patrick.net

Hey, I stopped by that house near 375 Hawthorne where the veterans live and chatted with 3 of them sitting on the porch.

It's a halfway house for mentally ill veterans, not necessarily alcoholics.

Just wanted to clear that up.

Patrick

It’s a halfway house for mentally ill veterans, not necessarily alcoholics.

Hmmm, I guess that negates the possiblity of playing "orange crush" by REM on 10 (but this one goes to 11).

HARM,

No, no, your conclusion is reasonable. It's just that a lot of people take it too far. My buddy Ed just bought a 4Runner after trading in his Jeep. He, too, swore that he would "never buy a domestic piece of crap again," etc. Except that in 100,000 miles, he had no problems with his Jeep other than a broken fuel gauge that was replaced under warranty in a couple of hours! The car was perefectly reliable! He's not anti-American, he's a Naval officer, but he too has fallen for the mystique that American=crap, Japanese=superior.

My sister-in-law was the same way. She drove '85 her Blazer for 275,000 miles! The last 50,000 were problematic, but up until then everything was fine! But she too described it as "crap," etc.

There was a qualtiy differnece at one time. Some people, like you, had bad expereinces and have every reason to be frustrated. But after that, it took on a life of its own and was exxagerated to ridiculous proportions.

And have you noticed that no one ever complains about Japanese cars? Am I to believe that none of them ever have a single problem? Well, when you drive past the dealer the garage bays are always full so that can't be true. But no one is ever willing to say that their Toyota/Honda/Nissan was "crap," even though some are. It's a psychological thing.

I'd like to interrupt this all car all the time love-in to declare Benjammin a troll!

Yup, he's a troll. Perhaps we can all move the gold paved BA and lunch with it.

Hmmm, I'm taking bets on how long before the new troll posts the same old tired MLS listings from SF. Come troll you know you want to.

I’d like to interrupt this all car all the time love-in to declare Benjammin a troll!

What Benjammin said has some truth to it. However, I do not see across-the-board rent increase yet. It seems to me that rent increase occurs mostly in upscale housing units at this point.

You sire are a genius of the first order, why my god you've discovered a trend using only two weeks of data. Besides I am sure the recent 2% uptick in rent prices more than makes up for the explosion in housing costs. After all if McDebtors are paying 5K a month for a stucco $hitbox I can rent for 1800, makes sense that the same $hitbox would be that much more valuable when it rents for 2k a month. after all with that extra 200 bucks a month you can buy more lube for you and your "friend".

Benjammin is demostrating a good point: we need to be vigilant about rising rent. If we see *widespread* increase in rent (I do not see that yet), we may need to adjust our positions.

Peter P,

Yeah, except that we've already noted the uptick in rent, numerous times. In fact, we've talked about the possibility of rent rising even before there were numbers. Mr. Trolly McTroll is just here for nuisance value and has no interest in constructive dialogue.

nomadtoons2 Says:

> then again, $4.50 gas would probably spell more than just people
> moving closer. It would spell economic disaster, which isn’t that
> far away anyhow even if gas prices go down.

The average American drives 1,500 miles a month and has a car that gets 25 mpg so they use 60 gallons a month. An extra $60 won't exactly spell "economic disaster" for most people. If they do some car pooling and riding public transportation they will probably only spend about $20 to $30 extra per month...

To me, a clear sign that something strange is afoot is how much people are willing to overpay for property, notably in Palo Alto. I'm sorry, but Palo Alto is simply not worth it at these prices--unless of course you've bought in to the madness and need to justify your financial pain. But, if you're a self-proclaimed financial genius, go ahead and buy that shack. Find out how much bragging rights $1.6M gets you. As a contrast, here's what that same money gets you in my neighborhood. And, we have easy access via ferry to jobs in SF:
tinyurl.com/fyvl6

If you happen to transfer to Seattle, here's something within commute distance:
tinyurl.com/hzxof

Welcome back Kurt! How are you doing, RE Skeptic?

Why am I a troll? www.patrick.net the chart clearly shows rents have been ticking up since Feb. Therefore FEB, MARCH, APRIL, now MAY i.e 4 months of rents going higher.

Ain’t it ironic?

I see rents ticking up since late March, and relatively flat before that. If you'd been following the BA rental market long-term, then you would also know that they came down significantly after the Dot.com crash and stayed flat for about 5 years afterwards. The question is, does barely more than 1 month constitute a long-term trend, and will it continue to go higher?

Rising wages, rising rents, low unemployment, etc. How does the housing market self-implode in this scenario?

You have just described in a nutshell the ideal "soft landing" scenario that RE bulls (such as yourself?) wish to see. If you've been reading this blog for a while (based on your comments, I seriously doubt it), then you would also know that such a scenario would be fine by us. I personally would *love* to get a 100-200% raise while housing prices remain stagnant.

