patrick.net

I think it said median prices are now 502k up from 490k. That is almost 2% up! It also said inventory is growing…

can this be true?…who is buying anything now when clearly the market has turned. it’s so frustrating…is there and end to this?

Median price can still go up. People tend to use the same amount of money to buy more house when prices are coming down - at least in the beginning before fear sets in.

Same-house pricing trend will be more telling.

SFWoman Says:

"(a Realtor friend is) seeing activities in TICs and small (studio and junior (??) 1 bedrooms.) I am going to have lunch with her next week and I’ll grill her."

There is a reason that up until recently very few people owned real estate as Tenants in Common (TIC). When one person has financial problems in a declining market they will not be able to find anyone to come in and buy them out so the other TICs will either be forced to take over the payments of the person having problems or loose the building. I know many people that own buildings as tenants in common that do not even think about what will happen when one of the partners (TICs) has problems and they can not find anyone to buy the TIC interest...

you’re changing the rules on me again. I thought we were told empirical data suggested that level 2 buyers stop buying before level 1 (lower income) do. This is contradictory no?

No contradiction. This only suggests that Level 1 buyers may be about to afford Level 2 houses there perhaps because of falling price.

Most people will "mentally account" in terms of dollars, not in terms of equivalent housing. That is, if you were prepared to pay $750 for a place, and now the same sqft, BR/BA, location goes for $550, you will almost to a science go searching for what's now selling for $750.

Of course, fear will change this as the market deflates, but still, most people will use their "housing allotment" in their mind to make decisions, not financial rationality.

SFWoman Says:

The sheeple thinking I see is having to send your children to the ‘right’ schools, of which there are six ‘right’ elementary schools in SF.

What are the other two top SF elementary schools? Most of my friends from college and grad school that grew up in the city went to Town & Cathedral or Burke & Convent (I grew up on the Peninsula before prop. 13 when the public elementary schools were better than all the private schools). It has always been tough for "sheeple" to get their kids in to any of the top SF elementary schools since most of the kids I know that went there have parents and/or grandparents who have been active donors since they went to the schools.

You must be the right weight, even if your body isn’t suited for it. I know women who probably haven’t eaten since high school.

It is good to hear that SF women are watching their weight since the worst nightmare for most guys is having the woman they marry get fat...

It is good to hear that SF women are watching their weight since the worst nightmare for most guys is having the woman they marry get fat…

How can people not get fat when the housing souffle is getting so big? :)

BTW, souffles do not pop. They cave in.

Of course, fear will change this as the market deflates, but still, most people will use their “housing allotment” in their mind to make decisions, not financial rationality.

This is why we are trying to set this "housing allotment" very low.

Because men never get fat

I wish.

she has the obvious fake breasts.

Unless properly fondled how can one tell? Perhaps she's just unusually perky. Let me know if you require further analysis.

ps Says:

"Ravi Batra, Professor of Economics at Southern Methodist University and author of the book ‘The Crash of the Millennium’ believes “we are going to have an inflationary depression and when that depression comes, high ticket items, along with oil, raw materials and farm products (i.e. commodities) could experience a serious deflation while the cost of services and imported goods will keep rising."

Ravi Batra also wrote the New York Times best seller "The Great Depression of 1990." In this book, Ravi Batra expresses a nearly cult-like admiration of Prabhat Ranjan Sarker. Batra then meshes Sarker's concepts on "The Law of Social Cycles", and various historical "Ages of Warriors", "Ages of Intellectuals", and "Age of Acquisitors" with the concept of a six decade economic cycle to predict: " Since the 1960s escaped a Great Depression, the 1990s will experience another cumulative effect - the worst economic crisis in history."

I get the idea from having read "The Great Depression of 1990" that Batra really hoped disaster would occur. Such a disaster would give cause for the social agenda he discribes in that same book, such as a maximum wage and a "wealth tax."

My point is that you may want to read "The Great Depression of 1990" and evaluate Batra's prediction for 1990-1996 before you give such high credence to any predictions Bantra may be making now.

My point is that you may want to read “The Great Depression of 1990″ and evaluate Batra’s prediction for 1990-1996 before you give such high credence to any predictions Bantra may be making now.

