patrick.net

If anyone debates that $80 is too much for an engineer; I know for fact that that agencies charge over $80/h for ENTRY LEVEL people.

Ptiemann,

I think we've already been over this before ad nauseum. The vast majority of Bay Aryan households --much less all Californicators-- do not make $200k or even $150k (1 haha). I work for an IT department in a large company and our entry-level QA staff don't make anywhere near $80/hr. They exist of course, but you are talking about a very small, select group of high-skill people.

http://www.bayareacensus.ca.gov/counties/SanFranciscoCounty.htm

Kobrick said that Google clearly has a great product, but that alone isn't enough to make it a good stock

Funny I cannot recall for the life of me buying any of Google's "products".

Last year, around same time. Everyone believed RE could only go up. Crash ? Huh. Hard landing ? Are you nuts ? The worst case was not soft landing, but a permanently elevated plateau.

Fast forward 12 months. Where are we ? Exploding inventory. Prices are not going up, no matter what the median indicates. Houses go "below" asking. Who thought that could happen ? In BA ? What happened to all the rich people ?

Just 12 months. Very short time. Very very short time. And interest rates are STILL historically low. This was a mania. It is ending on its own. All the other things HARM mentions can only add to the downward trend.

No bear market ends in a short time span. The trend continues till everyone is convinced that this is how it will be forever. We have just begun the bear market.

How long will it go ? How will it end ? Who knows. But I plan on being in an economic downturn for a long time.

If anyone debates that $80 is too much for an engineer; I know for fact that that agencies charge over $80/h for ENTRY LEVEL people.

I do not know any agency that charges $80/h and pays $80/h. What kind of charity is that?

If I charge $80/h I will only pay $40/h or I rather close my doors.

Here’s your Google orb of influence

Should we say Google in Retrograde?

Not to sound mean here.. but as someone making 50k and now hearing from people that seem to be making 200k or more here, on other sites, and in the papers now bitching that they can't afford, and what an outrage it is, well.... welcome to the club! I've been in it for a hell of a lot longer than some who make 2,3, and 4 times as much as I do. Actually, hearing so many people here that make a shitload of money concerns me. That means as soon as the prices start coming down... KABOOM! tons of people who are doing very well, who've saved up, and are in a better position than I am, even though I've been saving my ass off for years. A person making 200k can save more than me in 6 months than it took me 5 years to save. depressing.

ptiemann Says

Someone wrote:

Just take 2 married immigrant engineers. $250k combined income easily.

The are not making any more "immigrant engineer couples" ! Those who existed before, have already bought. The newer ones are very happy earning fabulous salaries in India and being "nouveau rich" there.

A person making 200k can save more than me in 6 months than it took me 5 years to save. depressing.

True, if you are thinking of a person just like you but making 4X the loot. But let me assure you most if not all BA jackasses making 200K plus are tapped to the max. Know what goes good with your new 5 series? Well thats a 5K mt bike that you never ride. What goes good with your uncomfortable but stylish danish modern sofa? Well a 50" flat screen, nevermind that there is nothing to watch.

@WW2,

Ignore the "everyone here makes $___,000,000.00 a year" nonsense. Census numbers (plus personal observation and common sense) should have disabused any non-troll of that foolishness long ago. I put that myth right up there with the "wage inflation will bail us out" crowd.

>>A person making 200k can save more than me in 6 months than it took me 5 years to save. depressing.

They can, but do they?

Ignore the “everyone here makes $___,000,000.00 a year” nonsense. Census numbers (plus personal observation and common sense) should have disabused any non-troll of that foolishness long ago. I put that myth right up there with the “wage inflation will bail us out” crowd.

Perhaps you would be happier back in Russia you Amerika hating fiend.

To BA Or Not To BA Says:

I was in self-doubt till the beginning of this year. I thought there was bubble, but I was about to give up. There was enough theory on this and other boards about why the house prices should correct. But there was no evidence in real life that I could find. Zilch. Nada.

Now I see evidence of the beginning of the crash all around me. I see the change of psychology. I see change of tone in RE agents speak. Not only I see high inventory, I see price reductions, and house not selling even AFTER the price reductions.

This is exactly playing according to the script.

What else do people expect ?

_____

Very good, positive post. It makes me happy to see that you are observing the unfolding of a housing crash like the unfurling petals of the Golden Lotus Flower.

What else do people expect? Hmm...good question!

Well, what I'd like to see...what I expect to see is a growing anger...a smoldering rage that finally expresses itself in explosive, medieval vigilante sort of ways as you see mobs of angry folk, carrying lighted torches, hoes, brooms, and shovels, chasing their naked realtors down the street, screaming, "kill the lying, little rat! Kill that motha..."

