patrick.net

The sales I'm seeing are not limited to $700k. I'm watching plenty of houses up to $1M go sale pending.

If there is a continued rush to buy before mortgage rates go up and/or the credit expires, then you are going to have prices inflate again. If they inflate more over the next few months, then they have to deflate by that much just to get where we are today.

I have been patiently waiting and I think we are looking at the same area. It beats me, really. If a house is even slightly "underpriced" as per realtwhore, it goes to sale pending within a week.

Me personally dont care, I will wait unti 2012, if thats what takes to bring some sanity to prices.

Tomrisk says

Will drop another 30% in BayArea R.E.. Maybe right in some worse area with junk properties, but in good area, drop for another 5% is max.
By the end of this year, everything will come back on track and back to business. This summer is the last chance to get on the train, last call.

hahahahaha

wow

Tomrisk says

Will drop another 30% in BayArea R.E.. Maybe right in some worse area with junk properties, but in good area, drop for another 5% is max.
By the end of this year, everything will come back on track and back to business. This summer is the last chance to get on the train, last call.

you're kidding right? 5% max in the "nice" areas, where option ARMS spread like wildfire? I see.

Tomrisk, my view hasn't changed - we've been on the fence for a while which is why we are constantly looking. I still think there is potential for a train wreck in the future.

I don't see how you can miss the train. Unless we truly go back to 2005 and use toxic mortgage schemes, house prices have to have a relationship with salaries. If you can explain, in coherent English, how this is the last call for the train, I'd love to hear it.

things putting a damper on housing

1. unemployment
2. access to credit
3. fear

#3 is starting to weaken so more people are buying. #1 and #2 will eventually turn and the housing market will be back to normal. Unfortunately a "normal" market here in the bay area is one that's fairly competitive.
Right now things are still pretty slow. There are a lot of pending sales compared to last year but at least we're not seeing bidding wars.

Tomrisk says

camping says

The sales I’m seeing are not limited to $700k. I’m watching plenty of houses up to $1M go sale pending.
If there is a continued rush to buy before mortgage rates go up and/or the credit expires, then you are going to have prices inflate again. If they inflate more over the next few months, then they have to deflate by that much just to get where we are today.

You said, “Why get on the train right before the train wreck?” on my posting http://patrick.net/?p=28257
Sounds like someone start to worry that they will miss the train again.
Good time to rethink what you are believing in, never too late.
patrick.net-kers are human and human make mistake, majority always love to head to the wrong direction.
Will drop another 30% in BayArea R.E.. Maybe right in some worse area with junk properties, but in good area, drop for another 5% is max.
By the end of this year, everything will come back on track and back to business. This summer is the last chance to get on the train, last call.

Tomrisk,

While there is always a possibility that you are correct, from where I stand, your prediction has a very slim to no chance of becoming reality. I find your statement, "human make mistake, majority always love to head to the wrong direction," very interesting because, based on the statistics, the majority is buying right now!! People on p.net are the MINORITY; so go figure. Under your own logic, buying now would be heading in the wrong direction.

Best of luck to you brother...hope you are right for your sake (but don't think you are).

toothfairy says

things putting a damper on housing
1. unemployment
2. access to credit
3. fear
#3 is starting to weaken so more people are buying. #1 and #2 will eventually turn and the housing market will be back to normal. Unfortunately a “normal” market here in the bay area is one that’s fairly competitive.
Right now things are still pretty slow. There are a lot of pending sales compared to last year but at least we’re not seeing bidding wars.

Tooth,

I beg to disagree. We are seeing bidding wars; hence the opening of this thread. If the economy is, in fact, turning around, then I would agree with what you are saying. However, if it doesn't turn around, which I don't think it is or will in the short term, then prices will not stabalize or go higher. They will go lower. As for fear...if government subsudies have been at the core of the rally this last 10 months, then you haven't seen the tip of the iceberg in terms of fear. What do you think is going to happen when the governement pulls out?