Why do we have to believe in the solution before we believe in the diagnosis?

SFWomen,
I think your realtor friend knew that you lurk around in this forum and might have fed you with incorrect information so that it will create a last minute panic buy. I am sure the grilling will bring out more information. : )

It's funny. I told my husband several months ago, all I want is a 3/2 with a 2 car garage in a decent neighborhood in the North Hollywood area for around $500 to $600,000. It can be a fixer but it needs to have some big trees in the area. At the time it seemed like an unfindable thing. You guys give me hope that maybe, if I wait a year or more likely two....There will be a fire sale. So far, what I'm looking for is between $850-1 mil. I'm waiting and watching and trying to be patient. This is a great forum. A lot of us seem to share similar sentiment and some of you have great info! Which of course is not investment advice...but the debates shed light on those murkey corners the realtors try to hide. ; )

SFWoman Says:

"My friend says that a few banks in SF are now offering individual TIC loans. Since TICs are still lower in cost than condos, and if there are now individual loans, could that account for what she is seeing?"

As far as I know only a couple (not a few) banks were offering the individual TIC loans and as far as I know they have funded less than a dozen of them.

"Could you tell me the difference between TIC and co-op? I looked at a couple of beautiful co-ops, and they tend to be higher end. They do require very large amounts down (usually 50%), but is there any difference other than size/price?"

I realized that it would take a while to write out the differences between a condo, TIC an Co-Op so I found a couple URLs:

http://tinyurl.com/nuq27 http://tinyurl.com/obfdp

The basic differences are condo you can sell to anyone at any price any time, TIC there will be an agreement that ties all the "tenants" together that may place some restrictions on the sale of a TIC interest, and Co-Op there are always a lot of restrictions on the sale of your interest. Getting approval to buy in to a nice NY Co-Op is harder than getting in to some exclusive NY clubs. Many nice Co-Ops require that you pay "cash" for your shares to keep out the riff raff (not many people can come up with $10 million in cash).

Below is a URL with photos of my favorite SF Co-Op. I don't know if 2006 Washington requires residents to pay cash, but the $10 million apartment price and $4,000 a month HOA fees probably do a good job at keeping the riff raff out...

http://tinyurl.com/ofmj8

she has the obvious fake breasts.

Unless properly fondled how can one tell? Perhaps she’s just unusually perky. Let me know if you require further analysis.

surfer-x,

Please let me know if you need any assistance in conducting such research. My services are always at the disposal of the noble quest for truth and knowledge. ;-)

Visualing the housing bust.

Well it seems to me like the employment market is turning around in Silicon Valley. I notice there's more traffic at commute time, and I notice some of the places I go like the gym and shopping are busier. Everyone I know who was laid off in the tech bust is working again.

That said, there's a whole lot of houses been for sale a long time where I live in S.J. Seems like a disconnect between the employment market and the housing market, at least for the time being. One scenario that seems entirely counterintuitive is that we might have opposite trend in employment market and house market. Well, why not? When we had doom and gloom in the employment market, house prices went up. Maybe it's wrong to assume that the two are closely linked.

PS said :

Not true - the Indian Rupee has been trading in the range of Rs 44-47 per dollar over most of the past decade. The Indian Reserve Bank tries to maintain this exchange rate.

4 years ago each US$ gave more than INR 49 according to Economist.com. Today it is around 44. Last year at this time, it was close to 43. Even at today's price, that represents 10% devaluation.

PS said :

With regard to your original point though - it is my understanding that the change in Rupee-Dollar rates is driven more by changes in the Indian Reserve Bank’s peg policy, rather than by fundamentals such as trade. In this situation, I still believe that it is inadvisable to read too much into the change in Rupee-Dollar rate. Since policy can be reversed more easily than fundamentals can be, the trend is somewhat suspect and cannot be extrapolated too far into the future.

Do not disagree there. But if - big if - US$ devalues against many other currencies due to inflation, actions by our federal reserve, oil being traded in euros etc - then exporting US techie jobs to India would likely become unattractive. Unless, IT wages in India start dropping, which is indeed possible. So I don't know to what extent a devalued US$ be helpful for IT jobs here. But it cannot make it worse.