Greg,

Just remember that my opinions are worth what you paid for them. I think 1-2% deflation falls within the "zone of error", and is not sufficient to constitute real price deflation to be worried about, so long as it's not protracted for too long.

Michael Holliday Says:

Well, what I’d like to see…what I expect to see is a growing anger…a smoldering rage that finally expresses itself in explosive, medieval vigilante sort of ways as you see mobs of angry folk, carrying lighted torches, hoes, brooms, and shovels, chasing their naked realtors down the street, screaming, “kill the lying, little rat! Kill that motha…”

That's just more of the same, though - people refusing to blame themselves for bad decisions and finding a scapegoat. This is already happening in the media/NAR publicity machine, with all those claims that either the Fed raising interest rates are the main culprit in the slowing market, or that all the bubble stories are just a "self-fulfilling prophecy." What a joke.

Micheal Holiday,
As mentioned yesterday, the boycott housing site is evidence of a vein of people that all feel the same.. which is PISSED. The visitors seem to be people that have had some pent-up rage for some time now, as evidenced by some of the messages in the visitor's section. Mob mentality for sure.
I think that this is one life-altering event that doesn't get discussed much amoungst those that feel helpless about it. If more sites like patrick, boycott housing, and Craigslist can eventually harness this mindset, then the battle is already partially won. Then again, I assume the amount of people actually pissed enough to look for sites that discuss it is fairly small, so who knows?

Where I live in Sunnyvale and Mt. view areas there still is not that much inventory available. YES, it’s higher than what it was but not materially so to get sellers to panick and lower prices materially.

These places are within the orb of influence though.

Blogs are a very powerful media, and we should take comfort that our form of information and debate is growing in influence and importance.

However...

We should not delude ourselves about the relative size of "us" versus the "sheeple". We are still a very small majority compared to the population of those who buy and sell homes. I assure you many many times more people are influenced by those stupid "nasty wife" ads than by all these blogs combined. This is why, if we want to have the biggest impact possible, we need to remain credible, self-challenge our own community's most objectionable and outrageous claims, and cooperate when the "mainstreamers" pick up on our torrents.

It seems unfair that some jackass talking head gets to have his/her staff dip their big toe into a world we've all worked hard for years to create, and then present it to the masses as if they are the fount of knowledge. But life ain' fair, it just is.

I've been pondering ways we (all the legit bubble bloggers and their blogs represented here) can get more exposure to big media.

Any ideas?

$95k is only about the median income in Santa Clara. So… a lot of people are making a lot more.

If $95K is the median, then half are making more by definition; the amount by which they exceed median is not revealed by this number.

Fyi for burbed, hellboy, etc.

When quoting a previous post, it's helpful to offset it using italics tags:
<i> Quoted text here. </i>
Diplays as: Quoted text here.

This makes your responses much easier to distinguish from the quoted text.

When I interviewed at Sega (I declined the offer, because I would have had to sell my house to rent there), the guy RUNNING the place had not bought yet because prices were so high. This must have been 10 or so years ago. Bay Area prices are unfathomable to me. I don't understand how it works.

I'm more interested in what happens to the places that Californians retire to. I feel like at least I have a chance of understanding those markets.

Greg,

If "inflation" does not match real GDP growth, then growth will be halted in short order. This is why there is "normal inflation", and why it is normal for it to be sustained over very long periods of time. There will continue to be real GDP growth for so long as there are productivity improvements, we continue to replace depreciated capital stock, and there is 0 to positive population growth.

Actually, so much of the alienation we feel is a product of the fact that the MSM never tells our story.

The MSM is dominated by the Boomers. The issues we are experiencing aren't on the radar screens of people at the SF Chronicle or the CBS Evening News.

And it's not just the housing bubble. Most of us are in our late 20's and 30's. Let's see a show of hands: how many of us would like to trade places with a recent graduate. Anyone?

(This is something that we Gen-X'ers will have a duty to change in the future once we are in charge -- we will have to insure that the kids who come behind us have a future and do not have to struggle needlessly like we did.)

The MSM doesn't ever talk about either of these issues. Partly because its principals, 50-something Boomers, can't relate. And partly becuase they just don't give a damn. In the case of housing prices, their interests are actually opposed to ours.

So don't feel bad if you get frustrated by the fact no one talks about the issues that are important to you. Your feelings are normal; the MSM is not reporting them.

>>I’ve been pondering ways we (all the legit bubble bloggers and their blogs represented here) can get more exposure to big media.

>>Any ideas?

Easy. You pointed out how effective the nasty wife commercials are. Take up a collection and advertise on TV.

I vote for a commercial where all the realtors are werewolves and all the mortgage brokers are vampires.

(Randy's comment prompted the above post, meant to cite to him but forgot.)

hellboy says:

Where I live in Sunnyvale and Mt. view areas there still is not that much inventory available. YES, it’s higher than what it was but not materially so to get sellers to panick and lower prices materially.

