patrick.net

A good portion of their ads is mortgage related. When that money dries up, it will be like Yahoo all over again.

This is what I suspect.

What are you talking about? Google never goes down; plus, they're not making any more of it; and don't forget everybody wants some. And you know, Google is WAY up compared to Febuary 2005.
There _IS_NO_ Goobble! Errr, I mean Booble...or something.

Another entertaining article on Yahoo finance:
Why Homeowners Get Rich and Renters Stay Poor
http://finance.yahoo.com/columnist/article/millionaire/2585

I can't believe this guy can be a columnist on Yahoo Finance, is this an informercial spot or something? The article is so biased and simplisitc that it sounds like a grade school book report of Rich Dad, Poor Dad.

Now, with the revelation that they too skewed their numbers it’s already begun to have an impact on the balance of the sector.

You're not implying that GOOG mistated GAAP earnings are you?

The Google effect is more psychological than real by any economic measure, regarding the RE market. There just aren't enough employees enriched by their stock to make an impact except in a couple of neighborhoods near the GOOG campus. This is true even when considering the wealth GOOG has created for employees of acquired and co-invested companies (these are really the only people making money on the stock post IPO).

I think a lot of people wanted to think of GOOG as the Netscape of this cycle; merely the first in a series of high-flying IPOs. This never materialized...which is actually very troubling given that the total number of IPOs (in terms of # of deals and value) is actually higher than it was during the Netscape era rise of the dot-com bubble. The difference this time is most of the deals are "real" companies, and as many are coming out of NYC and the NE as SV.

It surprises me a little that there are folks out there who still think they can sell the “there is no bubble” line of BS. Everyone I talk to anymore has fully embraced the bubble, even those who have bought in the last few years. Maybe it’s just more obvious where I live and harder to deny.

SQT, sadly there are PLENTY of clueless sheeple still out there --just look at Shiller's recent O.C. homeowner survey. The one that showed most people expected 23% appreciation for the next TEN years. Industry shills like the W.F. dude will still find plenty of greater fools ready and willing to buy their snake oil --all the way to the bottom.

Blind optimism and greed trumps all on the way up, but fear and greed wil rule on the way down --reflexivity at work!

Hey, I'm starting to sound like Peter P...

Did you notice the “Wine and Cheese” Open House’s HOA fees were $429? Is that typical in the BA?

$429 is not particularly high for BA. Nicer buildings will charge you $800 - $1000 a month.

The Google effect is more psychological than real by any economic measure, regarding the RE market.

Everything is psychological. ;)

Another preeminent tech firm, Electronic Arts in Redwood Shores (Silicon Valley North?) also had a sluggish last quarter and is laying off staff, including, it was reported, some game designers.

EA is one freeway exit away from Oracle. Let's monitor Redwood Shores and Foster City real estates.

Industry shills like the W.F. dude will still find plenty of greater fools ready and willing to buy their snake oil –all the way to the bottom.

Should we be evil and starting selling RE snail oil? :-P

Perhaps we should remember the line: Don't be evil.

That’s crazy, what exactly do they provide in terms of value for 1K a month. At that rate it would be cheaper to live in a hotel.

It is crazy indeed. Many people who bought (or thinking of buying) are leaving this out of the equation.

Here,

$250 HOA gives you gated parking and an elevator
$400 HOA also gives you a pool
$800 HOA may include steam rooms and a gym
$1000 may add a doorman?

It varies though. In Palo Alto, $500 HOA buildings may not even have pools.

I was watching a BBC special a short while back and what appears to be the standard in London is that affluent people have rather shabby “flats” or lofts where dirty laundry and take out food piles up during the week. Then on the weekend they retreat to their estate in the country which is really more an accurate reflection of who they are, their tastes, preferences etc.

On weekdays, we live in a shabby apartment with dirty laundry. On weekend, we sleep and in our dreams we live in our "estate". :)

I nearly clicked the wrong link and deleted this whole thread, whew.

I certainly don’t see any signs of a “crash” coming to SF. I don’t really see what SFWoman is talking about. Again, this blog seems to have it’s own version of reality which is different from what I see going on out there.

We have yet to see which is the reality, because the reality tend to resemble what you are looking for.

If rent really goes up, well and good. There is no bubble. We need to be vigilant.

Yes, I’m sure. I’m trying to buy in SF right now, so I would love it if this blog’s version of reality was the right one.

That is what one of my friends told me. Well, sort of. It was something like:

"I do not mind GOOG going down so that I can buy more."

I am not a fan of LJE (Larry Ellison), but he is right about one thing: Silicon Valley is becoming the next Detroit.

San Francisco is better, but I really cannot think of any real edge over other US coastal cities like Seattle and San Diego.

San Diego is bursting as we speak. Once the correction is complete there, it will have more advantages over us.