Which appears to bear out the theory that even though the reported median price is increasing, the price for the same-house (or equivalent) is trending down.

I do searches for low-end condos/townhomes. It seems that the inventory for < 650K homes is resuming the climb steadily, after a small dip near the new year.

Again, zillow.com may be of help.

I'm not sure what's going to happen to the bubble. One possibility: if people continue to want to own their own homes, and they can't afford one, then there will be upwards pressure on wages. This means small businesses just arbitrarily putting up their prices for goods and services. Waged workers will have to fight their employers, possibly go on strike, etc on wage demands, and so we will see an uptick in industrial action. (Your mileage may vary depending on how 'unionised' your particular country is.) Because the small businesses put up their prices AND housing is expensive, there will be double pressure on upwards wage demands.

Therefore, the consequence of this will be inflation. Effectively, the dollar will become devalued due to a flow-on effect from housing inflation. The gains made by some will therefore only be short-term. This is capitalism and inflation at work - stok market crashes - Fed keeps interest rates low - stimulates a housing bubble - upwards demand on wages - inflation - Fed raises interest rates to fight 'inflation'? - but average worker is hurting - industrial action - etc. Then you can do it all over again maybe 30 years later next time round.

The other option is that the people who are buying investment properties will more or less become a new economic class of landlords, and lots of other people will have to get used to the idea of renting a house or apartment forever from them. There will be a 'wealth apartheid' similar to Victorian times. Unfortunately, when the renters retire, they will still have to continue paying rent on low fixed incomes, whereas the house owners paid their houses off. So, they will be doubly damned, and no-one really will care - that's just the nature of the cruel market, so all the 'free market' apologists here will just have to accept that social outcome.

The one thing that will cap the bubble is simply that people will not be able to borrow any more money to meet the asking prices, which is what we're starting to see when prices have sagged in some areas. To buy a house or apartment as an 'investment' means that you need to get an ROI on your money. If the rent you can get is way lower than the debt on the mortgage, including interest, then you're not a wise businessperson. (However, some people still buy running at a loss because a spruiker showed them how it will go up 10% every year forever, so before long they will be able to re-fi and will be in positive cashflow territory. Further, the Australian govt is willing to reimburse you in your loss as a tax deduction.) But, normally, asking prices are capped by what people are prepared to pay as business investors based on a rent analysis, or what their existing equity and salary will let them buy as occupiers.

Interest rates being low for long periods means lower debt to service each week, so house prices go up, hence that's one feeder into the bubble, as we've seen. Liberalised credit from lenders is another feeder - used to be very hard to get a mortgage approved, or an investment loan approved - now lenders are throwing money at people at higher and higher risk. There are people like APRA (Prudential Regulatory Auithority) who tick the banks off about lending too freely, which is a regulator. The other 'natural' regulators are the aforementioned cap on wages and salaries, interest rates, other costs of living going up (such as commodity spikes - fuel prices, etc), population change, etc. Direct govt intervention could also be used, but property has been left in the free market to self-regulate in most places.

I don't think cheap goods from China etc are going to go up too much, it's not a variable. That's a long wave capitalist pattern of exploitation - and cheaper finished goods mean more disposable income for many households than before, also inflating house prices. Remember when VCRs used to be $1,000?

Warning - Off-topic: while this topic is still 'live' and people are still reading, can anyone comment on the claim on the site www.demographia.com that increasing housing prices/low affordability are pretty well caused exclusively by 'urban consolidation' policies, as proposed by Wendell Cox at the site www.demographia.com?

This site does a good international housing affordability study, but Prof. Cox examines areas like Houston, Atlanta, etc where house prices are still in line with salaries and wages, but they are still large and growing areas with a vibrant economy.

This is intended to be more of a civilised discussion and a considered examination of a hypothesis rather than a heated debate, I would like someone with the power to start a separate thread on it if at all possible. If it's true, or even a major order factor, that implies that it's not low interest rates, a flagging stock market, liberalised credit from lenders, an increasing percentage of investors, etc, causing inflation but more a 'land shortage' in the form of controls on supply of new housing, which will vary from place to place. I personally have my doubts about the thesis, especially given the factors outlined above, and my economic assumptions and thinking going back a long way now. Does anyone have any thoughts and input?

