patrick.net

What is everyone’s view on - if the bubble never pops but deflates slowly - and the prices remain where it is now for another 2-3 yrs.

If rent catches up to prices then I will see that there is no bubble.

I doubt the this very high price-rent ratio can be maintained with negative cashflow for long.

I predict the Fed will try to make a soft landing by raising interest rates once or twice more and then lowering them a bit...just to confuse us and get the buyers buying again.
I don't want people to get hurt by a crash...but then again...if prices stay this high, I'm also priced out of the market...as will be my kids and most of my friends and their kids.

Hi guys,

I found something interesting.

I am sure you are of aware of this website called the foreclosure.com. You can enter you zip code to see who in your neighbors are filing for pre-foreclosure, foreclosure, bankruptcy etc. Now, the interesting part is as below: try entering the zip codes for the posh neighborhoods like Los Altos Hills 94022, Atherton 94027, Saratoga 95070, Monte Sereno 95030, etc. then pull up the pre-foreclosure page which will show the defendent's names. Then randomly select these names and do a google search on them, you will find quite a few names who get in yahoo insider buy/sell records, namely some CEOs and executives of publicly listed companies.

Now you start to wonder what is going wrong with our country. Why are these executive/CEO types start to miss mortgage payments on their homes? I even found a public business figure in Taiwan on the pre-foreclosure list, I dug up some of his donation records, every year in the thousands. Someone who has the money to donate 5000, 8000, but can't make payment on property tax and is on the verge of losing his home. Interesting world out there.

Have fun.

There is also a home just built in 2005 in Saratoga which is recently foreclosed and repossessed by the bank on the market for 3M+. The advertising says, no expenses spared, yeah of course, the owner goes belly up building this home.

I am really starting to think that the high-end properties are in fact more fragile than the lower end. Who is going to take over this 3M+ home? Certainly not a power couple who can *only* make 500K. You are talking about 40,,000 property tax every year on this piece of beauty. For people who can afford the 3M+ homes, they are no dummies, or they will find it to be too crappy. I think this home can get a serious haircut of another 40%, which will still be beyond the affordability of most middle class families in the Valley, but at least more hopeful in finding a sucker.

A real-whore, a mortga-whore and a Chicken meet up.

The real-whore Says: “When I roar in the open house, the entire tract shivers with fear.

The mortga-whore says “If I roar on the TV, the entire state is afraid of me.”

The Chicken has the final word: “Big Deal. I only have to cough, and the entire planet shivers.”

In December I came back from four months in Paris, ate like a king while I was there, and didn’t gain weight. The women are so slim and eat very, very well. Everybody walks. It really shows what automobile culture and cheap gas do to a country’s figure!

That is right. I do not remember gaining much weight in Paris/London. I gained weight visiting Japan though. But I eat 4 - 6 meals a day (breakfast, lunch, tea, pre-dinner, dinner, supper) when I travel.

Big Deal. I only have to cough, and the entire planet shivers.

LOL :lol:

Peter P,

either you were on the corporate when you visited Japan or you have a deep pocket, I cannot afford to eat 6 meals in Tokyo if I am to foot the bill. Each meal costs at least 20 bucks, 6 meals a day will get me on the foreclosure.com in no time.

There are the cheaper ramen options, but they just don't fill my stomach, I am constantly amazed at how Japanese can survive on so little food while Americans have to supersize everything.

Owneroccupier Says:
I am really starting to think that the high-end properties are in fact more fragile than the lower end. Who is going to take over this 3M+ home? Certainly not a power couple who can *only* make 500K.

I've been wondering about that... Exactly how many ultra-rich people live here? They sure built a LOT of multi-million dollar mansions in the West Bay hills in the last 10 years.

I remember that in 2001 the highest sale price listed in the SJ Mercury for Santa Clara & San Mateo counties was only in the low $1 millions for more than a year. I assume that means that none of the numerous houses listed at higher prices sold.

What happens to the mid end if the high end of the market crashes like that? Will prices compress, i.e. $1.2 mil will buy you a mansion, while $900k still only gets you the 3BR rancher in West San Jose?

For anyone who caught Dave Leonhardt's recent NYT article ("Don't fear the bubble that bursts"), there's an excellent rebuttal from Paul Kasriel here:

http://www.ntrs.com/library/econ_research/weekly/us/ec030206.pdf

Very interesting data about the differences between the situation right before the last RE crash in 1989 and today.

either you were on the corporate when you visited Japan or you have a deep pocket, I cannot afford to eat 6 meals in Tokyo if I am to foot the bill. Each meal costs at least 20 bucks, 6 meals a day will get me on the foreclosure.com in no time.

