patrick.net

WW2 -

Personally, I dream of Charles H Smith's historically supported Bay area SFH median target: $315,00.00 - now that would be SWEET!

http://www.oftwominds.com/blogmay06/shiller-housing.html

HARM,

"Are you going bullish on us, dude?"

Firstly let's not go off the deep end alright? In regard to the HUGE RENT SPIKE I'd be more focused on WHY rents are likely to raise. If rents are moving up (however slight or much) IMHO that is something of a BULL capitulation! When unlimited upside is no longer the order of the day Mr. Specuvestor sits down and says to himself. "It was never my plan to be "stuck" with this property that long". I don't have the resources to fill this hole month after month. I suppose many have tried to do yet another re-fi and been turned down so they are playing out the only option left. This may even be true where "management" companies are involved.

However, regarding bubbles, Charles H Smith should not be referring to a "hockey-puck ascent to unsustainability", but rather a hockey-stick ascent to susustainability.

Oh well, metaphors can't always make sense...

/
__/ This is a hockey stick graph

( ) This is a hockey puck graph

WWII,

And we shall, and we shall. As far as my personal finances are concerned I know I'll feel a lot better at a neighborhood cook out when people in 2007/2008 ask me how long have I lived there? Then I get to tell them we're still moving in and I just stopped over b/c Mrs. DinOR hasn't unpacked the plates yet. I'll be getting mileage out of the "still moving in" line in 2009 and beyond.

This whole "rent spike" thing seems to be something cooked up by realtors and the like as fodder to pitch to current renters. " If you won't buy, well you'll be priced out or renting too! ha ha! Baloney. Rents will never come close to being the same as buying at this level except the few exotic high rises in SF. The day they even come to being within 20%, that will be when prices on housing has already fallen a considerable amount.

*ALERT TO SURFER X*

My folks back at corporate just sent me an e-mail. PBS is going to be airing a special tonight on "Boomers, finances and why they're screwed!" Now I wouldn't want you to miss that!

If rents are moving up (however slight or much) IMHO that is something of a BULL capitulation!

DinOR, we must do something immediately to prevent end-game bear capitulation! You're the expert on these matters, so you can be in charge. We could call it the "housing bubble blog bear retention prevention intervention committee" (HBBBRPIC for short).

To repeat my earlier point, rising asking prices for rentals does not necessary imply rising rents. If Patrick is reading this, I'd sure love it if he could produce asking volumes to go along with his prices graphs. Volumes have to be greater than 2000, but I have no idea if they've dropped since, say, 2003.

Likewise, consider the drop in median prices is San Mateo (as reported by this realtor's site:

http://www.creeksiderealty.com/bay_area_real_estate_market_newsletter/statistics_graphs/houses.htm

When this is coupled with the dramatic increase in inventory, it implies a drop in the market that is much worse than the drop in median prices alone. In either a rental or housing market that is flooded with inventory, the best houses will be the ones to go first. This implies superior product moving at inferior prices.

Or, I confess, it could imply crazed buyers grabbing the cheapest POS they can find... ;-)

We need to move away from using median statistics (median price, median income, median rent, etc). They are meaningless especially when we try to understand their inter-relationships.

We should understand the situation using:

1. same house price trend
2. same house (or comparable house) rent versus price
3. cost of housing versus income in the same household

Dinor,
Oh boy! I wouldn't want to miss that piece on boomers. Funny that PBS would air something like that since their core programming and audience are boomers anyway. On 2nd thought, maybe that's why they're airing it.
Actually, I thought I'd mention that while at the library last week, I saw this book: http://www.amazon.com/gp/product/0312326408/102-9353934-4868103?v=glance&n=283155
Anyhow, I couldn't help but wonder why you would need to write an entire book on defending boomers. hmmmm...

Dinor,
you should also read some of the rather long-winded reviews of that book. One of them- the longest one is really amusing. did you write that?