I'll post the question again in a newer thread at an opportune moment if there's not much interest here, as it's a very interesting thesis, and prices in North America apart from hotspots like CA, NYC, DC and Toronto are still pretty 'fair' to new buyers, unlike most of Britain, Australia, etc.

heh, that first sentence reads badly - should review my posts better ; )

delirious with a head cold...

back on topic, the other effect of the housing boom is that retail sales (or 'consumer confidence') are right down here, according to the national bureau of stats, so retailers are definitely suffering. hence, unemployment will go up slightly as they lay people off, and sales assistants and others will find it harder to find work and afford housing, etc. clearly every household only has so much disposable income, and more and more of it is being soaked up by passive bricks and mortar. you have to realise that only a relatively small % of the population is a new housing purchaser, many people bought 30 years ago for much less, etc and paid their houses off way back when, so they are not hurt by the boom, and still have some disposable income (possibly even benefitting by doing the old equity drawdown trick, buying investment properties, etc). ditto if you just inherited a house, or houses... but a significant number of young families would be hurting... i wonder what is going to happen when the baby boomers start 'downshifting' into retirement villages, hostels and nursing homes, and leave a pile of old houses empty with a population 'vacuum' behind them...

Juku Says:

http://futurist.typepad.com/my_weblog/2006/03/does_the_world_.html

hmm, yes, it certainly is. apropos of...?

that futurist site could be deconstructed all day - it's a rich vein of material...

renterCA Says:

> I’m a CA renter and would love to see things decline
> here in the Bay Area but I’m not betting on it. During
> the last bust in 92-93 when a lot people lost 20 -25% +
> realtor commissions on much cheaper property, the
> landscape was definitely different.

They sure were...
Almost everyone made a 20% down payment
There were almost no IO loans
There were almost no loans with low teaser rates
The ratio of home price to income was only about 25% above average vs 100-200% above average today.
Interest rates were falling from 1990 to 1995 (not rising like they are today)
Most rental payments would cover a mortgage

I could go on and on, want to change your bet...

P.S. Last night I made a post (time stamped 7:34) with some URLs that had TIC Condo and CoOp info that still say "Your comment is awaiting moderation" can anyone see the post?

http://www.mercurynews.com/mld/mercurynews/business/14112093.htm

Hmm, 24 year-olds buying $305k condos. And she gets to paint the walls purple!

Ack.

Did you guys read the SJMN about this past Feb, the Valley is having the highest number of stock insider SALES since early 2000?

http://www.siliconvalley.com/mld/siliconvalley/14088105.htm

Obviously the executives know that we are near a blowup, so better cash out the funny money before the s**t hits the fan.

Fed won't act to preserve high home prices:

http://www.marketwatch.com/News/Story/Story.aspx?guid=%7B6116173A%2DA04F%2D4EDD%2D8D0B%2D835D37201544%7D&siteid=mktw&dist=

Well, that settles that.

Lunarpark,

don't count on the Fed, the Fed's primary objective (in practice, not on paper) is to ensure full employment of the US. If supporting home price means sustaining the US through a bad depression, the Fed will certainly do it. Bill Gross was expecting a rate cut starting from the late half of the year, I think it is a reasonable bet, although I bet the Fed won't go through with the raise beyond March. CPI numbers are highly massageable, so I think the Feb low CPI is already a part of the backpedding to make way for not hiking the rate further. The announcement of mexican oil find, the announcement of extra US oil reserve, is all a way to contain the oil price for these few months so that the Fed will have an excuse to bring the rate hike to an end. However, to defend the dollar, Fed also need to put up an image of being tough, hence the doubletalk.

If housing comes down to an extent that it is hurting the economy, the Fed will be soon on a rate-cutting frenzy. However, unlike last time when Greenspan did it, there won't be much to cut.

"don’t count on the Fed...If housing comes down to an extent that it is hurting the economy, the Fed will be soon on a rate-cutting frenzy."

Yes, but when herd psychology changes all the cuts in the world won't help the housing market.