Don't mean to be overbearing but these are serious times. To casually suggest that jobs and access to credit is simply going to turn around overnight is, well, perhaps a bit niave. I encourage you to take a long hard look around you and what our governement is doing.

so you are saying everyone not on patrick.net is buying....
now that is some logic

sure there are government subsidies. temporary and artificial stimulus is sort of like jump starting a car. You crank it enough and eventually the car (economy) will start running again.
I dont like making short term predictions but if I had to I would say the next artificial stimulus will target #1 and #2 above. So I'd expect them to improve as well even if it is temporary.
In fact I'd be willing to bet money that by the end of 2010 the unemployment rate will be lower than it is today.

Trivial says

so you are saying everyone not on patrick.net is buying….
now that is some logic

Nice comment from the peanut gallery...that's "exactly" what I am saying. Please, give me a break.

toothfairy says

In fact I’d be willing to bet money that by the end of 2010 the unemployment rate will be lower than it is today.

BoL stopped long back to track the accurate # of unemployed. This whole 10% unemployment is phony, as it discounts people who fell of the benefits, stopped looking more importantly underemployed. While the govt can come out with any number they want, I would think the real unemployment is 20%

http://finance.yahoo.com/news/Underemployment-tops-20-pct-apf-2783967295.html?x=0&sec=topStories&pos=4&asset=&ccode=

And I believe, it will hover around this atleast this year and next unless some new industry picks up and massively like real estate.

Tomrisk says

Will drop another 30% in BayArea R.E.. Maybe right in some worse area with junk properties, but in good area, drop for another 5% is max.

First of all, this is based on statistics pulled out of #$#?

Second, even if its true, there is no hurry to go buy, since the housing prices wont go up anytime soon. I can wait and find the best house I like. Every sale happening in my neighborhood is very good because it brings down the $/sqft for my area :) I will wait, no thanks!

Don't look now, but there are as many homes owned outright (aka no mortgage) as have time bomb mortages. You see, the entire world is not leveraged out their bottoms. I have survived several recessions and real estate implosions - including the 1990's in the S&L meltdown. In retrospect, I now realize that I blindly bought and sold homes in virtually every recession. 1974, 1984, 1991, to name a few. The current cracker box I bought soon after 9/11 when the rage was "cocooning". In every case, the worse I came out of the deal was with what I paid for the house - net. Why? I buy value, not hype. My properties are kept in near pristine condition (it's actually cheaper to maintain than *fix*). I don't take equity out nor do I use my home as an ATM. That's what fools do. If you look at history (and, yes, it does repeat itself), you'll find that all the manias - including the tulip mania - ended up in a train wreck.

The truth is, our banks are broke. The FDIC is broke. Fannie Mae and Freddie Mac are broke. The gubmint has given away about 30 grand for every man woman and child in the country and is broke. Our conspicuous consumption based society is teetering on the brink. Unemployment will bring wage deflation as unemployed people will work for less, creating downward pressure on wages. Burger flipper wages don't buy houses, cars, or $499 iTablets.

Certainly hoarding your cash is a strategy. Alternatively, you can make an informed decision and move forward. You can hide under your bed too. They are all strategies. The booming stock market is a joke. Those that say "it's up 50%" flunked math. It's up @ 25% as it fell almost 50%. A 50% increase in an asset that was worth 50% does not make you whole. You're still underwater by 25%. The stock market collapse of 1929 and resulting depression were also caused by manias. The proverbial "everyone" was getting rich in the stock market and leveraging all your assets in order to "not miss out" was contagious. Unfortunately, it all imploded. Remember Beannie Babies? How many fools do you know that spent $50 for a 25 cent stuffed animal? I spent almost $25,000 on a trip to Italy last fall. All I have to show for that are pictures, fond memories, and some credit card receipts. Do I regret going? No. They're lifestyle choices.