The Greater Generation : In Defense of the Baby Boom Legacy (Hardcover)
by Leonard Steinhorn

From Publishers Weekly
Baby boomers have been vilified as noisy, self-centered, childish, elitist and self-indulgent. Steinhorn forcefully and gracefully defends his age cohort against these stereotypes in a paean to the generation that has forever altered the face of American culture. The so-called "greatest generation," he says, imposed a cultural complacency whose worst elements included racism, sexual inequality and anti-Semitism. Boomers rebelled against their parents' values, striving to create an inclusive society that would recognize the contributions of all of its members. Defying and denouncing authority, the baby boomers protested against an unjust war and challenged an unethical political system. Even after the clamor of the 1960s quieted down, boomers refused to tolerate environmental violations, continued to challenge racial and sexual discrimination, rejected religious intolerance and defied racial and sexual taboos. And despite an apparent conservative turn in America, says Steinhorn, boomer values have in fact permeated our society to the point where a younger generation takes them for granted. This powerful book by Steinhorn, a professor at American University's School of Communications, reminds us that boomers continue to provide the methods and the impetus that are moving many young people today to challenge political arrogance, deceit and jingoism.
Copyright © Reed Business Information, a division of Reed Elsevier Inc. All rights reserved.

OMFG! Someone please locate a barf bag for me... or two.

My source is the CA EDD.

* CA unemployment (overall) has fallen to equal the nat'l average.
* All non-farm classifications but one posted job gains
* Information posted modest declines (1800 jobs) mostly due to publishing and telecoms cutbacks.
* Farm jobs, even when seasonally adjusted, continue to shrink

* Most new jobs were created in Leisure and Hospitality, with half of those in food services.
* Tourism has recovered to pre 9/11 highs, and is on track for a record in 2006.

* Manufacturing gained about 1%; mostly in chemical mfg.

* Professional Business Services posted 21st consecutive month of job growth, mostly in professional, scientific and technical services.

* Unemployment in the BA is FALLING by 16.6% annualized; one of the fastest recovery rates in the country.

Yes, Boomers can take credit for all of the following:

--modern civil rights movement (started in the 1950s --at least)
--womens rights movement (started as far back as 19th century)
--landing a man on the moon (F-- you to WWII vets & Werner Von Braun)
--and end to "political arrogance and deceit" (Yeah, none of that in TODAY's world --especially around Berkeley uber-liberals. All my shrill left-wing activist friends just *love* to hear my opinions on illegal immigration, free ridership and personal responsibility. And they all listen SO patiently.)
--increased sexual promiscuity and accompanying rise/spread of STDs (oh, wait... actually they can take credit for that)

* Most new jobs were created in Leisure and Hospitality, with half of those in food services.

Food service... :-P

There are just SO many free-spirited, altruistic, selfless and generous boomers out there! Take the following, for example:

G.W. Bush
Karl Rove
Rush Limbaugh
Ann Coulter
Ralph Reed
Bill Kristol
Jeff Skilling
Michael & Timothy Rigas
Rob, John, Jim & Alice Walton
David Lereah

HARM,

Don't worry, I'm not turning into a Bull. But remember, I was never a Bear either. I just go by the data. And everything is in motion; nothing is static. Reversion to the mean and closing the affordability gap can and will happen, but it will probably do so with dozens or hundreds of variables, not with only one: nominal home prices.

Don’t worry, I’m not turning into a Bull. But remember, I was never a Bear either. I just go by the data.

I am still a bear, and I go by the feel.

Reversion to the mean and closing the affordability gap can and will happen, but it will probably do so with dozens or hundreds of variables, not with only one: nominal home prices.

I agree. However, the affordability gap may also be closed by building higher-density housing (i.e. smaller condo units) though.

Boomers, the Greater Generation
Er, they mean greater in girth, right?

Where are the good sectors to hide out if we are indeed heading into a Great Depression / Great Stagflation?

Any thoughts on that?

I wonder where the hospitality / food service jobs will go when we head into recession. :-)

I predict a rise in the consumption of ham croissants.

If I were to be cynical, I'd say that a weakening dollar bodes well for the Hospitality & Food Service sector, being that tourism in the US will become very affordable for the rest of the world. Maybe we can all get jobs selling hot dogs on the pedestrian approach to the GGB.

Thanks, hymie --I hope the comb-over wasn't too obvious ;-).

Randy,

When it gets really bad, we can send out kids out to beg.

HARM Wrote:

> @FAB, If I get the license but don’t actually practice
> the trade/join an agency, am I legally obligated to
> represent myself as a buyer’s agent (for commission/
> tax purposes) in my own private transactions?

You don’t have to represent yourself if you have sales or brokers license.