Personally I only count on the fed to screw things up.

You can give yourself a brief tutorial in identifying breast fraud.

SFWoman, again, without a clear scientific approach (fondling) there is no way HARM or myself could possibly tell. There is just too much variation. You say fake, I say correcting nature’s mistakes. I propose a vigorous testing protocol in which we first numb (Surfer-X to HARM, prepare to numb the region, HARM to Surfer-X, nmmmm, nmmmmm, nmmmmmm). Again, if you suspect a McDebtor of breast-fraud, kindly let the good folks at HARM-X know, we will conduct a 100 point inspection and get back to you with our results. Were here to serve, and nmmmmmm.

Ha Ha,

I've maintained for some time that Bend, OR is a house of cards. Every person you meet is either a builder (which anyone can call themselves) a realtor or mortgage broker. Owneroccupier said it best when he referred to "do some real work and stop pimping houses to each other". I don't know if he's been to Bend recently but it's the kind of experience that would prompt that very statement! Thanks for the link. While I believe that the BA and Sac. will be the "epicenter" of the crash it's always interesting to see some local coverage as well. The link mentioned a Bend RE blog and there were some great observations along with posters on Ben's blog that made note of the fact that many of the CA speculators are now considering "renting out" their investment properties. (Rent for a 3/2 in Bend and surrounding areas is about $7/800 per mo.) Good luck on that one.

Surfer X, SF Woman,

My wife pointed out the "plastic surgery gone bad" website to me awhile ago and it's really funny how someone you had thought of as "attractive" once exposed (for fraud) now repulses you. It's just one of those things in life you can't "un-see".

surfer-x Says:
You can give yourself a brief tutorial in identifying breast fraud.
SFWoman, again, without a clear scientific approach (fondling) there is no way HARM or myself could possibly tell.

My college girlfriend that grew up in Newport Beach used to say that her mom was the only woman with her natural hair color and real breasts living in Big Canyon. In the two years I dated her she had a habit of pointing out every fake blond and woman with fake boobs she saw. Some things I learned 1. Very few females over 14 have natural blond hair. 2. Very few (if any) tall super thin women have natural big giant boobs. 3. A natural breast (and a real expensive fake one) is asymmetrical and has a gradual taper at the top (like a ski jump) while most fake ones look like a round bag of saline was stuck under the skin. I read recently that the real estate slowdown is expected to drastically reduce Harley Davidson sales, I wonder if plastic surgery will drop when the cash out re-fi money goes away??

that futurist site could be deconstructed all day - it’s a rich vein of material…

This comment should be read as "no comment".

When we talk about our governments concern for it's citizens, perhaps we should concider the resume of our commander in chief.
George W. Bush

I was arrested in Kennebunkport, Maine, in 1976 for driving under the influence of alcohol. I pled guilty, paid a fine, and had my driver's license suspended for 30 days. My Texas driving record has been "lost" and is not available.

MILITARY: I joined the Texas Air National Guard and went AWOL. I refused to take a drug test or answer any questions about my drug use. By joining the Texas Air National Guard, I was able to avoid combat duty in Vietnam.

COLLEGE: I graduated from Yale University with a low C average. I was a cheerleader. I also joined the Order of Skull and Bones an elite secret society that uses cover-ups to advance it's members into high office positions. Thank goodness my biggest opponent this year is my fraternal brother.

PAST WORK EXPERIENCE: I ran for U.S. Congress and lost. I began my career in the oil business in Midland, Texas, in 1975. I bought an oil company, but couldn't find any oil in Texas. The company went bankrupt shortly after I sold all my stock. I bought the Texas Rangers baseball team in a sweetheart deal that took land using taxpayer money. With the help of my father and our right-wing friends in the oil industry (including Enron CEO Ken Lay), I was elected governor of Texas.

ACCOMPLISHMENTS AS GOVERNOR OF TEXAS: I changed Texas pollution laws to favor power and oil companies, making Texas the most polluted state in the Union. During my tenure, Houston replaced Los Angeles as the most smog-ridden city in America. I cut taxes and bankrupted the Texas treasury to the tune of billions in borrowed money. I set the record for the most executions by any governor in American history. With the help of my brother, the governor of Florida, and my father's appointments to the Supreme Court, I became President after losing by over 500,000 votes.

