patrick.net

Do you guys have an actual point? Other than being a PIA.

E-man says

Hmm, imagine what the offer would have been if they were able to get financing with 3.5% down.

During the bubble, people were doing 0% down or less! Some "buyers" go cash back after putting down $0 on an adjustable rate, interest only (or negative amortizing) loan. That's why prices got so high.

Image putting no skin in the game and getting paid to do so. Best case scenario: you flip in a few months and pocket $100k. Worst case, you walk away and get $30k for ruining your credit rating. That was a big part of the bubble.

just_passing_through says

I've been hearing about a lot of businesses leaving CA-specifically and heading to other countries, states etc..

The data doesn't support that -- let's look at businesses in California over the last few years:
2006: 1,265,268
2007: 1,304,291
2008: 1,337,920
2009: 1,347,245

Even in the worst economy since the Great Depression, the number of businesses in California has increased, although growth has certainly slowed because of the economy.

http://www.labormarketinfo.edd.ca.gov/?pageid=138

That's why in another thread I strongly cautioned people about overgeneralizing based on trend articles in mainstream media.

Troy says

most people in SVN weren't big fans of the communists by 1974. I don't think Thieu had a chance since the peace agreement we gave him in 1973 was just an armistice to let us get our POWs out, but in the mid-1970s if we had been serious about defending the Saigon regime (as serious as we had been in 1965-68) our investment in Saigon would have paid off as well as our interventions to save the Seoul and Taipei regimes from communism.

Thieu didn't have a chance because he was corrupt and incompetent, his regime was corrupt and incompetent, and the army of svn was corrupt and incompetent. You need to do a lot more research into the Vietnam war. Start by watching "The Fog of War" with McNamara admitting the war was a mistake and unwinnable. On a side note, he also admits that the soviets had operational nuclear missiles in cuba during the missile crises, something that has never been brought out before. Pretty scary stuff.

No matter how much the US intervenes, you can't prop up an incompetent, corrupt, unpopular government forever. It hasn't worked once. Seoul and Taipei always had functioning legitimate governments.

I cannot find the median price in 1997-1998, by 2000 the Bay Area was already in quite the bubble. My husband was shopping for a home in 1997, in El Sobrante there were many homes for sale in the 120-160k range that were sitting for ages. There were also homes for sale in Orinda in the 240-280k range with no bidding wars happening. I know many people who bought in Lamorinda in the 1990s in the 250-350k range.

Tude says

I cannot find the median price in 1997-1998, by 2000 the Bay Area was already in quite the bubble. My husband was shopping for a home in 1997, in El Sobrante there were many homes for sale in the 120-160k range that were sitting for ages. There were also homes for sale in Orinda in the 240-280k range with no bidding wars happening. I know many people who bought in Lamorinda in the 1990s in the 250-350k range.

10 years of solid bubble and now with heavy fed intervention to keep it propped up, it will take 20 years to deflate and come to normalcy, basically both buyers and sellers are screwed.

bob2356 says

You need to do a lot more research into the Vietnam war.

Actually, I don't think I do. The war was arguably a mistake -- or at least mistakes were made -- but it was never unwinnable. Westmoreland just fought it wrong.

Thieu was corrupt, ARVN was corrupt, but that was part of the mistakes we made, not taking over ARVN like we took over the Korean army.

The military geography of Vietnam made it very difficult to secure the Saigon regime's control over the hinterlands, but with a long-term 200,000-man force along the DMZ and into Laos, Thailand, and Cambodia it could have been done.

http://www.dtic.mil/doctrine/jel/jfq_pubs/2217pgs.pdf

We'd won the war against the VC by 1972, the problem then was PAVN owned every battlefield we'd fought on out in the sticks -- from Khe Sanh down to the Iron Triangle.

http://www.time.com/time/magazine/article/0,9171,905909,00.html

The territory PAVN controlled wasn't significant in population terms, but it was strategically useful in that they had "inside lines" of communication and the freedom to concentrate their forces anywhere they desired, from 50 miles n of Saigon, 50 miles outside Banmethuot and Pleiku, to 30 miles outside of Hue and Danang.

bubblesitter says

Tude says

I cannot find the median price in 1997-1998, by 2000 the Bay Area was already in quite the bubble. My husband was shopping for a home in 1997, in El Sobrante there were many homes for sale in the 120-160k range that were sitting for ages. There were also homes for sale in Orinda in the 240-280k range with no bidding wars happening. I know many people who bought in Lamorinda in the 1990s in the 250-350k range.