> If so, what if I just get the training but forgo taking the
> license exam? Do you think it’s still worth it?

You will learn more helping a top real estate agent for one day than you will learn studying for a real estate license. Most of the stuff on the real estate exam is stuff you will never use.

Randy,

I was talking to some German friends over the weekend. They are located in the Bavaria region.

It seems that the employment situation in Germany is picking up, one guy is in machine tool business and he says they have increased pay by about 12% last year. German companies are very cautious about taking on new headcounts because it is extremely difficult to lay people off, so unemployment rate still remains high, but those who have a job generally have a higher pay raise. His feeling is, the German machine tool industry is benefiting from the infrastructural investment in China. Germans and Japanese are major beneficiaries in supporting the machine tools and automation lines for the world factory in China. But who is this world factory serving? I believe that the Germans and Japanese are just again serving the US consumers in the end, via China.

Another friend from there also mentioned that Germany will start to implement VAT tax (sales tax?) later this year, and people are generally concerned, because it may hurt the burgeoning German internal demand. The same concern also exists in Japan, which is going to implement its own sales tax very soon. We will see how that works out.

So in a way, I am looking for a big and furious housing crash, but sometimes I also wish for soft landing. Right now it almost seems that Americans are singlehandedly lifting the world consumption, so if our demand dries up too fast, we may send the world into recession that will hurt everyone, except for the very rich.

Hello!
$ucka Clara County inventory continues to climb. 4509 SFR & Condos, compared to the mid-October-2005 peak of ~4350. This according to mlslistings.com. Yes, some $ucka's are still buying; but even more are selling....
Good day all!

SQT,

I think it is because people who read a certain type of blogs already have their mind set up about certain things - they are already going there, the blogs are just giving them a push.

This is because a lurker need to spend more time and effort looking for a blog that suits his spiritual needs (or inquisitive mind). I didn't come to patrick.net because it is recommended on WSJ or Economist. I was a marginal housing bear and coming here makes me a fundamentalist housing bear.

So blog reading is a self-selective process, a particulary type of blog just has a bigger impact on people of the SAME MIND.

OwnerOccupier says:
It seems that the employment situation in Germany is picking up, one guy is in machine tool business and he says they have increased pay by about 12% last year.

Wow. Are you sure? That would be great. In the last couple of years, the raises in Germany were either non-existent or more like 1%-2%. Germany became poorer relatively to other industrialized countries.

Another friend from there also mentioned that Germany will start to implement VAT tax (sales tax?) later this year, and people are generally concerned, because it may hurt the burgeoning German internal demand.

I heard they're actually increasing the existing VAT from 16% to 19% (which is a hike of unprecedented magnitude) in order to support their "big government" policy financially (you know, "take from the workers, give to the slackers").
The last SPIEGEL title read: "Wieviel Steuern braucht der Staat? Die Große Koalition zur Verteilung nicht vorhandenen Geldes". In other words: "How much tax income does the government need? The Great Coalition for distribution of nonexistent money". The article scared me a lot.

I'm losing hope on Germany. But that's just me.

SJ_Jim Says:
$ucka Clara County inventory continues to climb. 4509 SFR & Condos, compared to the mid-October-2005 peak of ~4350. This according to mlslistings.com. Yes, some $ucka’s are still buying; but even more are selling….

Let me relativize this for you:
5/16/2006: 3397 SFH for sale or sale pending
5/16/2001: 5041 SFH for sale or sale pending
(I only have 2001 data for SFH w/o condos, so I found the corresponding number for today from MLSlistings).
The 5041 figure is within a few percent of the peak for that year, so if the number keeps climbing this year, that would be a good sign.

On the other hand, a friend tells me he bought a newly built house in Saratoga this week. The seller had dropped the original asking price twice, both times by about 15%, then accepted his lowball offer for 20% below the new, reduced asking price.
Do the math: 100 * 0.85 * 0.85 * 0.8 = 57.8. Comes out to a 43.2% price drop.
No idea what how ridiculously overinflated the original asking price was, though.

So, *something's* going on.

OO,

I would echo Girgl. Germany is starting from a much higher unemployment baseline than the US; *much* higher. And, most unemployment in Germany is among the younger generations as the older gens sit there in protected jobs. Also, everyone is basically holding their breath over German consumer confidence right now. Last week the FT had a comparison of all the Eurozone's + UKs consumer confidence as compared to real growth, and Germany is by far the lowest confidence for the most growth. Basically, Germans are pessimistic, even when there's good news.

