patrick.net

I don't think there will be a 50% reduction in gains on housing as a whole. Instead what I think will happen is that housing-boom era housing will take a major hit. Everybody knows that most of those lofts built in SF, SJ, and Oakland are really just the cheapest container that could possibly be built for living quarters. Their appeal was only caused by the bubble. Something.. anything.. built during the bubble was seen as "a great investment opportunity". Now that the bubble is now going away, I see these lofts losing most of their appeal, if not becoming downright undesireable.
A close 2nd place would be all the vanilla homes built 2" from one another in Sacremento and other places like Pleasanton, etc. Those places are unique in only that they ALL look the same. Again, builders realized they could built anything, even if it flew in the face of human intrests, and built the same damned thing over and over again. If things normalize, nobody will want to live in the exact-same-house-as-neighbor-B-. I see these places losing a lot of lustre as well.
But for older, established areas like where I live? Most areas like this are packed full of rich people. Execs, Lawyers, Doctors, etc. These people are smart, and like anyone with a brain, they realize the value of a solid, well organized community. I wouldn't expect to easily stir them out of their hovels. Prices there will probably fall, but probably very... very.. slowly. They have the money, so there's no need to get desperate.
So my take is that the UGLY Super-suburban/ metrosexualloft areas are going to fall, and fall HARD. But the kinds of houses you and I would want to live in will probably take way longer to settle, if at all.

So my take is that the UGLY Super-suburban/ metrosexualloft areas are going to fall, and fall HARD. But the kinds of houses you and I would want to live in will probably take way longer to settle, if at all.

I do not mind living in a nice condo if the price is good. They do have some pretty NEW buildings in the Peninsula, like this one:

http://tinyurl.com/npc4d

WAY out of my price range though. :(

George,

As soon as I sign on my re-fi I will remit to you the amount of $2.50 payable in "bubble bucks" to the account of your choosing!

Currently, you can barely get anything built for 250/sqft in the Bay Area. Construction costs may not go down that much.

I'm not really interested in new places, so I'm using a 250 sq ft guidline on existing properties, as on a 1200ft place, that'll be about a 300K mortgage (with some money down), which is about as much as we can comfortably afford.

We sat out the bubble on the way up (oh, how I wish we could have afforded to buy in 2000. OK. Maybe not), and we're renting a nice place where we can stay indefinately, so for us its just a waiting game. If prices don't come down enough in the places we like the most, then we'll start looking in other less expensive places. We're not buying until we see a house we like and can afford, even if we're still looking in 2008/2009.

SHTF - good luck with the move! We only live in LA due to jobs, but if either of us was to lose our jobs, we'd seriously think about moving somewhere else too. The West Coast is great if you can afford it, but there are beaches galore on the East Coast too!

Well, at least the futures chart has some dots in it now. A good start?

http://www.futuresource.com/charts/charts.jsp?s=SFRK07

TFS Brokers,

Got a link?

DinOR, see my last comment.

When most articles in the mainstream media start by saying it is a rough/soft landing, then follow up with something along the lines of "There is more choice now, plus sometimes there are incentives, so it is a buyer's market now", it is classic spinmeistering, but it is nowhere near to a buyers market. I would classify it rather as a nervous, fearful sellers market, still wearing rose coloured glasses.

When mainstream media says price increases of 1%-5% a year equals a slowdown that equals a buyers market, this is clearly nuts, because a 1% increase in already crazy prices indicates continued unaffordability is the norm. A larger collection of unaffordable housing continuing upward at a slower pace in no way equals a buyers market unless wage growth starts to outstrip price inflation significantly quickly.

A buyers market begins to occur when prices revert to a point that a person/couple with a median income can afford to buy a decent property in an average neighbourhood without creative financing.

If buyers still can't absorb the inventory at that point, then the real buyers market begins.

Real pain has to precede a real buyers market, as sellers will not go there voluntarily. That means the real buyers market, if it ever gets here, will start first in condos and is at least 2-3 years away.

My $.02.

The West Coast is great if you can afford it, but there are beaches galore on the East Coast too!

The East Coast isn't any better!

Hi all,

"The more I learn, the more I do not know."

Isn't that the truth. However, I think we're heading into a recession (if we're not already in one). As a result, seller's of RE will cry uncle and cash will be king for the next couple of years. Unless the fed decides to cut rates, (I look for them to raise rates at their next meeting), the RE market will continue to stall and fall.