10 years of solid bubble and now with heavy fed intervention to keep it propped up, it will take 20 years to deflate and come to normalcy, basically both buyers and sellers are screwed.

All I am arguing is that there is also a change in perception that happened. People really did "get rich" doing nothing but flipping houses and extracting large amount of equity. So many people I know that are in their 30s and 40s really know nothing else but bubble real estate prices and truly think that this is temporary, there's no way prices can get any lower, or that they better get in now before they are priced out AGAIN.

With everything that has gone on in the last 3 years, people perceptions of real estate as a sure fire get rich quick scheme remains strong er than ever.

Tude says

I cannot find the median price in 1997-1998, by 2000 the Bay Area was already in quite the bubble. My husband was shopping for a home in 1997, in El Sobrante there were many homes for sale in the 120-160k range that were sitting for ages. There were also homes for sale in Orinda in the 240-280k range with no bidding wars happening. I know many people who bought in Lamorinda in the 1990s in the 250-350k range.

Can you point out any of these houses in Orinda/Lamorinda? It's also worth noting that in expensive areas like Lamorinda, the housing stock may have been improved since the 1990s bust (certainly true in parts of San Francisco, although not universally by any means). If the "same house" that was a 3/2 with 1500 sqft is now a 5/3.5 with 2800 sqft, that doesn't say the market changed, but rather that the house changed.

1997 was the tail-end of the previous bust, so it was a bottom-type year. Look, I agree that Bay Area housing either moved off fundamentals or changed fundamentals at some point between the 90s housing bust and now. People try to rationalize this by saying "it's always been expensive here!" That may be true in recent history, but it seems clear from data that housing moved differently from wages during this time, so some shift may have occurred. Some people argue that the dotcom bubble or dotcom money caused this. I'm not sure what happened, but it does appear that something happened to the fundamentals.

The point is not that Bay Area housing is cheap or that it's affordable as a general standard. It's not either of those things. But if a house is highly cashflow positive as a rental, it's strange to think that you should be getting a better deal. That's not really how markets work -- the arbitrageurs raise the prices to market value. In this case, the arbitrageurs are the investors who are getting highly cashflow positive properties.The difference between housing and other markets, is that housing is far more illiquid because of thin trading, high leverage, etc. This doesn't mean that housing should ignore fundamentals, but rather that it is an inefficient market that is slower to adjust than a more efficient market.

The problem is that you're not even making a plausible argument about distortions. For example, during the boom, "investors" were buying cashflow negative properties by bidding them up far above a reasonable asking price because they expected massive appreciation and they got cheap loans. This was a huge distortion. What you're talking about is not a distortion based on the numbers you have given. Instead you're complaining that people are doing perfectly rational economic things!

Tude says

I cannot find the median price in 1997-1998, by 2000 the Bay Area was already in quite the bubble

http://archive.dqnews.com/AAMain1998.shtm

Troy says

Abandoning Vietnam completely in 1973 did in fact throw away the investment we had made in Thieu's regime, and was a mistake (but a mistake dictated by the national disgust with the war by 1970).

It was a waste of lives and resources. We should have never entered that war. And we shouldn't be keeping ground troops in middle east either. Obama needs his head examined.

thomas.wong1986 says

http://archive.dqnews.com/AAMain1998.shtm

Thanks, thomas.wong. Papers like the LA Times and the SF Chronicle give even more granular zip code by zip code data compiled from DQ, which is quite helpful sometimes. It looks like the granular 2008 data is still on DQ's site per the link you sent, so we could easily compare that to now.

Tude says

by 2000 the Bay Area was already in quite the bubble.

The stock options cash out in the B2B sector. Like you hear today regarding FB, Twitter, Zynga, etc.. billion dollar valuation, we also had back more than a few so called B2B companies valued into billions in a overall 3-4 Trillion dollar marketplace.

http://news.cnet.com/2100-1017-236096.html

Online procurement rivals Commerce One and Ariba are engaged in a marketing battle for the ages.
At stake is a healthy piece of the business-to-business e-commerce market, which Forrester Research estimates will reach $1.3 trillion by 2003. Commerce One and Ariba provide key tools within that market--complex procurement software that enables companies to automate the buying and selling of goods and services on the Internet. Plus, they are using their systems to build huge online exchanges where companies will do everything from selling crude oil to buying materials required to make clothing.

corntrollio says

1997 was the tail-end of the previous bust, so it was a bottom-type year. Look, I agree that Bay Area housing either moved off fundamentals or changed fundamentals at some point between the 90s housing bust and now. People try to rationalize this by saying "it's always been expensive here!" That may be true in recent history, but it seems clear from data that housing moved differently from wages during this time, so some shift may have occurred.