One thing RE perma-bulls fail to recognize is that stagnant nominal RE prices during high inflation does not mean that housing prices didn't fall in real terms. It just means that the correction took place entirely through non-RE inflation. If wages and non-RE prices skyrocket while housing stays flat for many years, the value of your house vs. all other commodities has still fallen in real terms.

Either type of housing price correction (inflationary or nominal or combination) is acceptable to me. It still does not refute the bubble's existence, nor the correction that follows it.

I’m sorry, but Palo Alto is simply not worth it at these prices–unless of course you’ve bought in to the madness and need to justify your financial pain.

Palo Alto is way overrated.

Rental rise impacts? Unless and until someone demonstrates for me the quantitative failure in the HSBC research, and thereby my own Bubblizer model, I maintain that rising rents are barely material. They would need to increase by nearly 60% broadly to make a meaningful impact. We won't need to be wary of that, everyone will know it is happening if it does.

Anyway, rents can't go up by that much without a significant amount of wage inflation. This can't happen overnight; such moves generally take years to play out.

DinOR,

I don't think young people should buy at all unless they're ready to settle down somewhere for at least 5 years. A house is a durable good, damn it! It is not an investment! If these morons want an investment, they can go to Montana and buy some asbestos pollutes dry rangeland with tail end water rights!

However, I maintain this is a macro problem and the young people are just mentally hedging so they won't feel like idiots if they get stuck with overpriced POS.

Actually, I’m surprised rents haven’t risen more than they have. Thousands of units have been removed from the rental stocks of communities all across the Bay Area thanks to apartment to condominium conversions - and these units are, for the most part, not being replaced.

It is not unlikely that converted condos become rentals again as "investors" try to get money for part of their mortgages.

Hi Pete!
I'm doing well, thanks! I've been contributing mostly to another local blog. In observance of the centenary of the 1906 earthquake, we're posting some articles on local earthquake hazards.
Here's one: tinyurl.com/l6rlv, with more coming.

I’m doing well, thanks! I’ve been contributing mostly to another local blog. In observance of the centenary of the 1906 earthquake, we’re posting some articles on local earthquake hazards.

Yeah, I have read that. I visit marinite's blog rather often.

Joe,

I don't pretend to know why the unwashed masses think the things they do. Wait, yes, yes I do. Most of what I had heard on the "quality" front had more to do with specific components; e.g. getting a shipment of 1000 widgets machined to a tolerance of +/-.001 cm from factory A, and every widget is in spec, vs. getting a shipment of 1000 widgets from factory B that only have a tolerance of +/-.01 cm and a dozen of them exceed those tolerances (i.e. defective).

I personally love my Chrysler, in part because it is reasonably easy to work with, and the transmission/engine is essentially bulletproof. (I know I'm calling down the wrath of Murphy, but properly maintained the thing should run forever.) There are always exceptions!

Aug-Oct 05 had an amazing increase in rent, whoops it reverted to the mean. Go away troll. Hey, how are the SF MLS overpriced condos doing?

Sure, rents came down from astronimically unfair levels since 2000, but i’ve seen rents creeping up for at least a year and a half now.

I would say 9 months or so.

If real estate stays stagnant, while we all get 100-200% raises, that’s fine for homeowners and renters a like. Why? B/c generally both make money and both are benefitting. Don’t know what the argument is here.

One thing though: when the market is stagnant, there are mor choices. :)

Other more responsible cities such as Concord have such an ordinance where only a certain percentage of units can be converted per year and only a certain percentage of those units can be sold to investors. Concord has been and is approving conversions nonetheless.

On the other hand, I think it is better not to have any ordinance. There will be more incentive to build higher-quality rental housing and they can be quickly converted to owned units so that supply will be there when the market needs it.

Like price control, anti-conversion ordinance may give counter-intuitive results in term of providing affordable housing.

More choices good for all of us! For buyers who want to buy, and for homeowners who want to move up. Win for all, as all our incomes are rising.

Let's hope so.

astrid,

I really don't mind if people "mentally hedge" b/c I probably do it 5 times a day. It's when people take pains to "go on record" that bugs me.

"We'll just buy a place, any place and if it goes up we'll look smart"

"but if it doesn't we'll have gone on the record as having said"

We're in it for the long term.

We didn't buy it as an investment.

We really like the area.

Etc. etc. This I have heard enough. All this hedging. Just once I'd love to hear somebody say, "We knew we couldn't afford to live here but thought we'd just throw our hat in the ring and it totally back fired so we'll be lucky to bail out before our credit gets hit too bad".

If a small car hits a SUV it will not flip.

Depending on the angle of impact, it might. In particular, if the crash causes the SUV to drastically change its direction ot travel, it is more likely to flip.

Someday I'll have to tell you guys the story of the Chinese auto production manager who ordered non-spec parts. His reasoning? The parts were foreign made too and I'm getting a nice kick back...

