patrick.net

FR,

That's the whole point. The "OR" in DinOR tends to imply I'm from Oregon? I'm hardly intimate with the BA (other than 3 mos in the service in the 80's) so I'm no expert and I don't portray myself as such. But it's like you guys are painted into this teeny tiny corner and tout endlessly about these few select communities that (up until this point) have remained largely unscathed by a bust that's affecting the balance of the country. Really, I dare you to go over to Ben Jones' Blog and tell everyone there about how "rosey" things are. Dude...... they'd eat you ALIVE!

FR,

Let me put it to you this way, o.k? Why is SO important that your home continue to appreciate? (And in a wild fashion I might add). Why is that so important to you? If we're so obsessed with "affordability" why are guys like you so determined to go "double or nothing" ensuring that future buyers will be forced to use even more rickety financing than you did? How is that "progress"?

Surely you have other investments? WE all do!

SFWoman,

Thank you and good morning! Exactly. The value derived from having a storm cellar is in one's being in there "before" the storm. (They're of little use to the dead).

SFWoman,

I sometimes get concerned that folks here might get the wrong impression. I'm a stock "trader" not an analyst. Big difference. Now..... I DO get my "dope" from analysts but I want to make sure that much is clear.

What is also clear is that RE momentum players are on their feet cheering for ever more "creative" loan products b/c they know. They know it's over. The only way any GF could possibly "afford" their overpriced hovel is with even greater leverage. They know. They're barely making the payments now, no one of any prestige lives in their neighborhood/complex so their GF HAS to come from within their own ranks. They know.

And you don't have to be a REIT analyst to see that.

FR,

O.K whatever.

So it's "o.k" for equity locusts to migrate endlessly in their pursuit of easy money taking their "road show" to Vegas, Boise, Bend and Billings, MT but it's NOT appropriate for us to comment on it? Where do you think all of the money that drove those markets came from?

None of us lives in a vacuum. In spite of your deep and debilitating state of denial, neither do you. How is it possible to have a serious and undeniable market correction from coast to coast and yet have the BA walk away without so much as a scratch? Look, I've put several credible questions before you that you've conveniently chosen to ignore. You've refused to address the core issue of just why constant and unceasing appreciation is so damn important to you yet for some reason can't fathom my frustration? Next time change your screen name to "Get Real" o.k?

SP,

your post clearly spells out what this website appears to be all about.

"I am pretty certain your mind isn’t open, but in denial - and based on the data you provided, you are NOT “on the fence”."

I meant on the fence as to whether I believe a serious correction is coming in the BA douchebag.

"Your data, if true, means you are a Fucked Borrower, who has put his finances at risk to buy a shitbox near the peak of the bubble — and is understandably desperate to see this bubble continue (at the expense of other people), so that your bet doesn’t go sour and put you deep in the shithole."

awwww, SP can't buy a house. Another solid argument.
Anyhow, I guess I rest my case. At least a couple of people tried.

To those that did, your arguments seemed to speak mostly of the yield curve. Which is a good indicator, for a recession. However, for some reason recession does not equal BA housing correction. ie... dotbomb, housing continued to go up in the area. I remember reading an article in the San Jose Mercury in the 2001 timeframe which was title "Housing continues climb, but at a slower rate".

Imagine me sitting there in 2001, 23 years old, with a good engineering job, wondering why I couldn't buy a house. And I WAS SURE that the dotbomb bust was going to make housing go down. In fact, everyone WAS SURE. But it didn't.

So, yield curve is good for predicting recession. But is recession good at predicting housing collapse? It wasn't 6 years ago.

Fuzznuts,

Talk about taking two personally selected data points not making an argument!

You're outta here!

DinOR,

note that I did not say recession never causes housing to go down.

Anyhow, I'm not saying any of this to get in an argument about arguments. I'm looking for someone on the board to tie it all together.

The zombies are out this morning.

Trees grow to the moon. Every asset which has ever undergone unusually high appreciation has continued that appreciation indefinitely.