A heavy impact was increase in wages from 1997-2000, we also saw rents rise. But quickly decline. Why..

Check PWCmoneyTree.com... see "Historical Trend Data" Chart, showing VC funding history from early 90s to 2000. Dried out by end of 2001. As you will see... Uber rich investors poured around $150BILLION into various tech companies. As they said.. Too much money chasing too few good ideas. We are abit higher than say the 90s but way way down from the peak. So funding of local state ups isnt driving incomes that much.

thomas.wong1986 says

Too much money chasing too few good ideas. We are abit higher than say the 90s but way way down from the peak. So funding of local state ups isnt driving incomes that much.

thomas.wong, I don't disagree with you on the VC funding and the character of it. However, I'm not sure what your argument is, or maybe you were just giving data and not making an argument. Is it that a lot of that money poured in by VCs (and by retail investors daytrading tech stocks) stayed in the local region? That's certainly believable.

corntrollio says

Papers like the LA Times and the SF Chronicle give even more granular zip code by zip code data compiled from DQ, which is quite helpful sometimes.

I found that the SJMercury very often leaves out the zips and provides far more rosier comments than DQnews.com. Local papers comments are much more biased than the raw data.

corntrollio says

The problem is that you're not even making a plausible argument about distortions. For example, during the boom, "investors" were buying cashflow negative properties by bidding them up far above a reasonable asking price because they expected massive appreciation and they got cheap loans. This was a huge distortion. What you're talking about is not a distortion based on the numbers you have given. Instead you're complaining that people are doing perfectly rational economic things!

The problem is, now everyone on earth thinks that they need to be a real estate "investor" to get rich quick. 10-15 years ago most people were buying homes to live in and raise families, a few people with extra money sometimes bought primarily multi-family units, or kept old homes and bought new ones, turning their paid off homes into rentals. There were maybe a couple rental in our neighborhood when I moved in in 1998, and they were owned by families that had them in their family for many, many years. Now? nearly every home in the neighborhood that comes up for sale is bought by an "investor" as a rental, at prices 80-100k more than the homes were selling for pre-2000.

Tude says

People really did "get rich" doing nothing but flipping houses and extracting large amount of equity

Fundamental laws of economics suggest that not everyone can get rich. Period. It is possible if there is surge in buying of those same properties by future generations. I don't see that happening with rise in income nowhere in sight. If there is no dramatic rise in income than there has to be something else like 0 down or 0% mortgage, back to good old days of NINJA loans. House prices has nowhere to go but down for years to come.

corntrollio says

Is it that a lot of that money poured in by VCs (and by retail investors daytrading tech stocks) stayed in the local region? That's certainly believable.

yes this is the point. lots of funding drove hiring, incomes, rents from early 90s to late 2000. But it was short term only. In many ways we should of corrected for the anomoly we saw by late 2001, but RE prices still increased while rents declined, as did incomes, and number of employers. Fairly large disconnect from fundementals.

thomas.wong1986 says

But it was short term only. In many ways we should of corrected for the anomoly we saw by late 2001

Thing is, I know plenty of people who cashed in 1997-2001 (and 2006-now at Apple & Google) and no longer have to work. There really isn't that much supply in the Valley.

Then you add in the non-tech upper middle class professionals who also have to live in the nice parts, that stresses supply even more.

There are 64 houses on the market in Los Altos. How many potential buyers if the price was right? 640,000?

Tude says

The problem is, now everyone on earth thinks that they need to be a real estate "investor" to get rich quick. 10-15 years ago most people were buying homes to live in and raise families,

There was lots of speculation on CA RE back in the 80s, but that ended badly for many by early 90s. Who can forget Tommy Vu

http://www.youtube.com/watch?v=iQNdi-fRExc

thomas.wong1986 says

In many ways we should of corrected for the anomoly we saw by late 2001, but RE prices still increased while rents declined, as did incomes, and number of employers.

