patrick.net

@HARM

I think your NIMBY conclusion vis-a-vis flyover states is faulty. The effects can be entirely accounted for by fragmented regional inflation differentials ala Bruce Greenwald’s work. In fact, NIMBYism is quite vibrant and apparent in even small, rural flyover redstate land.

Randy H,
To be honest, I'm not familiar with Bruce Greenwald or FRIDs but I'm interested in hearing more --could you please summarize the main points for us here?

I'm not sure I agree that NIMBYism as anywhere near as bad in other states as CA, though. A while back someone posted data from the CBIA that showed it costs developers something like $90-100K on average in mostly unnecessary zoning/municipal fees for every new home that gets built here, vs. much, much less elsewhere.

On topic,

If Zillow is anything to go by, then we've passed the peak even up here in "prime" Marin. I particularly like this data:

Past: This home 94941 Mill Valley Marin CA US
30 days -4.8% -0.8% -0.8% -0.6% 0.3% 0.6%

That's the home I'm renting, down -4.8% in the past 30 days.
This zip, down almost 1%
Mill valley the same.
Marin down over half a percent.

The importance of geographical placement has only grown as telecommunications have advanced.

Why? Won't people just cluster around culinary capitals instead?

Fragmented Regional Inflation Differentials (summary from memory)

Following the stagflationary periods of the 70s/early 80s, the recovery in wage inflation, capital creation and investment was regionally fragmented to an extreme degree. The midwest/plains and non-coastal southeast lost significant ground (over 100% in many cases) over the following 5-10 years. Except for the Reconstruction Era South, there is no precendent for such economic disparity in US history. This function resulted in the high wage inflation areas effectively extracting capital from the low wage inflation areas over multiple decades, and save a few small counterexamples, has never corrected. Thus, the differential continues to grow today, only a bit slower.

Many prices are set nationally, and the high income inflation areas have driven these prices, forcing low inflation areas into a cycle of more dependence on local economy (enter the Walmart strategy) and government subsidy. States like Indiana receive many times more government subsidy per capita than California or New York, even excluding direct agricultural subsidies.

This relates to development because most inputs into development as a capital stock creation endeavor are locally priced, except perhaps some raw resources. When you compare the costs of development burdens, you have to do so in locally adjusted economic terms: the cost of the inputs and the value of the capital created, all or most of which are locally priced.

What this all leads to is an Easterly-style "poverty trap" phenomena with an American flavor.

Somebody mention Baghdad Bob vs. David Lereah?
You must check out Marin bubble blog:
marinrealestatebubble.blogspot.com/

Here in So. San Jose (AFFECTIONATELY known as San Hosebag by some), word of bubble must've gotten out.... I need to rent anew, & it just so happens that the market is thinnning out. And based on conversations, there is a lot of rental interest (bidding wars coming soon?). Yes the wonderful part of renting: like it or not you get to experience new environs every now & again.

This is odd also because at the same time, homes for sale inventory is not really rising much...I'd call it stagnant...and sales have really picked up in the last 2 or so weeks.
Lot's of more fools??? Maybe it's different here???
WTFK's.

Randy H,

Thanks for the synopsis. Now that I understand what it means, I'm convinced that FRID factors cannot explain why CA housing costs --taking the housing Bubble OUT of the equation-- are always so much higher than elsewhere.

As you say, the FRID scenario assumes that "Many prices are set nationally, and the high income inflation areas have driven these prices". It's pretty obvious that "high income inflation" is NOT what's been driving housing prices in CA. As nomad's article stated, median HH incomes here are only 12% above the national average (census.gov/hhes/income/histinc/h08a.html), not nearly enough to account for the huge price differentials.

If you factor in the per-capita government subsidies as a form of additional "income", this would imply that non-CA HH incomes are in effect HIGHER than the census figures, and may even wipe out CA's 12% wage advantage altogether.

Here in So. San Jose (AFFECTIONATELY known as San Hosebag by some), word of bubble must’ve gotten out…. I need to rent anew, & it just so happens that the market is thinnning out. And based on conversations, there is a lot of rental interest (bidding wars coming soon?). Yes the wonderful part of renting: like it or not you get to experience new environs every now & again.