ACCOMPLISHMENTS AS PRESIDENT: I am the first President in U.S. history to enter office with a criminal record. I invaded and occupied two countries at a continuing cost of over one billion dollars per week. I spent the U.S. surplus and effectively bankrupted the U.S. Treasury. I shattered the record for the largest annual deficit in U.S. history. I set an economic record for most private bankruptcies filed in any 2-month period. I set the all-time record for most foreclosures in a 12-month period. I set the all-time record for the biggest drop in the history of the U.S. stock market. In my first year in office, over 2 million Americans lost their jobs and that trend continues every month. I'm proud that the members of my cabinet are the richest of any administration in U.S. history. My "poorest millionaire," Condoleeza Rice, has a Chevron oil tanker named after her. I set the record for most campaign fundraising trips by a U.S. President. I am the all-time U.S. and world record-holder for receiving the most corporate campaign donations. My largest lifetime campaign contributor, and one of my best friends, Kenneth Lay, presided over the largest corporate bankruptcy fraud in U.S. history, Enron. My political party used Enron private jets and corporate attorneys to assure my success with the U.S. Supreme Court during my election decision. I have protected my friends at Enron and Halliburton against investigation or prosecution. More time and money was spent investigating the Monica Lewinsky affair than has been spent investigating one of the biggest corporate rip-offs in history.

I presided over the biggest energy crisis in U.S. history and refused to intervene when corruption involving the oil industry was revealed. I presided over the highest gasoline prices in U.S. history. I changed the U.S. policy to allow convicted criminals to be awarded government contracts. I appointed more convicted criminals to administration than any President in U.S. history. I created the Ministry of Homeland Security, the largest bureaucracy in the history of the United States government. I've broken more international treaties than any President in U.S. history. I am the first President in U.S. history to have the United Nations remove the U.S. from the Human Rights Commission. I withdrew the U.S. from the World Court of Law. I refused to allow inspectors access to U.S. "prisoners of war" detainees and thereby have refused to abide by the Geneva Convention. I am the first President in history to refuse United Nations election inspectors (during the 2002 U.S. election). I set the record for least number of press conferences of any President since the advent of television. I set the all-time record for most days on vacation in any one-year period. After taking off the entire month of August, I presided over the worst security failure in U.S. History. I garnered the most sympathy for the U.S. after the World Trade Center attacks and less than a year later made the U.S. the most hated country in the world, the largest failure of diplomacy in world history. I have set the all-time record for most people worldwide to simultaneously protest me in public venues (15 million people), shattering the record for protest against any person in the history of mankind. I am the first President in U.S. history to order an unprovoked, preemptive attack and the military occupation of a sovereign nation. I did so against the will of the United Nations, the majority of U.S. Citizens, and the world community. I have cut health care benefits for war veterans and support a cut in duty benefits for active duty troops and their families in wartime. I am the first President in history to have a majority of Europeans (71%) view my presidency as the biggest threat to world peace and security. I am supporting development of a nuclear "Tactical Bunker Buster," a WMD. I have so far failed to fulfill my pledge to bring Osama Bin Laden to justice while your fathers, mothers, brothers, sisters, sons, daughters, wives and husbands are losing their lives every day.

RECORDS AND REFERENCES: All records of my tenure as governor of Texas are now in my father's library, sealed and unavailable for public view. All records of SEC investigations into my insider trading and my bankrupt companies are sealed in secrecy and unavailable for public view. All records or minutes from meetings that I, or my Vice President, attended regarding public energy policy are sealed in secrecy and unavailable for public review.

Bay Area DataQuick numbers are in:

http://www.dqnews.com/RRBay0306.shtm

Elsewhere in the world, price/sqft is used to compare housing price. Why is US using median housing price instead of price/sqft? It only makes sense to compare median housing price when you have a rather uniform stock of inventory, which is obviously not the case for us. Any history behind this? Do realtors provide price/sqft number on a timeline basis?

Viewfromsiliconvalley.com has weekly $/sqft data.