The big questions I read on faz.net or hear on DW are all about the continued strength of the Euro potentially hurting exports, continued failure to comply with EMU stability pacts, and how Hertz IV and other programs demands are forcing some pretty big tax increases.

Girgl,

probably I didn't phrase it correctly. What I meant by "employment picking up" was referring to the pay alone. The same guy was in a management situation with

Girgl,

probably I didn't phrase it correctly. What I meant by "employment picking up" was referring to the pay alone. The same guy was in a management situation with less than 2% pay raise for the last few years, and this was the first time he saw a substantial pay raise himself. His employer also added very few headcounts, as opposed 0 in almost a decade.

But my point is, even though Germany may look better for the time being, in few select spots (Munich or Stuttgart instead of Dusseldorf or Hamburg), the demand growth is still quite fragile. In his case, it was export-driven. So if we Americans turn off the tap, what is there left in the world economy?

Randy,

I am not sure if employement can measured across the board like this, you have to dig down to the core. Japan has been showing an unemployment rate of no more than 7%, but their way of doing it by having several people split one job, or reducing everyone's pay in the company, is that unemployment rate comparable to that of the US? I don't think so.

Hiring and firing is a lot more difficult in Europe, so unemployment rate is kept artificially high, no one is adding headcount unless there is a relative certainty that such a job will last several years at least. You are asking a lot of commitment from the employers to add just one headcount. So is the unemployment rate comparable to the US? Perhaps not either.

Girgl,

if you don't mind, what is the price range that your friend ended up paying?

The Boomers are on their third era. The Boomer era's are

1) Moral/Spiritual bankruptcy, 1960-1985, characterized by excessive drug use, excessive sex parties, excess just for excesses sake.

2) Ethical bankruptcy, 1985-2000, this era happened when the boomers collective realized that less for you equaled more for them.

3) My favorite, 2000-present, after they finally ran out of borrowing options, just plain ole bankruptcy. Enjoy your dog food fuckers.

SQT,

People who read blogs have a disproportionate influence because we are early adopters and in some ways thought leaders. We are more curious, smarter, more adaptable and communicate more. This sounds like a lot of self-aggrandizing hogwash, I know, but I really think it is true.

Owneroccupier Says:
if you don’t mind, what is the price range that your friend ended up paying?

He didn't share the dollar amount. Your guess is as good as mine. Sorry.

Girgl,

I am just nosy, here are the pending Saratoga new constructions:

http://www.mlslistings.com/common/properties/propertyDetail.asp?open=0&page=2&mls_number=617388&type=property&name=
$3.4M asking, after price drop will come out to about $1.96M, sounds a bit on the cheap side for a 5000 sft home on 1 acre plus land.

http://www.mlslistings.com/common/properties/propertyDetail.asp?open=0&page=2&mls_number=618614&type=property&name=
$3.3M asking, 5000sf on about 1/3 acre land, sounds like a McMansion to me. I think this is the most likely candidate. After price drop, $1.89M, I think your friend still get robbed. 5000sf homes are very difficult to unload now because of the heating and maintenance cost. If the other one is offered at a mere 20K more, I think most reasonable people will choose the previous one, but I doubt if developer will be so stupid to drop on that one.

http://www.mlslistings.com/common/properties/propertyDetail.asp?open=0&page=2&mls_number=571741&type=property&name=
asking $1.7M, 2900 sf on a 1/3 acre lot, after price drop will come out to be $1M, sounds a bit too cheap in this market, not likely.

Girgl,
Thanks very much for the long-term context of the inventory numbers (2001 vs. now). I do not recall too much the market dynamics in May 2001, but I do know that people buying, and perhaps using it as safe haven for $$$ after tech bust. But, not in such a frenzy as during the time of plunging interest rates from late 2001-2003, and during the loan-to-dead-people period from 2003-2005 (even now???).

And thanks for sharing the anecdote of your friend's $aratoga purchase; must not be too much a $ucka if they put in a lowball offer after (2) 15% reductions! As for $$$ amount, surely it's somewhere in the 1-20 mill range, yes??? (sorry bad joke)
Thanks again!