
Meanwhile, new areas like Austin and Memphis are fast becoming the new young person liberally minded artistic communities. Whether they remain affordable is yet to be seen. I highly doubt it.

Face,

You'll note that most people (including myself) predicted very modest nominal price declines for June, 2006, because I believe we will only be at the START of a very long correction cycle that will take years to fully play out.

But I want to have sushi anyway. Let's bet something. :)

The free market will determine the true fair commission.

But first it must be a free market.

OpenMLS, Banzai!

@HARM,

As has been said before so often, none of these areas were completely immune to price drops in prior busts

I think the more sapient point here is that truly upper income communities (like Atherton, Belvedere, etc.) are far less exposed to price drop effects *in terms of impact on wealth*, than the rest. If an Atherton mansion sells for 3.85M instead of 5.5M, that's a huge amount, but it has less effect on the owner's wealth than the 1.2M McMansion selling for 850K--in fact the McMansion owner may be forced to walk away and take the default while the Atherton guy has old money and real assets, and often owns a much larger equity stake in the house (or he has a private wealth manager who has helped him to diversify his assets so as to marginalize his home-equity-wealth exposure).

As to Realt-Whores making commissions.
unfortunately, like stockbrokers, they rely upon th commission for income.

Unlike the realtor(tm) broker crime family syndicate, stockbrokers operate in a largely open market. Without a cartel, they have faced very serious competitive pressures on transaction fees; thus the flat-fee/flat-rate brokerages.

So most transactions (pretty much all retail transactions) are unit-priced. The lexus-leasee cartel instead gets to perpetually price on a deal-value rate. They *only* get away with this by breaking US antitrust laws and using their lobbyists to keep from getting brought to due justice.

In case anybody was wondering, the partners at my husband’s large, first tier law firm make between $300,000 and $3,000,000 dollars. So they can be quite well off or barely able to get their foot in the door of a nice SF condo (at 3-4x income).

It really depends on whether the firm is making money. Some specialties really got hit hard by the tech bust (e.g. immigration). Some are doing really well.

PS, there is no particular problem with the "resilience" theory. However, it may not be immediately clear that which market segment is resilient.

On the other hand, resilience may not imply that prices will not crash; it may merely suggest that prices will rebound and exceed prior peaks sooner.

Here is a NYTimes article on online services which provide much of the info horded by realitors:

http://tinyurl.com/e4bfr

Specifically zillow.com and redfin.com

@zeke --thanks for the article!
Great stuff. Hopefully this will be the first nail in the coffin for the Realt-Whore MLS cartel.

And, remember, you are entitled to it.

They have earned their equity inflation too!

SQT,

I almost have to wonder if that wasn't a gag-listing:

I have two week before i loose my houses
Ok, buddy i'll be right over to "tighten up" those houses.

No Mortgage Brokers or loan officers Please, I cant Refinance, I am a broker Myself.
Huh?? You're supposedly a "mortgage broker", but you can't even refinance yourself?

I have two week before i loose my houses

I know this is a no-no, but I can't refuse:

loose Audio pronunciation of "loose" ( P ) Pronunciation Key (ls)
adj. loos·er, loos·est

1. Not fastened, restrained, or contained: loose bricks.

(apparently passing the rigorous examinations to become a mortgage broker are only marginally harder than become a realtor(tm))

Tip: For zekes' NYT article (above), use BugMeNot.com.
An excerpt:

Redfin, though less well financed than Zillow, is perhaps even more ambitious in its aim to take on the work of agents. The site, which maps listings with other sources of real estate data for Seattle, added a feature last week that allows a visitor to buy a property online.

Redfin shows the potential savings on every listing. For instance, the "direct savings" on a $699,000 house currently for sale in the Queen Anne district in Seattle is $13,980. The buyer gets the money at closing so it can be used for the down payment or to pass to the seller if it was used to sweeten an offer.

Has anyone out there personally ever used any of the online MLS/Realtor competitors (ZipRealty, Help-U-Sell, Zillow, Redfin, etc.)? If so, what are your impressions?

