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Benjamin,
you're right only to an extent. The largest number of homes are being built in the midwest and SE. the prices there are actually well below the national average, thus it should come at no surprise, with an ever-increasing number of people leaving CA , and the entire east coast for these areas that there should be a demand for more housing, even though there is no shortage of land whatsoever. The national data you're posting is 'national', and not reflective of California, which has been slowing 4 months in a row. http://abclocal.go.com/kgo/story?section=business&id=4095429
-Northern california numbers out any day now.
So I'm not sure how much relevance posting national data, about cheap housing being built 2500 miles away has to do with a blog specifically dealing with BA RE and it's issues has. IMHO....
Ok Randy,
but do you think an employee is going to go to Wal-Mart and buy a lawnmower with painkillers?
Keep in mind when you read "income" statistics, the financial press is primarily concerned about whether income is rising as a cost to employers. So, even if you don't get more HaHas in your paycheck, anything that increases what your employer pays for payroll is income inflation.
You're right nomadtoons,
This is why many say that inflation is the cruelest tax of all.
I'd be reluctant to say that rents are going to the moon. They have firmed somewhat after years of languishing, but to the moon? Nah. I expected this as it became more obvious that purchasing property with hemmoraging monthly negative cash flow no longer makes good business sense (not that it ever did). Now that the outrageous appreciation is officially off the table folks with excess inventory to let have gotten more realistic about what they need to generate from a property for it to make sense. In short, they've finally learned math.
We just sighned a new lease with our landlord.No increases, same low price. Show me the rent increases, and I'll be sure not to move there.
I believe it was Peter P that said a few threads back that "rents" in his area while firming would just about cover the taxes and HOA's due on a monthly basis. The "owner" would still be on the hook for the brunt of the mortgage interest. So we're a long way from a balance on the rent/own calculator.
nomadtoons2,
Our lease expired in March and we have the same deal, same dollars only now we are month to month with out the lease obligation. If I wasn't so confident that a HARD LANDING will be obvious by July/August I could go back and renegotiate a year lease at LOWER price. I just might yet, but that would seem an awful lot like gloating and it's not my nature. Who can help me out here? We all know caveat emptor but what is the latin saying for "let the facts speak for themselves"?
Dinor,
We were thinking of asking for a lower rate, but since the rate is already very reasonable it wasn't a finacial burden anyway. The way I figured it was that A: we take good care of the place and have actually made the yard about 100 times nicer than what it was when we moved in, and B: The landlord said he was really glad we were staying. So to me, it would seem that a landlord who has good tenents that care for the place and live harmoniously next door are worth any raises in rent he might enact, so we're playing it safe for now. That said, there are still PLENTY of homes in our area for signifigantly cheaper than this one.
nomadtoons2,
Absolutely! Our little condo complex of 5 units is doing a bunch of improvements and they are so tickled that we are compliant about moving our car so the tractor can move in! Just doing my part! Last fall we did about 6 hours worth of work for a fall clean-up and it's like the HOA pres. and I are friends for life. The guy just can't say enough nice things about us! Next weekend we are supposed to grab garden rakes and work an are about the size of 3 pitcher's mounds and they are offering to buy us dinner!
I did not see my friends face down in the mud in 'Nam to have them ridiculed by some faceless cowards. Oh wait that's right, I didn't go to 'Nam. Nevermind.
What? You don't want to drop over a mil for a $hitbox? Come on cowards, just pry up one of those gold bricks off of a Bay Area road.
nomadtoons,
Keep in mind the primary audience for the financial press. It may be an error on the part of the news providers, but traditionally they have targeted a demographic concerned mostly with investment-related news. Changes which are microscopic for the average worker have can have a very significant effect on the investor. If, for example, wage inflation for a particular sector (say energy) was 2.0% per year, and headline inflation was 2.3% per year, then a 0.1% change in inflation will cause all those spreadsheets of valuations and stuff to change and affect the implied stock price, EPS, PE, blah blah blah.
Surfer X,
If you lived in the former garage converted to an uninsulated "studio" you could plow the house down and have an 800sq. ft. lawn!