It's been mentioned many times before, but I suggest reading "Devil Take the Hindmost" to get a historical sense of bubbles. Those of us predicting a bust are partially basing it on the psychology of man. Groupthink affects bulls much more than bears. It's a fantastic party, but when they take that last step of the staircase... bang.

Through Google cash source pumping $$$ onto the penisula, the BA bubble may be the last to pop. As DinOR points, out, a survey of Ben's blog shows that the rest of the nation is popping hard right now. If the BA defies gravity, the solution is to leave the area. Painful from a personal perspective but not as bad as the nightmares BA owners are going to have over the next 5 years.

Yeah, Fuzzy Math and Confused Renter....

....shift yer arse off the chaise longe, tell the Houris to stop handing you peeled grapes for a mo', and explain to us why we're wrong?
You can't just wander in somewhere and demand the locals prove 6 impossible things before breakfast with out doing a bit of hard graft yourselves.

I admire your chutzpah for coming here and being contrarian, but, as a minority, its up to you to argue your point to us, not for us to argue our point to you.

If not-then despite the flood of housing data to the contrary - there are still bullish sites like the SDCIA Messageboard, or Bloodhound Realty - which would be more your cup of tea.

dryfly,

Typically I don't care to start my Friday's out w/ he said she said either (myself being the "he" here) o.k?

You just can't get these bulls to give it up as to why RE has just gotta gotta go up! (Other than they bought at or near the peak and all things considered are already screwed).

I know it might be tough to see the impacts of the "rolling bubble" from Guttenberg, IA but if you shared a border w/CA you'd definitely be feeling it! Bend and our coast are awash in bubble bucks and even dives like Ashland and Medford have become unaffordable to locals. Do they give a rip? Pffft. They'll ditch their specuvestment in "wet hell" like an ugly girl at a dance!

"It's a fantastic party"

FRIFY, like I always used to say, "Relax...... the cops won't be here for another 10 minutes!" Or:

"Quick, somebody give me a drink before I pass out!"

You know, no one appreciates more than a self-educated person such as myself the value of being disrespectful to your mentors when you're not getting the answers that suit your agenda!

Nobody, and I do mean NOBODY calls my pal SP anything other than SP alright!

Contrary to trolls insistance this is hardly a "love fest". There's a constant and spirited difference of opinion. As events have unfolded before our very eyes that difference has greatly narrowed as a function of market conditions. Oh btw, ISM #'s says the hopes for a soft landing got lost behind us on the last bend in the river along with "free lunch" and his rowing partner "anti-gravity".

"despite the flood of housing data to the contrary"

speedingpullet, well said. The entire post. I'm really at the point where I don't feel I have to prove anything to any bull. If you're the guy pitching an upside down asset in a declining market YOU make the case to me! Absolutely.

Oh btw Merrill Lynch's RE analyst used the term "barrage" not flood. Either works but "flood" might mislead the reader into believing that all that's required is hiking up one's pant cuffs. ""Barrage" OTOH tends to imply that ducking and hiding would be more appropriate.

dryfly,

My HS buddy got a job w/the Milwaukie Road (when they were still in bus.) and slept in a caboose in G-Berg! For kids from Chicago it looked a lot like "Children of the Corn" so we would do a road trip to cheer him up. As I look back it really was neat little town. He married a bar owner gal and they live in Calamus.

My HS buddy got a job w/the Milwaukie Road (when they were still in bus.) and slept in a caboose in G-Berg! For kids from Chicago it looked a lot like “Children of the Corn” so we would do a road trip to cheer him up. As I look back it really was neat little town. He married a bar owner gal and they live in Calamus.

Is this some kind of code? Coptic?

X,

Yeah! LOL! Actually G-Berg is a town that time forgot. It's pretty backward and I think we were the only "crime" they'd ever had.

Face Reality said :

Care to tell me where exactly the crash is in the Bay Area? Sunnyvale? Cupertino? Palo Alto? San Mateo? Where?

Welcome back.