I'm not an expert when it comes to the economy, and I'll leave it to those with superior knowledge to correct me if I'm wrong. Nevertheless, I believe it will truly be a buyer's market by early next year.

Seller's market: buy now or be priced out forever
Buyer's market: never a better time to buy

Conclusion: buy, buy, buy :)

not investment advice

Thanks TFS.

You're both an introducing and executing broker for CME CSI Futures? Any way you can hint at what kind of liquidity the options are seeing?

SHTF,

Congratulations. My wife and I made the same decision a few months ago and I look forward to our own move as soon as I have a job nailed down. Life is too short to be put on hold indefinitely, or be held hostage to credit bubbles and NIMBY politics.

Personally, I'm sick of California period. Current bubble aside, living here hasn't been even close to "affordable" or comfortable for working families in well over a generation. It still amazes me how people from other places have such an unrealistic rose-tinted view of the "California lifestyle", as though everyone who lives here is a successful actor, lawyer or surgeon, and we all live in Malibu. Simply put, life here stinks for the average person --shitty substandard housing, extreme overcrowding everywhere, a flood of illegal "free riders" simultaneously driving down wages and driving up taxes, perma-gridlock in most cities, hellishly hot summers (unless you're rich enough to live ~1 mile from the beach), shitty schools and high crime. Who could ask for anything more?

Someone else can take my CA Gold Wonka Housing Ticket the next time that rare, brief window of peasant affordability rolls around (2010, 2015?). I'm done waiting.

You’re both an introducing and executing broker for CME CSI Futures? Any way you can hint at what kind of liquidity the options are seeing?

Wow.

@tannenbaum,

Huntsville, AL, Raleigh, NC & Portland, OR are all top spots on my list. Aside from being very affordable and very livable, I have family and friends in these locations.

@George,

:lol: So, I'd be trading the frying pan for a somewhat more affordable saucepan?

Marin county is really pretty. Perhaps I should get a place in Fairfax near Jack. :)

@Ryno73,

Culture is great when you can afford it. All most CA "natives" have time and money to do is go to work to feed their mortgage(s). I'll grant you, the BA is a whole lot nicer than SCAL or Central Valley --especially along the coast. However, there are plenty of other locations rich in natural beauty where an average wage earner can live a whole lot better.

Peter P,

Thanks for the link. Calling the data sparse at this point doesn't seem to go far enough! I hope the chart "fleshes out" soon! Wouldn't that be crazy, if someone here became a super sharp CME housing futures trader and paid for his/her "post bubble manse" with trading profits?

I've vowed abstinence from this blog. But cannot resist ...

What distinct culture does BA have/offer, other than geek-making-money and mindless health freaks?

I’ve vowed abstinence from this blog. But cannot resist

This is why teaching abstinence may not work. :)

What distinct culture does BA have/offer, other than geek-making-money and mindless health freaks?

It has the very good sushi.

Wouldn’t that be crazy, if someone here became a super sharp CME housing futures trader and paid for his/her “post bubble manse” with trading profits?

Short of raising a minimum of 350M to set up hedge plays using said futures, I'm afraid the rest of us will have to wait for an ETF tracking those futures.

Yes, excellent international food one of the (few) things I'll miss about CA. Sadly, this does not come close to making up for the hellish rat race that life for non-elites here has become.

What distinct culture does BA have/offer, other than geek-making-money and mindless health freaks?

Compared to? Surely not your Heimat designate?

Yes, excellent international food one of the (few) things I’ll miss about CA. Sadly, this does not come close to making up for the hellish rat race that life for non-elites here has become.

To me, food is slightly more important than my life.

HARM,

Good to hear you being angry! More people in SoCal should be. When I was stationed in Long Beach, CA (early 80's) we made around a hundred dollars a week. The truth is though we had MORE disposable income than many of our civilian friends in the area. B/c our "housing" medical and dental plus all of our meals were covered the $400 a month was for partying (save for an occasional haircut).

I'll agree, it hasn't been affordable for most working people at least since then. But I had to light a powder keg under my old buddy to get him the hell out of there. It's like this strange "co-dependency" or weird fear that keeps people paying taxes for things they don't get to use, insurance thru the roof and unreal mo. mort. payments b/c they're afraid that if they leave things will revert back to being "cool"?

Compared to? Surely not your Heimat designate?

Shanghai is way better than BA, hands down, except for the horrible summer weather.

Randy H,

O.K just open the housing ETF's at $10 a share? These guys always seem so hungry for new offerings, I'm giving it 6 months! They don't necessarily have to base it on the Case Shiller model, they'll think of something.