One day rather than dreaming of an estate with a pool you can buy Gary’s estate, that fellow with the, the, well that special eye.

I actually do not have a dream "estate", this is why I put a pair of quotes around it.

That said, I am realy intrigued by the dynamics of this bubble and the psychology involved.

I firmly believe that when it’s all said and done that your generation will have an honest shot at affordable (not necessarily cheap) housing.

Actually, I believe homeownership rate will drop significantly after the bubble bust. Affordability may not improve by much. However, people may be adverse to ownership and lenders may be adverse to extending credit. It is not going to be pretty.

I thought you were absolutely 100% sure there was a horrible bubble

Well, if rent goes up significantly to correct the P/E aberration, then the bubble will disappear, right?

No one can dispute that GOOG went down, but if you look at home prices in Nob Hill, Russian Hill, South Beach, North Beach, etc. in SF you will see that prices as well as rents are significantly HIGHER this year than they were last year.

No contest.

Face Reality, luxury properties in prime areas can be quite price volatile though.

I just walked down to the Marina for a burrito and overheard a woman talking to a man (her partner?) and the conversation went ‘OK, then we can refinance on the second, and we should be able to swing it until …’ And the man chimes in ‘I don’t know, are they going to let do it again?’ I think I may have spotted a couple of RE debtors.

Let's hope he is not our-friend-whose-name-we-dare-not-say.

I don’t think that owning a piece of prime land in SF can hurt you in the long run (assuming you can afford it)…

True enough. But the psychological shock of a multi-million "paper loss" can be difficult for those who can afford.

Face Reality, I was not directing any anger towards you. Thanks for being here.

OT

See this great article:

In come the waves

Jun 16th 2005
From The Economist print edition

The worldwide rise in house prices is the biggest bubble in history. Prepare for the economic pain when it pops

Great article and their are wonderful graphs showing the bubble in the US, Britain & Australia is actually bigger than the one in Japan.

http://www.economist.com/finance/displayStory.cfm?story_id=4079027

Losses on paper don’t hurt any less!

They may hurt more because you cannot deduct paper losses.

They may hurt more because you cannot deduct paper losses.

Well, if they are marked-to-market...

Again, I think people that either think RE will tank or keep going in the Bay Area who are in the middle class, and especially working class need to evaluate the reality of what the area has become. Sure- the quirks include nice weather, access to locations like Napa, the Sierras, and the ocean along with views of the Golden Gate. Maybe a few times a year you go and see those things. But the reality is that you must sit in traffic, book campsites, resorts, and events months in advance, and pay a LOT to do many of those things( like over $350 a night at a crappy lodge in Yosemite), and pay out the rear for the rest.. EVERY DAY. add to the fact that for those of us locked out of the market having to spend every day praying hard that by some miracle, housing prices will crash beyond control, which simply means the millions of us waiting for the last 4 years will jump, and hence keep the prices expensive at the very least. Is it worth it? Seriously. I think about the fact that had I moved to another city, like Dallas, Austin, Atlanta, Nashville, or any number of other unique and interesting cities, I would be way further ahead in life than I am now- instead of renting a house in an area that has a ever-stagnating salary base.
We can debate all day long. I have my own opinions about housing, which coincides with the general feel of this forum. But I'm about to say enough is enough.If anyone feels they simply must HAVE that 600k condo, then they can have right at it, and if they either retire at age 40 to "cash out" or become doomed to a life of financial failure, I don't care. It's really about what is good for me and my family. The Bay area is not a good place for my family, and when my alloted 3 year waiting period is up, and I decide whether or not the bubble has popped enough to afford a place, then I'll make my move.

As someone who lives in Alameda,there does seem to be a very distinct slowdown. There are a LOT of houses that have been up for sale at least since September, or even before. The house across from us, a victorian priced at 850k has gone up, then "pended" then gone down only to go up again. This has happened at least 3 times already. I wonder who owns it and if they bought it as an investment, because the price has gone down only 1000 bucks to 849k. Still other houses up and down central Ave go up and down continually- all with either "sale pending" or something like that. Then you assume it has sold only to see it go back up for sale again. There were 2 houses that were nothing special- ugly brick houses for 600k or more than were up for sale forever, said they sold, and now sit vacant. Who knows what the hell is going on. I have yet to see any real people move into anything yet.

which simply means the millions of us waiting for the last 4 years will jump, and hence keep the prices expensive at the very least

Not really. When the market tanks people will be afraid to buy. It is simple psychology.

The only people I know that aren’t bullish on RE are on this blog.

Very true. All housing bears here can be "absorbed" by a single subdivision.

nonadtoons says:

"The Bay area is not a good place for my family, and when my alloted 3 year waiting period is up, and I decide whether or not the bubble has popped enough to afford a place, then I’ll make my move."