Randy H,
I agree with you 100%. But I think that many people equate these minisscule changes with the spending habits of the average joe, or the kind of people that buy houses, etc etc. At least that's the gyst I get from Benjamin with the post above, which makes me think he was implying that the high price of housing was justified by these tiny incrimental "improvements"
BenJ ammin Says:
> How come our beloved site show
> that rents are going to the moon?
Rents are not exaclty at the "moon" since owners on my street are paying more in "property tax" than I am paying in rent...
When gas goes up in price demand for housing near jobs increases.
Many people don't care if they spend 4 hours in the car every day if they can save $500 per month in rent living in Tracy. When the price of gas goes up and they are paying $600 for gas to save $500 on rent they start looking for Bay Area apartments closer to work...
Gas would need to go up another dollar to force people to pay $2k for an apartment in SF... 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.
SQT,
Frankly I'm suprised that rents haven't gone up more. Given that there have been so many cancellations on new homes and so actual closings. Then again I suppose just in the same manner we felt that the entire year of 2005's outrageous "appreciation" couldn't go on forever rents too are proving "sticky". Some have mentioned that the rent increases we've seen are more energy cost driven than actual market/demand inreases.
DinOR I think rents in the BA will skyrocket. Afterall the run-up in housing is a result of the mind bendingly strong BA fundamentals. You see as the common average BA salary is 250K a year, even for the most lowly of tech worker, the housing costs aren't really that expensive. They merely reflect the nature of the area. To quote the most famous of Patrick Bears (now in hibernation), it's the "intangibles" of the area that make it just so gosh darn expensive. Besides wouldn't you pay to hang out with the trolls that frequent this site? The BA is full of them. But then again they merely reflect the amazing BA, replete with amazing weather, amazing food, amazing insular economy, and gold paved roads. As rents reflect the true cost of housing why would they not skyrocket? Remember there is a chronic housing shortage in the BA.
I'm actually on the opposite end of the spectrum. This summer will be a great time to pick up a late model, low mileage Suburban! They are already going so cheap! True, not an ideal commuter car but for golf outings in the summer and hunting and fishing trips, they're great! I'm thinking July maybe August. A lot of Suburbans in Oregon sit about as much as RV's but they are great fun for the "drive-in" season. Remeber the drive-in?
I believe it was Peter P that said a few threads back that “rents†in his area while firming would just about cover the taxes and HOA’s due on a monthly basis.
For SFHs, this may still be the case.
However, condo rent should cover more than half of PITI now. I tried to look at a 2/2 in Menlo Park that asks for 2500+ a month but it was already gone (in a week). Last year, no one would pay 2500 for an old 2/2 in MP.
Surfer X,
Damn that it is a scary thought! Paying a "premium" to hang out with the trolls!
I tend to think that even if rents rise, home prices will have to get down to "pre-bubble" pricing levels for there to be any semblance of sanity! When I first got out of the service it was actually a *little* cheaper to own than rent in Oregon. Right now (with trad. financing) it would cost us about double to own vice renting.
Like I say I went through the actual closings for our area YTD and it was NOT impressive! Only about 2 or 3 higher end homes sold and one of those was to a local realtor. Most of the inventory that was moving were older homes below the median and mobiles. Stuff like that.
SQT,
I commuted with a 4 cylinder Volvo 940 for about 10 years. You actually had to prepare and ramp up your speed so you weren't doing 45 mph at the top of Sylvan Hill (elev. 450 ft.). When my oldest daughter "took over" she would ask for 20 bucks for gas and I doubt 5 of it found it's way into the tank. Oh, come on! We all did it!
My impression is that higher-end homes are selling but lowering-end homes are not. This alone would keep the median price up there even if many homes are selling for less.
Surfer X,
While I realize you were being sarcastic above, let's pretend that rents do skyrocket anyway, and that BA fundementals come into play. I would think that if rents did go through the roof, all those liberals that have been focussing 90% of their attention on Iraq and Tibet would suddenly call foul and start on the warpath. Come to think of it, why in the hell aren't those 10's of thousands of protestors, who spent all that time and energy protesting over an event that likely wouldn't affect them directly choose NOT to protest over something that is actually affecting them all? Or- could it be that the majority of them already own their homes? Interesting... Sort of paints the picture diffrently doesn't it as far as their "values" really lay.