On the other hand, those places are suburban sprawl to the max, enough to suck your soul dry, places I don't plan to live in anyway.

@SQT,

I agree with your sentiments, but your math is slightly off: you should have pegged specuvestors at "two in five buyers" (40%), not one in four (25%). 25% is soooo 2004 ! :-)

I know one thing for sure, come the next RE crash, SoCal will be much more toast than BA, as it has always been.

I thought we were nuts, until I checked out some Santa Monica homes online, absolutely unjustified. It is not like the entire Santa Monica is nice, there are many half run-down alleys and houses, yet they sell at an even higher price than Pac Heights, or Portola Valley, Saratoga, etc. LA beaches? Give me a break, cold water, polluted, drills in sight, nah, thank you very much.

I second Joe's opinion and LA SFHs in good or bad neighborhoods can see easily another 50-70% crash from here. Plus, you guys are quite overdue for another big bang in the next few years. It could be any time now.

True, if you are thinking of a person just like you but making 4X the loot. But let me assure you most if not all BA jackasses making 200K plus are tapped to the max. Know what goes good with your new 5 series? Well thats a 5K mt bike that you never ride. What goes good with your uncomfortable but stylish danish modern sofa? Well a 50″ flat screen, nevermind that there is nothing to watch.

While I'm sure they waste a lot, it's pretty easy to save when you're pulling in $17K/month. Yuppie DINKs can buy all these toys you've mentioned plus the house and not sweat putting $3-$5K/month into savings. That's fine if trash talking their squandered wealth makes you feel better, just don't fool yourself that they're not sitting pretty.

Of course, once they have kids, they have to keep working to pay the Mortgage.

While I’m sure they waste a lot, it’s pretty easy to save when you’re pulling in $17K/month.

Do you know how much food can cost you?

burbed Says:

I disagree, I agree. I don’t think there will be a crash in Palo Alto, Mountain View, Sunnyvale, Cupertino (e.g. Facebook, Google, Yahoo, Apple). There’s just too much money here.

You forget one important ingredient: market psychology. If this whole thing continues downward as predicted, there will be acceleration downward in prices as the mentality of "must buy now or be priced out forever" is replaced by, "investing in RE is a losing proposition." Hence, those with the money you cite would not be so keen to rush and bid up on homes. It's already apparent in the high-end markets as we speak. Just check out inventory, numbers of under contract/pending sales, and you'll see sales in these areas have slowed to a grind.

dagnabit - screwed up the italics again...

The important contention many of you all are forgetting is that this asset bubble, just like every single other asset bubble in history, will collapse under its own weight. External perturbations like rising interest rates, Iran's nukes, Britney Spears abusing her baby, etc are not necessary to collapse a bubble, although they may certainly accelerate the process. It's the fundamental nature of mass hysteria and the herd mentality.

While I’m sure they waste a lot, it’s pretty easy to save when you’re pulling in $17K/month.

FRIFY,

Mmmkay...

First off, 200K/yr is $16,667/month GROSS, not NET. Take-home (after federal/state + FICA, etc.) is probably closer to $10-11k/month.

Secondly, we've already established that 200k is much higher than median/average/typical/whatever HH income, even in the Richer-Than-Thou Bay Area.

Third, with the U.S. savings rate in negative territory (for the first time since the Great Depression) who exactly is saving anything?

@Randy H --

"1) That the money will decrease in spending power even if your investments “beat inflation.”,

Can you explain what you mean here in a bit more detail?"

Yes, what I meant is that, despite the fact that my various investment accounts are increasing at, let's say 6% in a sluggish economy, while you're beating "inflation" (as measured by the nonsensical CPI which backs out food, energy/gas, and housing [in favor of the Rental Equivalency Index]), I can promise that your invested dollars are shrinking in purchasing power.

For example, the Orange County 3/1 house I began renting in July of 2000 was appraised then at $193k, and now with it valued at $650k circa late 2005, $193k wouldn't even be enough for a down payment unless you made $160k (1 HaHa) or thereabouts. You cannot possibly save fast enough.