I have only used zipreality but never bought. I used a realitor for a while and got access to cleanoffer.com which gives me good, accurate mls info in Marin. With that, and a tool like zillow I don't see much value for a realitor...except the contacts for closing, inspecting, etc... However the way the system is set up unless you find a house for sale by owner, it is hard as a buyer to get any price reduction by not using a broker.

Since the seller realitor will snag the full 6% (which basically gets passed on to me the buyer) and will split it with my agent if I choose to go there, there is really no benefit in not having a realitor...unless one of these online realitors gives you 2% back of their 3%.

In such a scenario I can definately see the value of one of these brokers.

But to answer HARM's question, I've not really used them.

Regarding the "buying without an agent, but seller has one problem": what I've done is set up an Excel spreadsheet (as any informed buyer does), but added in a commission structure iterative calculation to reflect a reduction of the commission structure in my final offer price. This has worked for me in every purchase I've made, but then again I've always walked away from ridiculous situations (like multiple offer bid wars).

Zillow.com is great technology (using googlemap), but I see one fatal flaw: the data is market lagging. Perhaps this holds up well in a normal, slowly rising market, but it is way off for the present.

I checked a home I've tracked in Corte Madera. Zillow shows it valued at 1,333,875. This home listed for 1.4M late last spring, and sat without a single offer. It eventually relisted 3 times, the last for 1.15M, and still didn't move. My estimate is the home is worth 850-925K in a normal market, but it's been driven up by the silliness of all the comps in the neighborhood over the past couple years. In fact, I really think they're just averaging comps with some dimensional aspects (probably sqft and #BRs), but I'd have to spend more time there to be sure.

Randy H,

I have to second Steve the Owner --Zillow is amazing.
Yes, the "Zestimate" price is based on lagging-indicator comps, but so is any Realt-Whore's estimate. In fact, I bet there's less room for deliberate distortions and error because Zillow has no reason to "game the comps" in favor of always-higher prices.

One of the best features of this site is it graph a timeline for any home's appreciation/depreciation (the giant bulge since 2002 for my current place is really striking) and it provides you with the past sales history, without having to go to the County Assessor's office or website.

One small blow against information assymetry, one giant leap for buyer-kind!

Revising my comments on Zillow:

I did check on the Hawthorne Ln. listing in Corte Madera I was skeptical about more; I hadn't looked into the 10yr timeline. This shows that this home was only valued at between 600-700K all the way up until 2005, when they listed it for 1.4M. At that point Zillow doubled the value, and it stayed there for the year it was listed (and relisted over and over). Now it's coming right back down towards it's real value.

The best thing is that I had *overvalued* the home. Zillow tells me it's even less than I had thought.

zillow pretty much shows a ~45% hike in Marin in the first months of '05. Then flat to a dip since then, depending on the price of the house...higher prices bigger dips.

Perhaps Google should go into the real estate business by incorporating MLS into Froogle.

I wear "cheap" as a badge of honor. I find it especially useful as a serial entrepreneur--it sends a pretty clear message to the employees.

I wear “cheap” as a badge of honor. I find it especially useful as a serial entrepreneur–it sends a pretty clear message to the employees.

What kind of message would that be?

Many of my socks have big holes. So long as I do not take off my shoes...

Randy…I have learnt to avoid these companies which I call JUNK statrtups …. I earn 160K per year with good work life balance ….

Good to know that our filter is working as intended.

btw, the only startup of 5 I've been involved in that was a junk failure was the dot-com during the boom which spent money like water and bought engineers personal environment pod workspaces. The other 4, which were very tough, long-hours, cheap as possible succeeded and employees who hung out long enough made off quite well upon acquisition--significantly better than annualized 160K per year. That is, afterall, the risk-reward proposition of a startup. It's not meant for the CSR have a celebration cake party every thursday crowd.

How do you know if a redneck is married?

Ans. There's tobacco spit stains on both sides of the pickup.

What's the difference between Bigfoot and an honest Realtorâ„¢ ?

Ans. There have actually been sightings of Bigfoot.