If you haven't browsed Wiki lately, it's a good read. There's a cite to Patrick.net and a quote attributed to Lereah. If it's really him he's sounds like he's ready to cop a plea:
Peter P,
I couldn't remember the exact quote but I believe that was the "spirit" of what you shared. I can definitely see how a few high end closings can skew the numbers. What does that say about the mindset of potential buyers and your local economy at large though? Sounds sloppy?
What 'Ben Jammin' (MP, Jukubot?) is referring to is the one-month spike, mostly in 3 & 2-Bdms apartments displayed on the rental search engine page of this site:
True, I also see a big one-month spike... after 5 solid years of flat-to-declining rents. Big whoopiety-do... If it continues sharply upward beyond one-month, I'll be impressed, As DinOR & SQT pointed out, you'd need to see years of big, sustained increases to come close to balancing the price-rent ratio. This would also mean WAGES would have to be increasing as well, as you cannot pay your rent with borrowed NAVVLP monopoly money.
If the housing market corrects entirely through wage/inflation increases vs. nominal price drops, you won't see me crying about it. Can't really complain about having my wages double or triple while RE proces stay flat. The only challenge will be how to inflation-protect my savings/investment $$. Given paltry-to-negative real wage growth over recetn years, I find this a rather unlikely scenario, though.
What does that say about the mindset of potential buyers and your local economy at large though? Sounds sloppy?
In the Bay Area, higher-end homes did not enjoy a bubble boom during recent years. Buyers of there homes are not credit-dependent and so they are likely to buy when inventory goes up.
In Mountain View, Google-effect is raising rental prices. :(
Rent is not back up to 1999 level yet but it is higher. If this continues, a soft-landing is not impossible for some type of housing units in some locations.
surfer-x: Gods, I love these roads. Whenever I'm short of cash, I just take a garden trowel and pry up some of that gold.
DinOR: The Latin you were looking for is "Res ipsa loquitur" (the thing speaks for itself).
Peter P,
Even fresh off the assembly line in 1994 the Volvo 2.1 liter engine put out an impressive 110 HP! Now imagine years of idling in stalled traffic, an "iffy" rear main seal and about 300K miles. nomadtoons2 could have given me a run for my money with his lawn tractor!
To quote the most famous of Patrick Bears (now in hibernation), it’s the “intangibles†of the area that make it just so gosh darn expensive.
Hey, 'X',
Did you mean "most famous of Patrick BULLs" (Jack)? :-)
To quote the most famous of Patrick Bears (now in hibernation), it’s the “intangibles†of the area that make it just so gosh darn expensive.
Did you mean “most famous of Patrick BULLs†(Jack)?
"Reasonable bull" was the term we used.
In Mountain View, Google-effect is raising rental prices.
Rent is not back up to 1999 level yet but it is higher. If this continues, a soft-landing is not impossible for some type of housing units in some locations.
Ok, that tears it! I'm going up to my manager right now and *demanding* a rent-driven salary increase. If rents are really going to double or triple to meet housing prices, then the boss is just going to *have* to pay me a lot more to stay here. I'll just point out to him how I'm a lot more productive than 12 illegals or overseas workers, not to mention my sparkling personality and smile!
Think this approach will work?
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This tiny old box is for sale to any fool willing to throw away $1,595,000. While it is close to a nice park, what you will not learn from the sales material is that there is a half-way house for alcoholic vietnam vets nearby as well, nor that the street, which is quiet on Sundays, is a major thoroughfare during rush hours. In fact, the traffic situation is so bad that there was a city attempt to block much of the traffic through strategically placed barriers recently, but the outcry was so great that the barriers were removed, leaving only a simmering acrimony between neighbors for and those against the barriers.
There is no backyard at all, only a wooden deck. The house is overshadowed by the much larger house to the right. The steps are cracked brick, and the handrails are just painted pieces of pipe. There is peeling paint and perhaps some rot around the foundations.
The house has several cramped and unusal spaces which are called bedrooms for sales purposes. What used to be called the garage is a studio unit perhaps rentable to Stanford students, though that rent will make no significant difference to a mortgage this large.
#housing