Homes are a place to live. Write that down. Forget market timing. If you try it, you'll miss every time. If you're concerned about losing money on a home, don't buy one - ever. Sit smugly in your apartment and writhe with glee at every market swing that negatively impacts housing and laugh at those poor fools that bought a home. When it reverses itself, you'll sit there and hope that the market implodes so you can, again, prove yourself right. Buy or rent. It's a personal choice. However, most of the people that I know who own homes are financially stable - more financially stable than the renters I know. In addition, certain geographic areas - including the Bay Area - have always been more expensive than the fly over states.

The American economy has, historically, been very resilient. However, it's based on credit and access to capital because we - as a nation - have never learned to live within our means. Credit is nothing more than borrowing against future earnings.... the pulling forward of demand. Borrowed money makes you poorer. Unfortunately, the paper pushers have taken most of the manufacturing from a U.S. base to foreign based. When you do that, you destroy the middle class. That's why you now have the rich and the broke. The broke may have nice incomes, but they're broke. They're credit slaves.

The real enemy to any economic recover are those people who want free services provided by the government. Once you remove any incentive for productivity, the resiliency of this economy is doomed. High taxes are a disincentive to work. That's why there's a net outflow of people from California. They're heading to places like Texas where middle class values still prevail and the total tax bites aren't approaching 50% of your gross pay.

The same thing is happening in some wealthy countries at east coast too.

Not much new houses, lots of sales pending. My local MLS database shows me a pattern. Homes are going under contract w/in a week when they are relatively in good condition and the listing prices are set below the tax assesment value. Crappy homes or homes listed higher than tax value are still sitting there on the list.

Maybe, people are not as broke as we thought they are. Or, maybe, more people are richer than we thought. Maybe, it's investment company, you know, those ladies teamed up in group trying to share profit by buying and selling homes together. For them, this spring to summer could be the last chance. I may able to figure out what it is in couple month, since I am keeping my eyes on dozen homes that are currently under contracts.

I think bay area, especially santa clara counties have too much money. For a couple working in high tech, it's not hard to achieve 250K annual household income. With a couple of years' saving, it's normal to afford a 1 ~1.2M housing....especially, lots of Chinese and Indian high tech immigrants, who are fighting for the top 1% school district for their kids. I think the price in south BA won't be going down,,,it'll go back pre-crisis in a matter of months.....

It's just too much money in this area,,,,,,

wkong, do you own?

NAV,

>>Don’t look now, but there are as many homes owned outright (aka no mortgage) as have time bomb mortages. You see, the entire world is not leveraged out their bottoms.

Nobody said what you stated above. No-one said that that 50% of all houses are mortgaged time-bombs, or underwater, or anything even close to that.

You are cooking up extreme statements just for effect. This is also known as erecting strawmen and then easily knocking them down.

Here is what *I* will say: One only needs a quite SMALL amount of underwater and foreclosed houses to put some serious downward pressure on the marginal price of houses in a specific area.

As Crash-Ola said, watch the upcoming effect of option-ARM loans in the "nice" areas.

Wkong,

>>It’s just too much money in this area,,,,,,

Not anymore, you must be living in a 1999 time-warp. And no, Tesla Motors filing for IPO is NOT going to change that.

high end market may be stabilizing..

http://sanjose.bizjournals.com/sanjose/stories/2010/01/25/daily82.html?surround=lfn

Certainly hoarding your cash is a strategy. Alternatively, you can make an informed decision and move forward. You can hide under your bed too. They are all strategies.

Why is it that when we replace the word 'saving' with 'hoarding', it suddenly sounds so small and ugly? And why is being skeptical of prices (especially given the recent fallout?) tantamount to being indecisive and hiding under your bed? Skepticism is good. It is the mother of self preservation. Now if we're talking about buying MREs and burying gold in your backyard, sure -- outright destitution sounds more interesting than that shit.