Yes, that's noticeable. We basically substituted one bubble for another.

Tude says

The problem is, now everyone on earth thinks that they need to be a real estate "investor" to get rich quick.

Maybe we should agree to disagree, but that's not what you're describing at all. I gave an example of distortions in the housing market that caused wannabe investors to get into the market because they thought they could get rich quick -- the recent housing bubble. What you are describing is perfectly rational economic behavior. These people are true investors who want to get rich slowly -- by having good fundamentals in their investments.

There were maybe a couple rental in our neighborhood when I moved in in 1998, and they were owned by families that had them in their family for many, many years. Now? nearly every home in the neighborhood that comes up for sale is bought by an "investor" as a rental, at prices 80-100k more than the homes were selling for pre-2000.

If this is indeed true, then it's possible a change has occurred in your neighborhood. This happens. The best example I can think of is Noe Valley in San Francisco. It used to be a blue collar-type neighborhood back in the day, but now has gentrified and has quite expensive homes. Sometimes demographics change.

But again, what you are describing is rational economically. I understand that it's frustrating, but that doesn't mean that it's improper or that perception about housing changed the way you're saying.

If anything, it means that perception changed for the better because the real investors are back and are looking for good fundamentals, as opposed to the amateurs who never looked at fundamentals and basically just speculated.

Tude says

I wonder if the real estate bubble has juts permanently perverted people's ideas about it, everyone wants to get in on the next bubble early this time, they are all so sure it will skyrocket again soon.

I'd believe this only because I still see this type of mentality. I'd look at it in a few different ways. The bubble- no doubt- was the biggest bubble we've ever seen. It effectively priced out a lot of people- people like me who make good incomes. This in turn has probably caused a lot of people to fear that they'll stand the chance of being priced out again if they don't buy something- anything- they can afford now. At the same time there is still a whole ton of people living in places like the Bay Area who still believe in the " We're special!" mentality.

As far as investors, well there's an awful lot of fly-by-night get rich quick seminars for everything and anything. People are easily manipulated and convinced of various investment schemes- virtually any kind except for those that make financial sense. Thus why you have a ton of real estate investors who are so eagerly buying up bottom-feeder crap and paying a huge premium for houses that should sell for way less than their all-cash offers.

Troy says

Thing is, I know plenty of people who cashed in 1997-2001 (and 2006-now at Apple & Google) and no longer have to work. There really isn't that much supply in the Valley.

How many do you really know? If there isn't enough supply, then wages should go up in order to compensate, which could push houses back to fundamentals.

Troy says

There are 64 houses on the market in Los Altos. How many potential buyers if the price was right? 640,000?

Isn't this true of anything?

Troy says

Thing is, I know plenty of people who cashed in 1997-2001 and no longer have to work. There really isn't that much supply in the Valley.
Then you add in the non-tech upper middle class professionals who also have to live in the nice parts, that stresses supply even more.
There are 64 houses on the market in Los Altos. How many potential buyers if the price was right? 640,000?

The point is they sold ... way way way overpriced paper (stock) for real cash.. and bought into LA, at someone elses expense.
The motto for overpaying back then was .. "it didnt matter because it was free money anyway, and I have more where that came from!" Do you also remember that? I do!

Are you willing to spend $60K or more to buy a condo with a shady HOA? Does it make economic sense? If the answer to both of those questions is not yes, walk away.

If I'm misunderstanding things, what are your concerns here? Did you fall in love with the property and now don't want to let it go? Or are you asking because you are just curious or if you want to know if anyone has seen this before?

Plenty of shady condo dealings happened during the recent boom. It's no surprise that you're seeing some of it. If I may ask, what region?

gbenson says

some screwy stuff going on

gbenson says

if we would like to raise our offer?

gbenson says

I generally try not to be a conspiracy theorist

Why are you still interested?

thomas.wong1986 says

The motto for overpaying back then was .. "it didnt matter because it was free money anyway, and I have more where that came from!"

Right, the money wasn't created out of thin air. That's the thing about asset pricing -- there's actually no such thing as "cash on the sidelines." When one person takes his/her cash from the "sidelines" and buys an asset, the seller then takes that exact same cash and puts it on the "sidelines." No net change.