I will tell you where crash is. If you accept BA as more than those 4 cities. The crash has begun. It has started in Tracy. Pleasanton/Dublin is following suite. It has started in Gilroy. Morgan Hill is falling.

Even your San Mateo "median" is down YOY. I am sure you know median distorts the picture on the upside. So individual houses are down much more than that.

Search the archievs of this blog for "Evergreen". You will see posts detailing individual houses, MLS number listed with their history of reduced prices over sitting on market for 6 months.

You might have noticed that inventory has stayed high and has not gone down as much as seasonal patterns would indicate. If you search for reduced priced listings, you will find such in Cupertino as well.

This is just the begining. It's equivalent to nasdaq dropping from 5K+ to 4900.

This is in spite of a strong job market in BA and low mortgage rates. Come spring there will be more inventory, -ve YOY median - even in cities you mention, and a tremendous change of sentiment. Come 2008, you will have ARM resets. You will see price drops even in Monta Vista, how about that ?

That's my prediction. So come back here next summer and then in summer of 2008. And we will ask each other, where is crash.

No one knows the speed and depth of "crash". Why pretend in predicting exact numbers ? As long as numbers keep going down, bears win.

3. They are relying on historical data when we are in a climate we haven’t seen before.

I missed this one. Every victim of previous bubbles has thought the exact same thing. Newton held off from the South Sea bubble until he could no longer resist the pull of the tremendous gains everyone was bragging about. Then it all came tumbling down once he committed his money.

Like Newton, you're only human Fuzzy. These bubbles are castles in the air created by mass psychology of people saying "It will not go down... it will not go down..." and they're right for a lot longer than anyone expects because people on the sideline start chanting the mantra and the cult grows until there are no more converts to the ponzi scheme. Once you break the growth pattern and the mindset behind it, everything comes plunging back to earth. This is happening RIGHT now if you just open your eyes. Devil Take the Hindmost charts this same psychological pattern for 350 years and there is nary a decade or two without a bubble. "Those who do not study the past are doomed to repeat it."

Remember the scene in Empire Strikes back? Luke is losing his concentration as we speak... "Han?! Lea?! Greenspan? Bernanke?". R2D2 is about to plunge into the swamp.

StuckinBA,

Thanks. (Where were you guys at 5:00am this morning?)

I told the guy, I don't have the lay of the land on the BA b/c I don't live there! I could not have been more open about it!

What these yahoos also fail to realize is that for bubble watchers right now it's like we have an 8 car NASCAR pile-up unfolding in front of us (FL, MA, SAC etc.) and they keep trying to divert our attention to the pits. When the we get the flames put out and dust settled we'll let you know!

Post #173 posted at 2006-12-1 @ 10:12:52 am by Jon seems to be in moderation because of two urls. Can someone let me know how to approve it for publication? Or just go ahead an unstick it, please?
TIA
SP

Perhaps all of you are right, and there will be a crash. As some have pointed out, it is already in our midst. That much seems to be obvious.

As to the extent of it, the soft landing seems more likely. Although cults like yours attempting to spread fear could feed into a more abrupt crash. That's where the psychology comes in. How bad will people freak out when their house drops 20%.

The BA will certainly get hurt, but will probably still continue to defy gravity on the affordability front. Lets be real, a large majority of the people priced out at $750K will be priced out at $600K (a 20% drop). For the most part it means people like me who with creative financing can afford $750K, will be able to grab a safer loan for the same house.

Anyhow, as the crash slowly plays its way out, we will all be 5-10 years older. Are people gonna sit and wait until their 50 years old to buy their first house? Probably not.

Randy's Bubblizer is based on the time value of money, which will stand to increase any loss over time realized by the difference btw. owning and renting. Is there a time-value for quality of life? Is quality of life more important now than 10 years from now? It should be, as the chances we will be alive goes down the further out you look.

DinOR :

No problem.

Did you notice the change in the tune ?

