patrick.net

DinOR,

GOOD POINT! It takes time we do not have to recover from a $100,000 mistake.

They will have a names for us when we go house shopping looking for pre-bubble prices - "Vultures."

If a fellow bought for $400,000 in 2004, he should be happy to sell for $425,000 in 2007. That is, unless he HELOCed a couple hundred grand. In that case, if he is asking $600,000, he is really playing the buyer for a rube by expecting the buyer to pay off of whatever the seller spent his HELOC on.

The buyer and his realtor may consider me a "vulture," saying I am taking advantage of a down market to "steal" a house from a poor, distressed individual. I say the seller is a jerk, expecting me to impoverish myself to bail him out of his overspending.

I too, am looking ahead to 2007. But we may only have to wait until school starts for the fun to begin!

This isn't a buyer's market. The term "Buyer's market" doesn't even belong in the conversation when it comes to housing.

So.. my friends, the time has come for me to make an announcement. Many of you have listened to me go on and on and on about someday moving to another state, another city, another town where living is more affordable, and the salaries actually pay for the costs of living.

That time has come. Me and my wife had a serious conversation last night. We are now definantly moving out of the state within a year or less. We haven't decided which city we are planning to move to. Nashville, Asheville, Raleigh Durahm, Chapel Hill, and Richmond are all possibiltites.

So I have to tell you that as soon as we made this decision, my whole outlook suddenly changed from one thing to another. Housing isn't a problem. The cost of living isn't a problem either. The problem is the job situation.That said, I feel better about it because I sent in a few replies to a number of agencies in some of these cities, and heard back from 2 within 10 minutes. They NEED people with my skills badly. The kind of people with my skills that are plentiful and common in California are severely lacking in these areas. So in many ways, I am deeply relieved already.I think finding a job will be easier than I previously thought. I hope.

I am now going to start consolidating, selling, and getting rid of my accumulations of junk and unneccesary items. The move is now more about physical preparation than financial concerns. I've already looked at homes in all of these areas are realistically within our range. We do not plan on buying when we move to wherever. We want to really get the feel of the area first. That and even though homes are extremely affordable by CA standards, they are still overinflated there. The prices will come down there too, hence renting will be like saving at the same time for the future when those already low prices are even lower.

I have no doubt that I will miss it here. I've grown accustomed to the area, the food, the people, music, and weather. But I've also been feeling like I increasingly need to run the rat race for years in order to simply save up enough of a down payment to purchase what I would still consider a sub-par home.That's not a good feeling. Perhaps the prices will fall. But even if they fall 50%, we're still talking 450-500k for an average home, and if the prices fall that much, there will be so much stagnation in the economy that those prices might as well be bubble prices since the economy will be in the shitter. Maybe not. Maybe someone will invent "booble.com"

Our decision to move was based partially on a desire to be near our families and also so that we could live a normal lifestyle with the kind of middle class, back yard BBQ exsitence we grew up and came to expect as a given for those of us who made the effort to suceed.

Perhaps I am totally wrong about all of this. Maybe I'm a quitter. Perhaps things will turn out amazingly well, and all of us would have been able to pounce on those lovely craftsman houses while all the idiots that used IO loans squirmed under their foreclosures. I don't know, I can't predict the future. Instead I am placing my bets that a better future lies in an area that provides a suitable economic situation for it's residents. That's why I'm placing my bets that the Southeast will be a future growth spot for people like me, perhaps the last frontier of classic middle class America as we know it.

I've learned a lot living here. I have come a very long way, worked at numerous companies, honed my skills, tried so many diffrent things, met so many diffrent people with a diffrent point of view. I will use this knowledge for the rest of my life, wherever I go. Whether we wind up becoming residents in Nashville or Raleigh, I'd say the things I did and saw in California were a great benefit and will only help me appreciate what other things life has to offer. I will also appreciate what people in those places take for granted: good schools, roads, affordable living, and homes that are within reach. Even nice homes. I have a new appreciation for the American dream, and I will hopefully find it in these new places. I've been gone for a long time now. perhaps the " new south" is set out for me to rediscover.

I wanted to thank you all for being a great help in educating me. I don't have a high level degree or a comprehensive knowledge of economics either. My decision is what's best for me and my wife. I'll keep you all informed as the time creeps forward.

MA,

Seriously? Last I heard the Fed Funds futures were at only a 28% chance of yet another delicious raise.

Headset,

So good to have you back sir! You've nailed it. Nailed it with the precision that we all expect from "aviation types"! You know one gal that used to post here *athena* was fond to say, "No, I am not interested in buying you maxed out credit cards". Another one of her gems was, "Making someone else's retirement (one payment at a time)".

The fact that I'm unwilling or just plain unable to afford to pay off your trip to the Bahamas, your brand new SUV, kids college and mom's well, ahem "augumentation" shall we say makes ME the bad guy?

Yeah sure right whatever. I'M the Vulture, I'M the bad guy.