Shanghai is way better than BA, hands down, except for the horrible summer weather.

Isn't it too hot in the summer. The pollution is likely to be worse though.

I heard that food in Shanghai is very good. :)

Not only can you save on the purchase price, but you can have instant equity in your home.

Instant equity?

When people say cultured places in America, NY and New England come to mind. Some parts of old South, too, although I haven't been there.

When we say cultured places on this planet, the old world come to mind. Italy, Southern France, old towns in China and India, blah, blah, and blah.

In cultured places, there are traditions and people know their places in this world.

The world cultured means aged when one talks about certain food items. But the same holds for the culture of a society.

CA has nice coast lines. Nice, but not great. When I was an intern at SGI in 1994, a bunch of intern geeks (mostly from the east coast) went to visit many parts of CA with a BA native. Cool. But I wasn't impressed. The east coast is far better, if not for the insufferable summer.

I don't know why building a mansion on a view cliff is such a grand thing. I for one would be bored by such a dwelling. Occasional weekend hideaways, yes. But primary dwellings? No way.

The so-called beautiful, expensive, scenary places are for middle-class suckers who never had money and struck rich later in their life.

About TFS, from CME, for those interested:

http://www.cme.com/files/TFSHousingPresentation.pdf

HARM,

Maybe I worded that incorrectly. Let me put it this way, even hacks like myself will from time to time hit a "decent" golf shot. Friends will kid you about how you're really "sandbagging" and are a better golfer than you let on.

But to yourself you're thinking "Man, and I was just about to give up this STUPID game entirely". "Maybe I don't suck as bad as I thought". So your love for the game is renewed all over again.

Are there rare instances where you find you CAN get home in under an hour? Where there IS a great sunset? Like just enough to keep you going?

HARM, SHTF,

Hope the decision works out for you. Good luck. It must have been a tough decision. But you have to do what you have to do. California - or any place - is not worth putting you life in mortgage slavery or on hold. You will miss something, you will gain something. As long as result is more aggregate happiness for you, that's all that matters.

RE: When is it a buyers' market? I think the reason realtors are calling this current market a buyers' market is that they really don't have a better name for it. It's a stagnant market really, where sellers and buyers both have no particular advantage, and the people who are worst off are the realtors due to lack of transactions. The realtor-spin is clearly calling this a buyers market to try and get transactions going again. However, until buyers set the agenda at negotiations (eg, when Randy's lowball offers get consistent and earnest counteroffers), that's when we're approaching a real buyers market.

And…I’m in my 40s and would like to know the feeling of ‘owning outright’.

It may not be a strong feeling... property tax, insurance, and other fees will still need to be paid.

It is better to be a king with everything provided for. :)

Governor Conan Says:

What distinct culture does BA have/offer, other than geek-making-money and mindless health freaks?

lol. Is there a 12-step program for blogging addiction?

The BA is overrated. I like it here just fine. It's certainly prettier, with better outdoor activities, food and possibly better culture than some parts of the country. However, it's definitely not the be-all and end-all.

Prettiness, outdoor activities: Tetons, Tahoe, PNW, Colorado Rockies, southern Utah all come to mind as prettier with better access to outdoor stuff (opinion).

Food: NYC is comparable, if not better.

Culture: NYC, Chicago, LA, ?DC, Boston are all comparable if not better.

There are just a lot of people in the BA who HAVE to believe this is a better place to live in order to justify the rat race, paying $1000/sf for crappy homes, hellish commutes, and overcrowdedness in general.

Food: NYC is comparable, if not better.

APAC cuisines taste funny in NYC, although it has much better Italian and Continental food.

Culture: NYC, Chicago, LA, ?DC, Boston are all comparable if not better.

To me, culture is all about food. Boston has good seafood.

I want close to a half acre…4br. and 3 baths and at least 2400 sq ft. And of course mature trees.

I do not know what I want yet...

Sometimes, I _dream_ about a 3000 sqft, 3 bedroom, 4.5 bath condo with a doorman.

Sometimes, I fancy a cute Victorian house.

Sometimes, I just do not care. :)

Good mexican food is tough to find in NYC and Boston. The BEST Thai I’ve ever had is at Brown Sugar in Boston. But I can’t claim to be an expert.

Good Mexican food is tough to find even in California. I am not an expert in Mexican food though.

It is actually not difficult to judge food even if you know nothing about the cuisine: food is considered good only if you can feel every ingredient singing.