My lease is ending soon too. But I need to get out of San Hosebag. :)

This is odd also because at the same time, homes for sale inventory is not really rising much…I’d call it stagnant…and sales have really picked up in the last 2 or so weeks.
Lot’s of more fools??? Maybe it’s different here???

People are waiting until spring. At least one of my friends is waiting until then to unload a property.

What sales? All I see is open house signs.

But is rent going to increase 50% soon. If so, I am buying.

"My lease is ending soon too. But I need to get out of San Hosebag. "
Good for you! For some reason damnit I like it here (maybe I need to see a doctor about that???). Actually...family friends etc. has lot to do w/it.

"What sales? All I see is open house signs. "
I see a lot of open houses too...especially last weekend when the spring weather caused them to bloom like wild flowers.

Mostly I track s. san jose through:
southsanjose.com/realty.php
It's tedious, but nice in a way because it breaks down properties by neighborhoods as small as ~5 miles^2. Anyways although inventory isn't changing much, there's quite a bit of cycling...that is, currently listed properties are typically ~1 mo or less on market. In contrast, through november/december/january, many properties were on market for 2+ months.

I also use some searches on ziprealty (the new "only show reduced price properties" feature is great).

Anecdotal example: the house 2 doors down from where I grew up (quintessential urban sprawl middle class neighborhood) was listed at 690K for 3 days before selling yesterday (1972 ranch build, 4bd/2ba 1700 ft^2). However, a recent comp sold in August 2005 for 690K (4bd/2ba 1678 ft^2), which _would_ indicate a bit of price stagnation (then again who knows what actual sale price of recent sale is).
I guess I see a lot of stagnation (as one would expect at the apex...?).

@HARM,

I am excluding RE bubble regions from the FRID analysis. I, like you, believe there is a geniune asset/credit bubble. I'm also not convinced that 100% of the difference is purely inflation differential in all cases. I am convinced that most of the difference in most cases is inflation.

@newsfreak

I agree with the direct, proportional representation arguments. However, the counterarguments are strong; and I recognize that. Eliminating 2-Senator per state rules and/or scaled proportional Representative rules would only worsen the plight of the existing poverty traps. You would essentially remove both their disproportionate government subsidies and their political power. In the worst case, 5 states would run the other 45 *all of the time, without exception*. 3 States would usually be sufficient for most political actions.

SQT

Good point. I grew up in the midwest, and frequently miss it.

In addition, for me anyway, there is the factor of what brought you to an area and does it feel worth it to you? I think about this whenever Seattledude disses Seattle. I lived in Seattle for a couple of years, and really loved it. In contrast, I have lived off and on in coastal California for several years, and don't like it much. But I loved my work in Seattle and have been much less happy here professionally, and I know this has had a big impact on my perceptions of CA vs. WA.

seattledude,

“About 1980 was the peak of everything. ”

SFWoman

Except for hair. Everybody had really, really bad hair.

LOL!

Central Coast said:
In San Luis Obispo the fight to keep newcomers out and new development from growing has been lost due to State threat. CA threatened to take away funds because SLO wasn’t doing it’s ‘fair share of growth’.

Interesting. I had heard that restrictions on growth had been loosened, but didn't know why.

Does 1980s fashion critique count as forbidden boomer bashing?