Just for a few days... it is clearly unsustainable.

Took a look at the Ben Stein piece "Think Grim" that ha ha posted above.
Lo and behold the end of his piece is sprinkled with suggestions for what mutual funds to buy. It seems as though every doom and gloom story I read ends up with a link to:
a) equities / mutual funds, or
b) gold or oil or whatever commodity, or
c) religion.
Why can't they just end with "And I don't know what the hell you should do."

SFWoman,

I believe that if this is the ONLY home and primary residence of these people, they should be able to turn in the keys and walk away. Not the case if 1) they have refinanced, or 2) this is not the primary residence, and people who can make payments on the 1M+ homes definitely fall into the "higher-than-median-income" category which makes filing personal bankruptcy difficult under the new law.

It is just amazing to see how many people out there (including some business elites with an affluent facade) are living a borrowed lifestyle. There are quite a few tax liens in Los Altos Hills for around 50-100K, and obviously they are not the retirees who only need to make meagre prop 13 payments that can never add up to such a significant amount. We are seeing people who can buy a multi-million dollar home but cannot make the annual property tax. Oops, honey, I forgot to budget for the prop tax.

Girgl,

it is already the case as you mentioned. If you look at anything above 1.5M, you can actually find some relatively reasonable properties (1 acre+ land with 2500-3000 sft home in a posh neighborhood in West Valley), but if you look for anything between 1-1.5M, it is just crap, anything between 800K-1M is nothing but crap.

It seems that the ceiling of any 200K+ household can borrow is about 1M. So anything above 1.5M has to clear at a "more realisitic market price" not financed by cheap loans, and anything below that is hopelessly inflated.

Governments have been unsuccessfully trying for over a century to get people to move away from the cities, and especially inland (80% of Australians live within 30 miles of the ocean).

Just as I suspected, Crocodile Dundee glamorizing everthing outback was just a front man for the Auzzie Government's master plan to disperse the population. Now that walkabout animal guru Steve Erwin is pushing the same subversive cause.

ajh,

The article linked stated that our own FED was looking at bubbles in the UK and AUS mkts. as in "barometer" of what we might anticipate here in the U.S. The ONLY point that I was trying to make was that other than being english speaking countries there is little of value that the FED should expect to glean from looking at your data. Australia is so unique in so many ways that it seemed to me that they were just grasping at straws for some kind of "long shot" at a soft landing. Btw, saying that there was "only" a 15% decline in median price doesn't qualify as a crash (unless of course you put 10% down).

SFWoman,

I pulled the "15%" out of thin air, from what I've read (particularly in Sacremento) 15% price reductions are now low hanging fruit. For a recent buyer (suddenly turned seller) he/she probably doesn't have 3 or 4 months of cash reserves let alone 3 or 4 years to allow inflation to "bail them out". B/c this situation is becoming more acute by the day I would say my reference above is "actual prices". We're moving into real time here.

Davis_Renter,

Interesting post! Bomb proof? Centex has "extended" the 12 Hour Sale for the entire month of March? Would that make it a 744 Hour Sale? Gas baby, stone gas!

Like I say, we're moving into "real time". Houses can't be traded like stocks? Then why am I getting Level ll Streaming Quotes?

SQT,

Do you have to do some kind of subscription to have access to that data?

If you look under Preforeclosure, the defendent's name will show up. I have already found one acquaintance in a posh zip code who is known for his lavish lifestyle. I thought he cashed out big time before the dotcom bomb, but I guess his core competency must be spending.

SFWoman,

I am not sure if it is essential for the trophy wives to get on the deeds, we are in CA, if couples split, the wives get to go half with their hubby for any wealth accumulated after the marriage, right? Plus, most trophy wives need to sign a pre-nup anyway.

SQT,

Thanks. Isn't it incredible how we're reduced to "cobbling" together data from multiple sources in order to create a more complete picture of a property or a neighborhood? I understand protecting peoples privacy but I'm willing to bet that the people that complain the loudest about Zilliow for instance are the ones most delusional about their home's FMV.

I just looked on foreclosure.com and there are 201 homes in foreclosure/preforclosure in my zip code. And it’s just beginning.

Am I reading this right? 148 foreclosures underway in Mill Valley? Prime Marin indeed. Maybe all those $3M Strawberry McMansions are going to crash after all.

