patrick.net

@ e-man, yeah you make sense. I guess I missed the size of that house, given it looks so crappy in the pics. You are right, that's a lot of sqft (to be verified by buyer?). ;)

It is the level of 'premium valuation' that I think is at question for me. The peninsula will definitely bear a premium for the foreseeable future. But how much? Houses I see here for $800k are literally $80k (at most) in my home state. Income in my CA zip is around $100k and in where I grew up, it's more like $40k. So, like I've said in the past there are a couple things I come back to again and again -

1) When most of the country is maybe 3x median income and (insert prime location here) house costs are 10x, seems like an unsustainable bubble. I'll grant a premium, but not that much.
2) This factor of desireability, where many want to move 'in' to the prime space (like where I lived in the upper west side NYC, or in this area parts of SF and places like Palo Alto, Woodside, Portola Valley) is hard to quantify. There are a lot of these people, but how many? I think of it as two bars on a chart. First, the number of people with the money and desire to move in to the prime area and who will therefore bid it up. They create an upward pressure that makes the median income less useful. They may have a bucket of cash but not that amazing of an income (previous house equity, parental loans, all the things we hear around here) The second bar on the chart is the number of 'desireable' properties in the prime area. I think both bars go up and down with market fluctuations.

The question for me is (and this is really what I care about), what do I do about it? I have ranted a bit but I do not have hard feelings about all of this. I would *like* to find a good house (or condo, or really cool: a loft) near my work. I know that what a 'good house' means has to be much less here than in say, Detroit. I am a student of the market, and feel I have been correct to date in 'watching and waiting'. Next move? Not sure.

SF ace says

median income in SFBA don’t mean anything to me, the income in the bay area is way too diverse to make any kind of meaningful conclusion. I honesty think you should throw out the top 10% and bottom 40% of salary to get a better idea of what people actually makes and can afford. I might also think about the 3X salary as well. It may work in Fresno, but every costs does not correlate to housing cost evenly.

Yeah, well I am thinking about individual zip codes not the entire SFBA. In some areas of the 'greater' SFBA median income to house costs actually match pretty well. Medians may not mean much, but I believe they mean something. I agree it ain't Fresno. I have lived in 5 states, from small towns to medium and large cities (including NYC) and frankly this area correlates more closely to NYC than anything else.

E-man, yeah, I get it wrt the old money. Day trader? More like a decade trader! That's the Shiller chart.

I tend to look basically from RWC to San Mateo. Or really anywhere within a decent commute of RWC, including by Caltrain. Sometimes I think of going up to SF ... This week I've browsed a bit in 95125 and 95112 because I used to live and work in those and feel I know them pretty well, and they are ok. I see you are in Milpitas.

E-man, afraid I am not a good stock trading reference for reading the technicals. I generally stay away from financials. I know a bit about the tech industry, but I trade very little. I was one of those who just did the 401k and let that fill up on big cap mutuals over the years rather blindly, which was fine as everything went up. Now I am undoing the results of that laziness. I have been moving a little toward commodities ETFs - but I am definitely a long trader.

I'll always take a good tip on property to check out! Thanks.

That was an informative post, thanks very much.

(13 :-)

Yes very informative, it basically debunks "fortress areas need to fall" that everyone talks about here. Many areas around here will never fall due to exactly what you stated. Places like palo alto, los gatos and others will remain high because they are very desirable.

You guys should research what happened to Tokyo and other "very desirable" areas of Japan....60-80% reductions in price....20+ years later...no bounce. And that is on an island with very limited space...

btw, no takers yet on the overpriced 233 Bay View POS....big surprise

someone will likely roll in and buy it with a tax-payer back mortgage, and they'll put a whopping 3% down...also given to them by the gov't and taxpayers

He points to specific reasons why a small area of the city can maintain such high property values, and you cite one of the worlds largest cities as a counter example.

The small area being described doesn't fall because it has a very small number of homes for sale per year. The people who live there have no interest in moving. The number for sale doesn't exceed the number of wealthy people coming into the city and/or building enough wealth to move into that area. Hence it's prices are supported by small customer base and smaller supply.

These are nothing alike. If you don't understand, re-read his statements, they are very clear.

Yes it's overpriced by about
$450,000 but it will sell for near asking, unfortunately. Only after interest rates start to rise will San Carlos property prices start softening.

Still no action on this house....tick, tick, tick

"New Aggressive Price"...lol

just want to to give some conclusions to these old topics. everyone was right that the property was gonna be low-balled. sold for 970K.

My relatives paid $565 / sq ft at the peak of the bubble a stones throw away from 233 Bayview, which just sold for $366 / sq ft. That's a strong down trend and an ugly situation. Lots of people in the same situation up there who either won't fess up to it or don't understand how bad their situation actually is (my relatives are the latter). My calculations suggest their home will likely continue to depreciate until it is worth 31-39% off the peak price.

Quant HF Mgr says

My relatives paid $565 / sq ft at the peak of the bubble a stones throw away from 233 Bayview, which just sold for $366 / sq ft. That’s a strong down trend and an ugly situation. Lots of people in the same situation up there who either won’t fess up to it or don’t understand how bad their situation actually is (my relatives are the latter). My calculations suggest their home will likely continue to depreciate until it is worth 31-39% off the peak price.

It's not ugly in my view at all, with regrets to your relatives. It's what needs to happen.

E-man says

I like pkowen’s perpective “It’s not ugly in my view at all, with regrets to your relatives. It’s what needs to happen.”

Agreed. I would add it was just plain stupidity and arrogance of buyers as prices skyrocketed to become cheerturds.

pkennedy says

Yes very informative, it basically debunks “fortress areas need to fall” that everyone talks about here. Many areas around here will never fall due to exactly what you stated. Places like palo alto, los gatos and others will remain high because they are very desirable.

http://www.paloaltoonline.com/news_features/real_estate/fall2000/2000_09_22.trends.php

"No one wants to recognize it, but between 1989 and 1992, prices dropped 30 to 40 percent. There's no question that could happen again. Everything has a cycle and real estate is no exception. It's foolish to think prices will go up forever. In the longer term they will, if you can weather the downturns in between. There's no way to know," Dancer said.

So what makes PA or LG imune to price declines? The majority of the price inflation comes form the free wheeling stock options of 1999. Take away IPOs and stock options what do you have left to support these prices. There is very little to support these prices. Desirabilty means very little.