Hey Seattledude,
Well as it so happens, ALL of my family live in the South and Western states. So in reality, most of my friends and family live back where I am thinking of moving back too.
As far as a reply to SFWoman,There are many many things that you can't do here in SF that people take for granted back home. Small things, but I miss them just the same. For one, you can have a huge yard where you can do whatever the hell you want. Interestingly enough, back home, I grew up on 22 acres, a ridge behind the house, a 2 story workshop, an inground swimming pool, 2 fireplaces, a greenhouse,a screened in porch with windows facing the woods that also had a small fireplace. A fruit orchard, and a hiking trail that went over the ridge and into the neighboring area.This sounds like an amazing place doesn't it? It is. It would surely cost you millions here. My parents are School teachers making less than 35k a year each.Their house and property even now is valued at around 135k.It cost 22k in 1974.As you can easily see, they live way better than I do, and very likely you as well, despite the fact that you sound somewhat well off.
People here in SF have to use public land as their backyard. If you want to go enjoy the outdoors, you have to drive somewhere. We just had fun in our backyard because it provided just about all the comforts you needed. You could do whatever you wanted too because the neighbors lived about a half mile away.
My brother just bought his first house in downtown Nashville for 55k. He just bought it outright. The guy works as a waiter. Do you know any waiters in CA who can do that?
Now.. I can imagine someone from CA who moves into a "flyover" state, well of course it will be diffrent for them. How do you think CA is for me? I've been here for 8 years and still I shake my head at just how stupid it is that people are willing to delay their lives for decades for what? A tiny little house that we in NC would bulldoze to make way for something more energy efficient. I stand firm when I think that Californians and New Yorkers need to get in a bus, take a road trip, and get some sense slapped into them. The value is simply not here anymore. There is no mystery.

dt said: So, now the questions is, what do we prefer. What do we really want? Do we like that proposition 13 or we don’t? I’m sure CA home owners love the proposition 13. Which home owners would want to take that proposition 13 away?

dt: I still hope to be a homeowner someday, so I like proposition 13. When I lose all hope of ownership, I will want to take it away. :evil:

This was my first use of smilies. I said :evil" but I wanted :twisted:.

I'm baaaaaaack. Too much to respond to, so I'll bullet:

--NIMBYISM (Communism) Bad. Capitalism, low taxes, red states good.
--CA: Love it or leave it. I love it. It is a PITA, though.
--God bless George Bush.
--I was in Sac yesterday. What a Shit hole.
--Our founding fathers distrusted democracy for a reason. CA and the war of Northern Aggression are two examples of their wisdom.
--CA has much pain ahead--but it will reform. Hang in there.
--29 is a tough time in your career--the bottom fell out from me at that age thanks to the tech bust. Two steps forward, one step back. It gets better. Aim high. Never too early to figure out where you want to end up.

And finally, I have been trying to talk friends out of moving to Oregon. They have read that home ownership is the "Cornerstone" of your financial future. Not if it becomes a "Millstone" around your neck. No place is perfect, not even if cheaper prices give that illusion. Learn to love where you're at. If people in Sacramento can do it, I guess anybody can.

--Beer deficiency BAD. I'm going to cure mine.

Peace
--Deo Vindice

I almost forgot my advice for baby boomers:

Plan on dying before your peers. Gen X and Gen Y hates you, and we will overcome you through your attrition. I would hate to be the last baby boomer left. You will be lonely in your kennel after we confiscate your assets to pay your debts.

--Deo Vindice

DiNor: Thanks. It's nice to be missed.

dt said: I believe the RE bust in the 90s because there were probably of job lost or not enough household income to cover the monthly payment.
Where as right now, the job growth seems good. Many companies are doing well.

dt: Job loss is often cited as the cause of the 90s RE bust, but prices had started to come down prior to the big job losses. It will likely be worse this time, with so much recent job creation being in RE.

Crashes occur because overvalued prices stop going up further.

Where are the NIMBYists when we need them to enforce single-family zoning rules?

Here in Texas, the real estate market is very strong. Property values increased an average of 3.3% over last year, which is pretty much in line with economic growth and inflation. Of course, some areas of the state–San Antonio, Austin, Dallas, Houston, Corpus Christi, McAllen–are doing better than others–El Paso (which I would never advise anyone to even visit).

I hope California can be as pro-growth as Texas.

California, on the other hand, is anybody’s guess. Without any inside information on the market there, I would expect prices to fall to where they are more in line with income and economic growth. Bad for sellers, good for buyers.

Very true indeed.

Is this ScottC the same as the previous ScottC? I like this one. :)

I never hated realtors anyway. But I still like the idea of Open MLS.

Free market, banzai!

I LOVE TX, and the upper South, too. One warning, though.