Good assessment.

I made my move 7 years ago to Phoenix. I saw the handwriting on the wall back then. I grew up in San Jose.

I'm thinking about making one more go at it before I hit 40. Just for old times' sake. To see if I can recapture a bit of the old Cali magic.

I fear that it's probably too far gone, though.

Either way you slice and dice it. We're friggen' screwed royally.

Good luck soldier!

She says she is too busy to watch the carnage, but might swoop in when it’s near bottom, but only if it won’t cost much more than her (rent conrtrolled) rent.

I doubt it will be close to the controlled rent.

Probably not. Rent control is rather fascinating. In San Francisco you can have landlords subsidizing the rents of people with very high incomes. I think they have changed that in NYC. I believe rent control has been lifted or at least adjusted at luxury buildings.

I still think that rent control is one of the causes for the lack of affordable housing.

Perhaps your friend can buy an income property near the bottom and have that cover her rent. ;)

I could have made a killing on the NASDAQ in 2000/01 (if wasn’t so busy covering margin calls).

I have a friend who got out just before the peak. I was telling my wife about this amazing person.

Then, he told me he was busy covering margin calls because he re-entered after the initial drop.

Some 1-bedroom condos which sold for $510K a year ago, are now selling for $620K. That’s an increase of over 20%! This is an extreme example, but prices overall are significantly higher than they were a year ago.

CAR (car.org/index.php?id=MzU4OTk=)

San Francisco Bay Dec 2005 median price: $712,940
Percent Change in Price from Prior Month (Nov): -1.4%
Percent Change in Price from Prior Year (Dec 04): +8.2%
Percent Change in Sales from Prior Month: -9.8%
Percent Change in Sales from Prior Year (Dec 04): -14.2%

Rents have gone up similarly. A 2-bedroom condo that I saw in North Beach which rented for $2200 a year ago is now renting for $2600.

See patrick.net/ for graph of current average asking rents on 1/2/3 Bdms. Link on the left also breaks it down by city. I just don't see any huge spikes there.

Again, anyone can use an isolated example/anecdote that supports either the bull or bear position, but the aggregate market trends are currently on the (mildly) bearish side. I believe this downcycle will play out like all the others --slowly. Painfully, excruciatingly slowly. But once the Titanic has started to turn, there's no stopping her.

Apparently a lot of high rise buildings have always had large footprints because of the economics of elevators, but recently those costs have come way down, and it is possible to build narrow, small footprint highrises that don’t block much view, are not wind channelers, don’t block much sun and are aesthetically pleasing.

I agree totally. I love high rise buildings. We need to make sure that they are built on sound foundations though.

Wasn't Towering Inferno (staring OJ Simpson) set in San Francisco?

Painfully, excruciatingly slowly. But once the Titanic has started to turn, there’s no stopping her.

It is happening more quickly than I thought.

"Look up “Robotic Nation” and the writings of Marshall Brain (yes that’s his real name) to see how some cornucopians have it all worked out - the robots are going to do the work for us! In their Future, there will be no more jobs for the working class and the planet will go to hell (because of all the energy and materials needed for robots) but hot damn, it’s gonna be great, the robots will work for us!" --Sunnyvale Renter

Hey Sunnyvale, I recommend to you the book "Player Piano" by Kurt Vonnegut. It is about exactly the scenario you describe above and all of the negative connotations that come with it. An interesting read:

http://www.vonnegutweb.com/playerpiano/pp_peterjreed.html

"No one can dispute that GOOG went down, but if you look at home prices in Nob Hill, Russian Hill, South Beach, North Beach, etc. in SF you will see that prices as well as rents are significantly HIGHER this year than they were last year." --Face Reality

Rents are not higher in SF. I just signed a lease on a new apartment after being in one place for the past year and a half. Rents were lower than the last time I was looking, and that is part of why I moved, I'm now paying $150 less a month. I was looking at studios in SF though, not the opulant palace rentals that are the minimum level of suitability for Signore "Face Reality" who faces only the reality he wants to see. Now is DEFINITELY the time for YOU to buy a place Mr. Face Reality. I DO believe that everything will work out GREAT for you if you buy right now. Be my guest!

The “intangibles” argument is always interesting to me. We get people who argue that the area I live in won’t go down due to desireability.

Any intangible would have been discounted by the market long ago. Current high prices are caused and sustained by unrealistic high expectations of future pricing. This psychology is reversing fast.

"I would argue that if you buy at the top of the market and are making mortgage payments on that $500,000 that has disappeared it isn’t just a loss on paper. You are going and working a certain number of hours to make payments on that vanished equity. You are also paying property taxes on the higher amount (until you can get reassessed)." --SFWoman

The lady speaks the truth. It's all about the cash flow. A cold, unemotional financial analysis. The way it should be.