The booming stock market is a joke. Those that say “it’s up 50%” flunked math. It’s up @ 25% as it fell almost 50%. A 50% increase in an asset that was worth 50% does not make you whole. You’re still underwater by 25%.

For the most part, the stock market is where the vastly less imaginative keep their savings. You'd be better off parking it in baseball cards. They're a divisible asset, and more fun.

Remember Beannie Babies? How many fools do you know that spent $50 for a 25 cent stuffed animal? I spent almost $25,000 on a trip to Italy last fall. All I have to show for that are pictures, fond memories, and some credit card receipts. Do I regret going? No. They’re lifestyle choices.

Agreed, travel may not be redeemable, but it's invaluable. That might not be true, though; apparently expensive European travel has become the new BMW where status is concerned. At least according to What White People Like.

Homes are a place to live. Write that down. Forget market timing. If you try it, you’ll miss every time. If you’re concerned about losing money on a home, don’t buy one - ever.

It's not about losing money -- everyone knows by now that a house is a money pit, but if you really like your place, it can be a fun money pit, just like a restoring an old motorbike or car -- it's more about not wanting to overpay initially for something that is clearly overpriced. Price is not a subjective. There are ways of measuring the value of anything. Example: I go into a grocery store and discover that a quart of milk is 40 dollars; being of sound mind, I will consider the price v the intrinsic value of the good (rarity, utility, production costs, etc.) and decide to hold off purchasing milk that day. It doesn't change the fact that I still want milk in my coffee, and it doesn't mean that I am priced out of the milk market -- forever. It simply means I need to do some research and try to find out what the fuck is going on with milk.

Sit smugly in your apartment and writhe with glee at every market swing that negatively impacts housing and laugh at those poor fools that bought a home.

See, this is more of the same. By creating mental imagery of some indecisive tightwad wringing his sweaty hands over the latest Case/Shiller numbers, you take the notion of defensive prudence and turn into a pejorative. What does being smug have to do with it? If anyone seems smug, it's because the one satisfaction they might have is that they weren't morons with their money. Now they remain stuck fast to the sidelines, waiting for the government to quit manipulating the market on behalf of the fools who were. Right now, a caricature of the average upside-down homeowner would look something like a guy walking around head-to-toe in bubble wrap, with a pillow strapped to his butt, a giant coil spring on his chest, crash helmet and curb feelers on his ankles. In other words, underwater homeowners have been vindicated of all bad decision making and are now being propped-up, while savers have been granted nothing besides subsidizing the former. It's like the guy I know who dotes on his one daughter who is a total F-up addict with a horrible personality, while all but ignoring his other daughter who's a real self-starting firecracker with good sense. If you're not a F-up, you sometimes get little more than the (smug) satisfaction of not being one.

Unfortunately, the paper pushers have taken most of the manufacturing from a U.S. base to foreign based. When you do that, you destroy the middle class. That’s why you now have the rich and the broke. The broke may have nice incomes, but they’re broke. They’re credit slaves.

Again, that's why ratifying Tariff law should be on everyone's mind.

The real enemy to any economic recover are those people who want free services provided by the government. Once you remove any incentive for productivity, the resiliency of this economy is doomed.High taxes are a disincentive to work. That’s why there’s a net outflow of people from California. They’re heading to places like Texas where middle class values still prevail and the total tax bites aren’t approaching 50% of your gross pay.

To be completely fair, they come here because there's a tech sector. If there was a tech hub in Kansas City, they'd move there. By the way, Texas has famously usurious property tax and sales tax rates, (Taxus), and the majority of Californians who move here seem more bent on creating a little poor man's California than they do in embracing any middle class sensibility.

Austin....very well said. Thank you.

SFace & wkong...can't disagree with you, which frustrates me. The apparent reality of affluence in the BA, particularly the south BA is just something I (perhaps "we") need to deal with. Only time will tell whether the level of affluence will dwindle but for now it is where we are at. Gotta say, I grew up in the south BA and consider it my home. If I didn't have such deep roots, I would move in a nano-second. The competition for housing and cost of living is total BS and the techies can have it. Even with the deep roots, I wonder a lot whether getting out of here is the way to go.