If real estate stays stagnant, while we all get 100-200% raises, that’s fine for homeowners and renters a like. Why? B/c generally both make money and both are benefitting. Don’t know what the argument is here.

@Benjammin,

An inflation-only correction would be fine by me, though personally I give it low odds. I doubt wages can skyrocket that much in the next few years, especially here in CA, where the local economy is itself heavily dependent upon RE and many high-wage tech jobs can be easily outsourced/arbitraged. A combination scenario of gradually rising inflation/wages with moderate (30-40%) nominal price drops sounds fairly plausible, though.

DinOR,

I'm constantly amazed by the stupidity of 75% of any given population (not just average Joes, we can start with Big Three executives and airline executives and go from there). I'm even more amazed by their ingrained need to feel not stupid.

As to the matter of verbalizing their mental hedges. Well, if we say it a hundred times a day, that must make it true, right?

Car talks ...

I've owned only one new car in my life. I really enjoyed it. If you want to spend up to 35K on a good car, I highly recommend BMW 325XI. Superb handling. Very safe. Very solid. Heavy. Great looking. Take the euro-delivery option. It'll save you $1500-2000 which you can use for a euro-vacation trip, driving your new BMW am der Autobahn, or even better, through the Alps. Also, get the cloth seats with leather sides. They are much more comfortable and aethestically pleasing than the (shitty and smelly) leather seats.

Cars are just cars. If you don't like driving a car that handles as well as BMW, just buy any car that runs, is reasonably comfortable and roomy, has a good reputation for safety and reliabity.

BMW feels like a horse. I'll keep mine till he dies.

FRIFY - Four Rentals in Five Years

Long time lurker.

Why haven't one of you smart folk remarked that the spike in 3BR rental prices might be attributed to folks who should sell because they're leaving the BA but instead are "just going to rent it out to cover the Mortgage". Correct me if I'm wrong, but Patrick's Webbots have no way of determining what rentals are actually renting at the advertised price. Sure, folks can advertise 3BR $3400 in San Bruno:

http://www.craigslist.org/pen/apa/156494230.html

...but isn't this really saying "Crap, I bought a Fog-banked San Bruno house for $750K and now I have to leave the Bay Area! I know, I'll just rent it out and have some sucker pay my mortgage!"

Sorry buddy, I can't help you. I'm in a nice 3BR SFH in Belmont for $2200 with long term lease.

but Patrick’s Webbots have no way of determining what rentals are actually renting at the advertised price. Sure, folks can advertise 3BR $3400 in San Bruno

You make an excellent point, FRIFY --AFAIK, Patrick's rental graph tracks ASKING rents listed in the classifieds, not actual rents ACCEPTED. This may be more of a symptom of that "escalation of commitment" by desperate homedebtors then any real increase in median rents. Deperate flippers wish to cover their over-leveraged a$$es when the NAAVLP resets, so they play a "shoot the moon" strategy of asking sky-high rents in hopes they'll get someone to bite.

Time will tell --if those rental graphs continue to trend upward for a long time (a lot longer than 5 weeks), then we may have to revisit the "soft landing" scenario.

One of the most frustrating aspects of trying to study the rental market is lack of reliable public data. NAR/CAR numbers may be dodgy/manipulated, but at least they exist. It's almost impossible to find equivalent non-proprietary data on the rental market.

Peter P,

I only live once, so I would like a fun ride for it. (and now, the hedging - if I get killed and comes back, I want to come back as a large country cat.

HARM: “escalation of commitment”

Exactly, and thus the increasing signal on Craigs list may in fact be symptomatic of pressured owners. If you bought last year and sold this year, you’ll lose your shirt on the commissions. Thus shoot for the moon to have somebody cover the mortgage. If you check inventory on www.housingmaps.com, you’ll find that the Peninsula at least still looks like it’s got plenty of inventory at all price levels in every town. When we gave notice on our last place, our landlord was worried. I think he rented it out again by keeping it pet friendly at the same price as we paid 2 years ago.

Trucks are a different beast. They are supposed to be the workhorses. I have no experience with them. My impression is that American trucks are the most robust.

If you check inventory on www.housingmaps.com, you’ll find that the Peninsula at least still looks like it’s got plenty of inventory at all price levels in every town.

Can you recommend something near Palo Alto (within 5 miles)?

My criteria:

* Allow cats
* At least 2 bedrooms
* At least 2 bathrooms
* Inside laundry
* Under $2500 a month

GentleCheetah,

And the 3 series BMW are Civics with RWD! :P

If I was in the market for that kind of car, I'd shop around for a mid to late 90s MB convertible. The upkeep will be expensive, but probably no worse than for new MBs, and I could get a much nicer car for the same $25-35K.

"My criteria:

* Allow cats
* At least 2 bedrooms
* At least 2 bathrooms
* Inside laundry
* Under $2500 a month "

And make them BIG bathrooms and BIG bedrooms, gosh darn it!