Randy,

these preforeclosure numbers include all those that were filed dating back to 2004 (perhaps it took a while to go back and forth on making the payments), so the real *prime* for foreclosure is yet to come. The date of filing is coded but you can easily decipher which number refers to what. The 2006 preforeclosures are only a few in each zip code. From my limited knowledge acquired from the web search, preforeclosures typically end up in FSBO first so that the owners can attempt to recoup as much as they can. When you see a listing these days with bold lettered "owner must sell", it probably means a preforeclosure FSBO.

See how things can only get worse? 2004 and 2005 were the GOOD years, and still some people had to give up their homes. I can't fathom what a mediocre year will be like.

SQT,

Part of the reason, a GOOD part of the reason I am so anti-bubble is that I definitely feel we had alot of neighbors "coat tailing" on our improvements. The upgrades/improvements we had done over a 10 year period involved a hell of lot more than putting up some flaky gazeebo project or koi pond eye candy. It seemed like all my neighbors were having the time of their lives, ATV's, 5th wheel campers etc. Most only did the absolute essentials and then only grudgingly, like when when you see someone painting on the last dry weekend in Oregon. Yet they will be beneficiaries all the same b/c now you have set the bar high and neighbors can play off of the potential of your success. I wanna see 'em tank!

Davis_renter,

I hear ya! Somehow saying liberal and collegetown seems redundant. Not..... that there's anything wrong with that! What I DO resent is the whole "captive population" scenario. We have that in Corvallis and Eugene right along with the outright persecution of college students. People, it's college, they're college kids, they're SUPPOSED to have fun!

New thread: Yield curve

I hear ya! Somehow saying liberal and collegetown seems redundant.

Yes, but some more more liberal than others. I bet UCSD is probably more conservative than UCB. :)

We have that in Corvallis and Eugene right along with the outright persecution of college students. People, it’s college, they’re college kids, they’re SUPPOSED to have fun!

In SLO Mr. Right and his band of facist monkeys shoot Poly students on sight. How dare those students even presume to have any fun, come on now, the boomers already took care of the drinking/drugs/sex games, get back to your hole and study.

either you were on the corporate when you visited Japan or you have a deep pocket, I cannot afford to eat 6 meals in Tokyo if I am to foot the bill. Each meal costs at least 20 bucks, 6 meals a day will get me on the foreclosure.com in no time.

Either that or you haven't been to Tokyo lately, I went last year, went out to dinner with friends in Shimokitazawa, there were 6 of us total, food until full and sake until drunk, total price around 100 US. It is more expensive in SF than Tokyo, think 10+ years of deflation while we've had 10+ years of inflation. Sat in a whiskey bar in Ikebukuro and drank till piss drunk, really good stuff, had 6 kinds of makers mark, total price after 7hrs of drinking? 120 bucks, go to a bar in SF and drink for 7hrs, better have your HELOC credit card on you, "I'll put this round on the house".

Actually, in Japan, if you stay away from crazy stuff (like O-toro, grade 12 Kobe beef, tiger fugu, etc) food is not expensive at all. Even abalone is affordable in Japan.

Roid is prime!

If you'll notice, the zillow zestimate hasn't been updated since Jan.28. (At least on my rented dwelling) So, the fact that it says the property has risen in price $7,000 in one week is old news. I want to see the current situation. Zillow has had the same facts on it for weeks now. Not only is their info not always correct...it's dated.

Zillow Zucks

APOCALYPSEFUCK is Shostakovich says

No one wants to hear a Reatltor® say anything.
A self-inflicted fatal gunshot after a full confession would be enjoyable, however.

I concur. There is nothing more lowdown than a Realtor scheming to get your down payment and get a contract signed. Of course you need financing to. Women are man traps to begin with. A Realtor puts on a sensual dress. Give you glimpses of her cleavage and pops you a beaver. Little do you realize your on your way to being in debt to some guy for the rest of your days. All because you went to a house showing.

APOCALYPSEFUCK is Shostakovich says

Of course.
But everyone knows that if you're in a room with a Realtor®, you're being inducted into a fraud.

Realtor is sad beaver. lol

LILLL says

I predict the Fed will try to make a soft landing by raising interest rates once or twice more and then lowering them a bit...just to confuse us and get the buyers buying again.

I don't want people to get hurt by a crash...but then again...if prices stay this high, I'm also priced out of the market...as will be my kids and most of my friends and their kids.

I think you are right on track there. Fed had a deflationary wind allowing them to keep the low rates to foster liquidity. But every student of the market knows that rates have to go up eventually.

Cash and stocks feel really good right now.

"It is not a purchase, it's an investment."
"This is a great location to raise a family."

I think their entire profession revolves around appealing to emotions of the buyers wife, oldest sales tactic in the book.