There was this biggot over at Ben's site that moved to TX from NYC. She thought it was ok to complain about how ignorant Texans are. Then she said "I refuse to adopt that stupid way of talking". And of course, "The way those people think down there........."

She was even shocked that "My husband was actually called a yankee, three times!". Texans, and Southerners in general, are some of the kindest and most polite people on earth. If the man was called a yankee, you can bet he deserved it. DO NOT move to the South if you are bringing biggoted attitudes with you. You and everyone who has to put up with you will not be happy about it.

She was fearful that she might lose her ass on the house she bought there. A brave reader responded that he hoped that she got what she deserved for being such a biggot. I do too.

--Deo Vindice

DO NOT move to the South if you are bringing biggoted attitudes with you. You and everyone who has to put up with you will not be happy about it.

Small correction:
I think you meant to say, "do not move to the South if you don't like EXPERIENCING bigoted attitudes directed AT YOU."

You weren't trying to be ironic, now, were you? ;-)

Some hard data:

GSP (gross state product portion of GDP national income accounting):

Growth 2003-2004:
CA = 7.8%
TX = 7.6%

Chained-Dollar Growth 2003-2004 (a more accurate infl adj measure):
CA = 5.6%
TX = 4.6%

only NV and AZ were higher than CA. Over the past 10 years, CA is *by far* the most productive state in terms of economic growth.

Absolute 2003-2004:
CA = $1,550,753mm
TX = $ 884,136mm

Contribution to US GDP:
CA = 13.3%
TX = 7.6%

CA must be doing something right, despite the "anti growth" attitude. I think CA can do *much* better, but the data doesn't support the pronouncements of demise.

--source, B.E.A., Regional Economic Accounts

HARM:
"I think you meant to say, “do not move to the South if you don’t like EXPERIENCING bigoted attitudes directed AT YOU.”

That's what I'm talking about, HARM. Apparently, you have done a statistically valid survey? Or was that just a stereotype? If you feel that way, please stay put where you are.

--Deo Vindice

That’s what I’m talking about, HARM. Apparently, you have done a statistically valid survey? Or was that just a stereotype? If you feel that way, please stay put where you are.

Gee, Mr. Confederacy, I haven't done any surveys lately. Maybe someone in the media could do one. They could start by interviewing all those guys in the white sheets that, um... you know, like to hang out in the woods, burn crosses 'n stuff.

Other than that, I KKKan't think of a single reason why anyone might have a bad impression of the deep South.

Cheers.

Housing Bubble Prediction: People in Red states are going to be fed up with the arrogant, communist, ignorant blue staters that move there for cheap housing prices. Especially the baby boomers.

HARM:

The largest Klan rally ever held was in Illinois. Both Massachusetts and Michigan had huge Klan organizations throughout the 1930s.

Remember the Black Man beaten to death in Brighton Beach? That was NY.

Remember Willie Horton? Boston.

Supreme court precedent on the right for Neo Nazis to March? Skokie Illinois.

How about those Neo Nazis in Idaho, gotta love them.

Where was that recent racially motivated prison riot between Blacks and Mexicans? LA. What a segregated shithole that town is.

--Deo

R Patrick:

"I still cant understand what heppened, the more I read the more I shake my head. It’s sad really I guess."

So we were counseling some friends of ours to reconsider their plans to ditch the Bay Area in search of affordable housing in the PNW. They have a couple of kids, mom stays home, and dad works hard, but is only making in the range of those recent college grads. Mom reads finance books that tell her buy a home, buy stocks, or you are just throwing your money away. They are OBSESSED with buying a house, no matter what. If they move, they will burn through their savings, and dad has to find a job that will unfortunately pay less.

They are good people, but not college educated. They really just want the American dream. They are outmatched by the financial press, the RealWhores and their foolish peers. Their parents did well by buying a house, so they see it as proof that in the long run, they can't lose.

They are the very portrait of the squeezed middle class caught up in this mania. The scary thing is, it really is different this time. I mean, it really is the same this time. The world moves in long cycles, yet people have short memories. Empires rise, empires fall.