For me in Portland, Oregon it's not about finding bottom or worrying about missing the train, it's about affordability. We already went down the route of buying too much house, went through lay-offs and career change and now we have two kiddos.

Unless we want an hour commute or to live in Felony Flats, we are very comfortable renting, comfortable missing the bottom...

Until we are past the diaper and $$childcare$$ stage we are content being 'loser' renters:O)

Austinhousingbubble,

>>See, this is more of the same. By creating mental imagery of some indecisive tightwad wringing his sweaty hands over the latest Case/Shiller numbers, you take the notion of defensive prudence and turn into a pejorative.

Applause for the elegant deconstruction of the Buy! Now! Housing Cheerleader Propaganda (TM).

Beautifully done. I don't have the patience myself to wade through all their long-winded claptrap .

Leigh,

That's right. It is all about affordability. And if you buy a house for a price that soon no-one else will be able to afford, you are setting yourself up for a loss later in time.

>>Remember, the program will end by April, first time buyers are in hurry.

What is that program again?

Save 8000, pay 16000 more than you otherwise would, then lose another 32000 when the prices fall again after april.

Sounds about right.

The 'program' is not just for 1st time home buyers. I think there is $6,500 in tax payer money waiting for others to purchase. But how much does that help in the Bay Area when you are lookin at such expensive housing?

Tomrisk says

Sorry, I just cannot say whatever you people want to hear.

You mean sort of like the front page of this site? :) I wish I could say only what people want to hear but I'm more interested in getting down to the truth.
So unfortunately I have to bring up some more bad news. There's also the folks who sold at the peak and have been renting ever since and sitting on a pile of cash. Not sure how many are in this category but anecdotally I know of at least one.
I feel this may be another factor driving high end sales at some point.

Most of the people I talk to who are looking to buy a house are pretty ignorant about historical Bay Area prices, cap rates, unemployment outlook or the whole situation with Option ARMs in the desirable areas. They only compare peak bubble prices to current prices and see this as a good opportunity to "get in before its too late".

people have pretty short memories and attention spans. They read a few headlines and talk to a few Realtors and are now convinced things are OK now. Just look at the stock market. Just because the desirable areas have not crashed yet, doesn't mean it won''t. I show people the rate reset chart and they gets this glazed over look in their eyes....

Tomrisk says

Sorry, I just cannot say whatever you people want to hear.
Recommendation:
Check with your lender, hear their side of the story and see what’s going on here in Bay Area.
Believe it or not, lots of transaction were done in cash, buyers were not even bother to go through the Bank.
Also, people have the pre-approval letter having a hard time to locate a house.
Remember, the program will end by April, first time buyers are in hurry.
Besides, Banks and Lenders try all means to keep the troubled house owners in the house rather than kick them out. Foreclosure properties flooding the R.E. market are not going to happen in Bay Area.
Fact is, in Bay Area, lots of people lost their jobs, about 10% to 20%, but the other 80% still making good money and 30% of them are waiting on the sideline.
Good luck house hunting.
Peace!

how does your lender know anything about cash transactions? Where is your data on all these people buying with cash? All these arguments have zero way for verification.
its like the mythical chinese immigrant buyer argument (or Russian/South American buyers in Miami etc)... lots of speculation and fantasy.

What happens when those programs expire and buyers are "not in a hurry" anymore?

I aint in a hurry ... Lord Barry can stuff that $8K in Barney Frank's behind.

Closer to truth numbers can be found here -

http://www.shadowstats.com/

Hi Everyone

I live in Danville, which is East of San Francisco and is not considered Silicon Valley. Homes early in January went pending very fast. Lots of homes came on the market in the last 2 weeks and did not go pending yet. Bernanke is pulling the plug in March so things are getting less rosy fast. Hang tight everyone, I think a slowdown is coming soon.