By the way, someone was telling me about how their parents bought in Los Altos for 1:1 income to house value ratio back in the 70s. I think the raw number was something like $100-120K, which was quite a considerable income back in those days. Still, I don't think it's equivalent to the $1M+ income you'd have to have now:

http://www.julianalee.com/reinfo/sold-LA.htm

this happens a lot with condos. They make money on both sides of the deal, through managing hoa and building them. I'd walk away.

Ah, Portland. The dream of the 90s is alive in Portland, Portland...

gbenson says

Plus now that I am aware of the relationship between the HOA and the owner of the rest of the units, I know whose unit would get the yukky end of the proverbial stick.

Yes, I've heard of this happening in boomtime condo developments -- weird collusion between HOAs and insider owners that screws the minority owners.

gbenson says

didn't want to sound too harsh on our rejection of the sellers 'counter' if the consensus is that I am just over-reacting.

No, nothing over-reacting here. You are exhibiting a natural response. You are probably correct that even $42K in this development would probably be a mistake. It is perfectly rational not to overbid in this scenario. It is only during the boom that people became comfortable with rampant overbidding, and it was a bad thing. You are perfectly correct to worry about whether you are getting the right value here.

corntrollio says

By the way, someone was telling me about how their parents bought in Los Altos for 1:1 income to house value ratio back in the 70s. I think the raw number was something like $100-120K, which was quite a considerable income back in those days.

Even for employer like HP that would be way way high in compensation back in the day. Different mentality back than.

I would look to Route 128 which had more hitech employers/ees and higher incomes.

"In 1955, Business Week ran an article titled "New England Highway Upsets Old Way of Life" and referred to Route 128 as "the Magic Semicircle". By 1958, it needed to be widened from six to eight lanes, and business growth continued. In 1957, there were 99 companies employing 17,000 workers along 128; in 1965, 574; in 1973, 1,212. In the 1980s, the positive effects of this growth on the Massachusetts economy were dubbed the "Massachusetts Miracle".

Major companies located in the broader Route 128 area included Digital Equipment Corporation, Data General, Thermo Electron Corporation, Analog Devices, Computervision, Microsoft, GTE, Polaroid, Sun Microsystems, BEA Systems, EMC Corporation, and Raytheon."

bob2356 says

Do you guys have an actual point? Other than being a PIA.

Mama I'm trying to get them to tow the line but THEY just wont LISTEN!

Troy says

Thing is, I know plenty of people who cashed in 1997-2001 (and 2006-now at Apple & Google) and no longer have to work. There really isn't that much supply in the Valley.

Those are well know names today, but few heard about Ariba, Agile, Commerce One, Matrix One, VerticalNet, I2, Tradex, PurchasePro, and a few others, each valued into the the billions.

Certainly were not worth that much, but had people who retired early.. Many who cashed out left the region, and some stayed.

HOAs - the American Soviet.

If you really feel this is because you started asking questions and the HOA is trying to keep things under covers, why not type up a flyer with this story. Make it clear there is *no* evidence of anything wrong going on, however your just wondering out loud and feel that transparency is a good. Leave the flyer at the condo gate and swimming pool.

gbenson says

Needless to say we don't, but I can't help thinking this is the banks way of getting us to 'go away' so they can take the higher offer.

There are common tactic to get you to pay more. All you do is stick to your guns. Back when i purchased my home, we didnt see this nonsense (overbidding, higher appraisals, etc etc).

Read this...http://www.appraiserspetition.com/

corntrollio says

It is only during the boom that people became comfortable with rampant overbidding, and it was a bad thing.

Right on mark. Its become an institutionalized behavior with buyers. And some still claim today, even as prices have declined, its still common practice. There is something really wrong here.

thomas.wong1986 says

Even for employer like HP that would be way way high in compensation back in the day. Different mentality back than.

Well, note that even though it was the 70s, that was both parents' combined income. That would be more than half a million in annual income for each parent to have a 1:1 ratio today based on median price.

thomas.wong1986 says

There are common tactic to get you to pay more.

Yes, this is quite common, especially on short sale scenarios. I've had a few friends bid on short sales and get told by banks that their bids were too low. Lo and behold, several months later, the property still hasn't sold, and the bank calls them and says, "okay, okay, we'll take $X."

By that point, you'd be a fool to take them up on the offer, because the market price is likely lower and the bank is more desperate. The correct answer is "well, yes, kind bankster sir, I am still interested in buying your property, but not at that high a price."