Right now, China and India are rising, and our standard of living is falling. The US industrial states are struggling with impossible legacy costs and an electorate that wants another "New Deal". Mean while, the South is rising, not from a new paradigm, but because it has Ricardian advantages based on low costs, low taxes, and low government service. Believe me, it is different than for our parents. The 21st century is not America's century, and housing prices will decline for a very long time reflecting lower wages and diminished prospects. The North East and most of the Great Lake states will fail to adapt, judging by history. The South is already adapted because it was poor for more than a century. It will benefit and gain political power domestically. But it is a zero sum game in a declining empire. I mean, unless it's different this time.

--Deo

You will be lonely in your kennel after we confiscate your assets to pay your debts.

The Xers and Yers won't have time to persecute the defenseless Boomers. We'll be more than occupied fighting the invading Chinese army in our own streets. The Boomers will be exterminated by the Reds just for being a burden. The Xers and Yers will fight and die in the streets, or spend their short lives in forced labor camps throughout the former USA. And that's looking on the bright side. Sigh.

Indiana house with wrong value ($400 Million!) causes budget shortfall and other problems:

http://www.cbsnews.com/stories/2006/02/11/ap/strange/mainD8FMLVLO0.shtml

Unalloyed:

Take heart. Empires don't collapse, they decline. Just like the Romans. The Chinese won't invade us for at least 100-200 years. We're just going to get poorer and poorer throughout our lifetimes as Asia rises. And of course our political landscape will be completely different from the last 150 years. It's a cycle (Kondratieff x 3 = 1 super cycle). Which is bad for US house prices!

They will tell you this if you take the intro to political economy class at any reputable university. Just don't bring it up on this board. People get touchy when you don't fall in line with the "America is different, and so is our history" argument. America only goes up!

--Deo

I just have some weird observations to share.

I have been tracking West Valley communities like Los Altos, Los Gatos, Saratoga, etc. I have noticed that the pending (continue to show) notice on website seems to on much longer than before.

When I bought a home 11 years ago, the whole process took around 20 days or so. Grant it, I was buying at almost 1/3 of the prevailing price, but the time taken to process a transaction should be fairly independent of the transaction price, plus we are have been used to the million-dollar price tag for almost 5 years now.

There are some properties that fall out of pending stage and come back on market. However, most of the pending notice on the website are there for at least 2 months! Is that normal? Why does it take so long for properties to go through a transaction??

Some other weird observation. Some properties come on MLS with a pending notice, I'm almost like, why do you need to show this property if it is already pending? Could it be some kind of MLS trick to show PAST TRANSACTIONS so that it looks like the market is back to red-hot normal stage?

Here is my conspiracy theory. If you look at the 120 or so inventory, only 3-4 pending will look extremely ugly, giving buyer a sure sign of a slowing market. However, if you let these pending signs just sit, even if they are long done pending, when the next batch of new inventory come in, the overall pending ratio will look much better. Better still, how about resurrecting some PAST transactions so the inventory is full of pending signs, looking as if the market is well and alive gain?

I am highly suspicious of the MLS playing some kind of a mind game. Because I have spotted 4-5 properties that were pending for almost 5 months now! How can a property be pending for that long! If I am the seller, I will sure run out of patience. It is also a bit too strange that there will be so many properties falling in and out and into the escrow again. That is just abnormal.

What I highly suspect is that MLS is intentionally letting transacted properties from last year, or a few months ago sit in the database, creating the kind of illusion that the current price still has takers. It is really not illegal to let the pending properties SIT, this is called window dressing.

dt,

I am in Los Gatos too, just that I am not tracking condos, but SFHs. Do you happen to see the same thing that I saw? Many houses pending for an extended period of time, 3-5 months pending, like they are stuck in the pending phase.

The SFH inventory in the West Valley hasn't grown that much, to be fair, most of them are just sitting there at an inflated pricing. Some of these houses that were pulled in winter came back to the market at another 10% spike in asking price. Good luck!

"...like they are stuck in the pending phase."
LOL SFH purgatory. Oh! The horrors of a market shift.
I always hesitate with conspiracy theories...but then again, history shows people do crazy shit when their livelihoods (you know, H2's & fat plasma's, etc.) are at stake.