@FRIFY

"I have until Winter to formulate Plan B. Distract and delay tactics are losing their efficacy. Footrubs and massage coupons might last me to next Spring… "

Obviously, you're in the exact same boat as me. It's awful letting your family down without even knowing it. All this time I was scrimping and saving and eeking the last ounce of life out of my 1994 Geo -- by saving a downpayment rather than jumping into a death-or-glory loan I was unknowingly knocking my family farther and farther behind. The inlaws think I'm a reckless gambler for NOT borrowing 9x my income to buy in. As the siblings were buying more and more condos on more and more exotic loans, it turns out WE were the gamblers, not them. Who knew? They're always asking "What exactly did they teach you in your BSBA program?" Well, they were filling our heads with stodgy, outdated information that used to pass as "financial prudence" (like the whole 20% down, don't take on more than 4x income in debt) but now would be called "overconservatism" at best. Plus, we go to the family functions and it's like a car show, all the sibs and cousins pulling up in the latest Mercedes thanks to their condos, talking real estate into the night. Always reminding me that they can't imagine WHAT I was thinking, and of course I have no defense. It's like the "walk of shame" and we get to do it at least once a week. Like I said, most times I wish she'd just meet somebody who owns a condo, he could sweep her off her feet and that would let me off easy. I could go someplace new, and never mention any of this mess to anybody! Just start fresh and hopefully not be so damn irresponsible the next time around. Screwing yourself is disappointing -- screwing your family is the worst circle of Dante's inferno.

PP,

Do you know how much food can cost you?

I don't want to shock you, but my Sushi intake fell 90% after we had kids. On top of that, Blowfish Sushi has been replaced by Supermarket Sushi.

On the otherhand, Oatmeal and milk expenses have increased 1000% fold...

:-)

I hate to say this, but why the constant attacks on realtors. They may facilitate the process and lie or cheat or otherwise misrepresent the buyer to the seller and vice versa, but really, the problem is the

sellers = insane asking prices, and arrogant insistence that they deserve them

bankers = nutbars allowing people to borrow money on the expectation they can repay later based on appreciation, not income, or more nefariously, hoping for crashes and foreclosures and getting properties back in big money private hands for pennies on the dollar

regulators = maniacs who allowed the fiscal environment to evolve because they feared telling big financial corporations how to operate their lending practices, or didn't want a recession after the dot bomb, and cut the rate to almost 0%

Japanese = carry yen trade, let's face it, in another 10 years the Japanese will own more of America then they did back in the 80s. Just watch...

Seriously, why don't we make fun of sellers more and forget about the realtors?

My $.02.

RW,

That is a single measure of purchasing power parity, not inflation. Inflation is multivariate, and the aggregate is intended to measure the depreciation of the monetary unit against a benchmark basket large enough to include all those variables. The "backing out" problem is very complicated, and you can read about it in many places. It's nothing sinister, just a problem with overloaded uses of CPI.

There have always been depreciating/appreciating assets and even specific deflation/inflation. This is not the same thing as general deflation/inflation from a macroeconomic perspective. If your investments are properly diversified then you are concerned about macro deflation/inflation, not about about specific PPP when measuring your returns.

RW,

I feel for you. However, I hate to sound like a broken record, but hang in there:

For example, the Orange County 3/1 house I began renting in July of 2000 was appraised then at $193k, and now with it valued at $650k circa late 2005, $193k wouldn’t even be enough for a down payment unless you made $160k (1 HaHa) or thereabouts. You cannot possibly save fast enough.

I must point out that you make a major assumption here, which is that the rate of appreciation you observed between 2000-2005 will continue, or at least not diminish significantly. I wouldn't be so sure. Many pockets all over CA are approaching (-)ive YOY appreciation, and that may just be the beginning. Also, not to be too much of a meddler, but it sounds to me like you have a whole lot of fear of dissappointing your SO. Doesn't she understand that (a) your intentions were/are noble (to save the "right" way and buy a home, and (b) even if you're renting now, that doesn't make you a loser as a husband? And what's up with hoping she meets someone with a condo who sweeps her off her feet? Is that Mr. suave FB? I mean, if you're truly hoping for that, you guys have serious issues beyond whether or not you're renting or "owning."

Again, sorry if that's too intrusive.

It is happening. I just do not want everyone to be too excited over the coming correction. It will come. We should be smiling. But we will save the laugh for later.

So you patrick.netters were hoping for a ~45% cut in RE prices within a short span of time (a year?)? When in the history of RE has that ever happened? Past history suggests more like a 6 year span.

HARM,

Quibble if you must, but I save a good chunk each month with two kids and a wife on a lot less than $200K. How do I do it? I rent (and eat in - see PP reply above).

Red Whine,

Yeah I hear you. You didn't bet on black and let it ride for 5 years, so you're the fool at the table with your original chips in your hand. Your inlaws may start changing your tune. I've been the bubble lunatic at the family gatherings for the past 3 years but at our last gathering, the smartest of the extended inlaws admitted there was a rocky road ahead for real estate. It's a 10-12 year full cycle so be patient and don't blow that nest egg.

Randy mentioned that all of the gold bugs who were crowing about their investment strategy a month back have disappeared or shut up. There's a similar quiet thats falling over the real estate boffins. Worst case, you spend an extra $25K and buy a house twice as nice as the POS you would have bought last July. Give it a year.