Guys,
Again I appreciate all the advice and comments. The decision was almost a 50/50 split over family being closer and cost of living. Many of you were right. I was bitter over the situation. After talking with a few of these agencies in these cities ( one in Nashville, one in Raleigh) I'm actually pretty excited because it will be cool to go to a job I enjoy and have the paycheck go somewhere besides a mortgage.
I plan on having a garage for my classic car, a small workshop, a garden, and a screened in porch. Maybe a house built in the 30's, like an old farmhouse. I realize that there will probably be wal-marts, Home depots, and Cracker Barrels galore. I also worry that I might have to order my favorite beer online. But these are small things and I'm sure within a year I'll get used to it.
You know what's funny? I already feel about 200% better now that the decision has been made. I do plan on enjoying it here, but hopefully we'll be moving during the torrential rainy season so it won't hurt as bad when we do skidaddle.

A buyer's market is one in which the the sellers are desperate.

I doubt prices will go back to pre-bubble level. I think they will retrace at most 50% of the gains.

However, I cannot ascertain the starting point of the boom.

It’s a classic bid/ask spread gap. No one can make the market.

Just like the housing futures market. ;)

Markets are reacting to rising chance of another rate hike. Indicators today revealed the strongest inflation measured in over 10 years. I think oil prices are finally working into the inner economy...it just took some time to squeeze all the way through.

RE is going to have a large impact on the job market as more realtors®, mortgage brokers and construction workers are laid off as the market continues to slow down.

Reflexivity - housing layoffs will further depress prices, causing more layoffs and more price reductions.

When it comes, it COMES. 8-O

Peter P,

You've reverted to hard-landing?

You’ve reverted to hard-landing?

The more I learn, the more I do not know. Bay Area is a funny place.

Ever aware of the BA bias to the blog I may agree. Perhaps only 50% of the gains will errode in the BA. However for much of the country there's a very real possibility that we'll actually "overshoot" and totally erase ALL of the gains since 1998? Just yesterday I'd read some of the most ridiculous "reasons" that Phoenix won't tank any further. I mean comical.

You know much of the run up in Bio-Tech stocks in the 90's was built on the same basic premise. Wealthy boomers (wanting to be "forever young") will POUR money into lifestyle and actual legitimate drugs. The story (like all good ones) had an element of truth to it. But valuations and reality parted ways by the late 90's as the "pitch script" got stretched a little thin. Looking back, in order to justify the the stock prices virtually ALL male boomers would have to have E.D. Virtually everyone would have to have alzheimers etc. Different asset class, same tired story.

A buyer’s market is one in which the the sellers are desperate.

Alot of them are already desperate, but it sure as hell isn't a buyers market. Right now, it's a suckers market and Realtwhores are trying everything they can to get to the very last few sheeple who spend too much time in front of the TV set watching reality shows and not nowing a thing about what is happening in the Real Estate. From what my wife told me about one of her co-workers buying last week, I can see that there are still some left.

As far as when it will be a buyers market, when a POS mobile home in a shitty area such as this goes for a few thousand instead of $200K. Then, when that happens, I will re-evaluate whether or not it is a buyers market.

A buyers market is when it is actually a good time to buy and we all know (at least us anti-sheeple folks) that we aren't there yet.

I'm waiting until a 2b/2b with a decent (5000+) lot can be had for around 250 per sq ft. Over here in the San Fernando Valley prices are already starting to halt, but no one has really reduced prices to a point where we can afford a mortgage.

Most places - Sherman Oaks, Encino, Tarzana - are still about 500+ per square foot, so we'll just wait it out until square footage comes nearer to what we can afford. If they don't go down far enough (which is a possibilty as all these areas are 'prime') then we'll look for somewhere in another, cheaper part of West LA (Palms, culver City etc..).

As far as a 'buyers' market, until prices come down to what I can afford (as opposed to what the sellers want/need) then its neither a buyers or a sellers market for us.

Personally, I'd like to buy a place in Topanga (90290) with a little land. Prices are astronomical at the moment...1.5 million plus. however, even Zillow is showing prices dropping there. Those 2.5 million houses are showing on Zillow for 1 million, and dropping. So, give it a year and some of them may be affordable.

I'm still calling for more like 100% reversion to 2001 prices in non-prime neighborhoods.

I offer the anecdote of our first BA home, which we purchased for $365K in 1996. Nice safe neighborhood in Redwood City, terrible schools, 3BR, 2BA, 1800sqft, cute little yard.

That home more than doubled by 2000, and now comps on the block are selling for over 1.1M. I'm sorry, 1.1M for 1800sqft is bubble. But even 915K, a 50% reversion, might fly in Menlo Park or Palo Alto, but not Redwood City.

I’m waiting until a 2b/2b with a decent (5000+) lot can be had for around 250 per sq ft. Over here in the San Fernando Valley prices are already starting to halt, but no one has really reduced prices to a point where we can afford a mortgage.

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

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.