Watchdog: Bailouts created more risk in system(Edited for relevant too topic)
By DANIEL WAGNER and ALAN ZIBEL, AP Business Writers Daniel Wagner And Alan Zibel, Ap Business Writers 1 hr 18 mins ago

WASHINGTON – The government's response to the financial meltdown has made it more likely the United States will face a deeper crisis in the future, an independent watchdog at the Treasury Department warned.

The problems that led to the last crisis have not yet been addressed, and in some cases have grown worse, says Neil Barofsky, the special inspector general for the trouble asset relief program, or TARP. The quarterly report to Congress was released Sunday.

"Even if TARP saved our financial system from driving off a cliff back in 2008, absent meaningful reform, we are still driving on the same winding mountain road, but this time in a faster car," Barofsky wrote.

...
Much of Barofsky's report focused on the government's growing role in the housing market, which he said has increased the risk of another housing bubble.

Over the past year, the federal government has spent hundreds of billions propping up the housing market. About 90 percent of home loans are backed by government controlled entities, mainly Fannie Mae, Freddie Mac and the Federal Housing Administration.

The Federal Reserve is spending $1.25 trillion to hold down mortgage rates, and millions of homeowners have refinanced at lower rates.

"The government has stepped in where the private players have gone away," Barofsky said in an interview. "If we take government resources and replace that market without addressing the serious (underlying) concerns, there really is a risk of" artificially pushing up home prices in the coming years.

The report warned that these supports mean the government "has done more than simply support the mortgage market, in many ways it has become the mortgage market, with the taxpayer shouldering the risk that had once been borne by the private investor."

Barofsky's report echoed concerns raised by housing experts in recent months, as home sales and prices rebounded. They warn that the primary reason for the turnaround last year has been billions of dollars in federal spending to lower mortgage rates and prop up demand.

Once that spigot of cash is turned off, they caution, the market will be vulnerable to a dramatic turn for the worse. Daniel Alpert, managing partner of investment bank Westwood Capital, wrote in a report that national home prices are bound to fall 8 to 10 percent below the lows of last spring.

"The lion's share of the remaining decline will occur in markets that saw sizable bubbles but have not yet retrenched," he wrote.

Officials from the Obama administration counter that massive federal intervention has helped the housing market stabilize and prevented more dire consequences.

Barofsky's report also disclosed that, while the Obama administration has pledged to spend $75 billion to prevent foreclosures, only a tiny fraction — just over $15 million — has been spent so far. Under the Making Home Affordable program, only about 66,500 borrowers, or 7 percent of those who signed up, had completed the process as of December.

He said the key to preventing future crises is to reform Fannie Mae and Freddie Mac, create and improve loan underwriting and supervision of banks. He stopped short of endorsing specific proposals for overhauling financial regulation, but said many of the proposals would go far to improving the system.

Once that spigot of cash is turned off, they caution, the market will be vulnerable to a dramatic turn for the worse.

The thing to keep in mind is that spigot is stuck in the on position, and they will not cut the cash flow if there is even a remote threat to the "housing recovery."

Austinhousingbubble says

The thing to keep in mind is that spigot is stuck in the on position, and they will not cut the cash flow if there is even a remote threat to the “housing recovery.”

They can only keep this spigot on so long as they can keep issuing T-Bills at low interest rates. If the overseas buyers dry up, rates WILL go up. The spigot may stay full of funds, but they'll come at a higher interest rate.

They can only keep this spigot on so long as they can keep issuing T-Bills at low interest rates.

I suspect there will be any number of gimmicks deployed to gig the market that we haven't thought of in order to keep houses moving at puffed up prices; perhaps community service in lieu of down payments, etc. In any event, I fear the bubble is back and is here to stay for a long time.

kentm says

wkong, do you own?

I wish I did. Pocket is shy....