- BA will not go down, strong job market, great weather, everyone wants to live here
- Cupertino and Pal Alto are not down (who cares aboue rest 98% cities)
- It's down only 5%, where is the crash ?
- You said it will be down 20% in 2 years, but it took 4 years and it's down only 15%

Yeah right. Dude, we were wrong. I admit it.

I agree with HARM. Time has come to ignore Fuzzy Math.

The constant change of arguments is tiresome.

Jon,

In spite of our age differences I find myself in very similar circumstances. The only other variable I could assign would involve going back to all of my clients and renegotiating fees which would totally screw them over and conflict with everything I stand for but...... I would be able to swing that $5,800 a month payment!

It's all about values Jon. You know that. Other than treating people ethically and fairly there are other perks as well. Like being able to afford to be generous once in a while! How many neg. eq. FB "owners" will be kicking in this Christmas when it it means the difference of being able to afford gas to get to work next week or not?

FRIFY,

my eyes are opening to it.

I don't think I will do anything about it, except keep trying to make as much money as possible in my career. As long as my income can support my potentially bad investment, I might even root for a crash. Then I can buy the place next door with a much bigger yard and knock down the fence :)

StuckinBA,

Oh yes. You could say I've noticed. In sales this is called "fetch". The prospect tells you, it's your software. O.K, you show him they are in fact compatible. Then he says, it's your price. Then you show him where you sit amongst the competitors. Then......

The bottom line is that the guy either doesn't need, or can't afford your product. If you're going to survive you need to learn how to weed these dickheads out quickly.

If you're asking for a "big order" I'll play fetch for a while but the guy had better be a whale! Fuzzy is a minnow.

See?

What is wrong with changing arguments?

Playing contrarian is a good way to hear someone's point of view, and to ascertain the solidity of it.

Some of the people on this site have been helpful, others just reply to a contrarian argument with insults.

@Fuzzy,

Bubblizer is based on the time value of money, which will stand to increase any loss over time realized by the difference btw. owning and renting. Is there a time-value for quality of life? Is quality of life more important now than 10 years from now? It should be, as the chances we will be alive goes down the further out you look.

You may be a bright engineer, physicist, whatever. But you could use a nice basic finance course. There is good reason that, when you look at a typical silicon valley company, the engineers are almost always the single worst group of employees when it comes to monetizing their stock options (and the best are usually the lowly bean counters).

TVM "tends to increase the difference over time"? Isn't that the point??? I thought that physicists understood first order derivatives.

And for the record, the Bubblizer forces you to choose a period -- a fixed number of years for which you are planning. Set it to 2 years if you don't care about the difference over the entire time you'll be living there, paying your loan(s), and waiting until the fateful day when you need to sell it to the next bigger sucker -- or so you hope.

There is a time value for quality of life. Economists call this utility. It's what *you* get out of something you buy. If you get more utility than someone else, you'll be willing to pay a higher price. That's what makes a market. But this utility also comes at a price. Nothing is priceless. Simply, because you don't have infinite dollars.

If you feel good saying "but you can't put a price on seeing your kids run through your own little garden on a Sunday, August afternoon", then so be it. But I can put a price on it for you. It's the maximum amount you are willing and able to suffer.

The problem you face is that (a) many people to whom you'll be trying to sell your house in years coming will not be _able_ to buy your house for a price that causes you to break even; and (b) many other people who can afford your home will not be _willing_ to pay your future price for the utility the believe they'll receive.

SF guy,

"For the most part it means people like me who with creative financing can afford $750K, will be able to grab a safer loan for the same house"

I was not referring to myself personally. But in general people with similar incomes.

Randy,

I was not downing on the Bubblizer. It seems to be a handy tool.

If you reread what I wrote, I was not discounting TMV. And I noticed you even have a cell in the spreadsheet for how much owning a house is worth a month to the user.

It was that cell that spurred me to think about what it is actually worth, and if that can be as simple as $/month. Seems to almost be more of a philosophical question.

btw... perhaps an improvement to the bubblizer would be to encapsulate different loan structures.... like the creative ones for instance :)

What is wrong with changing arguments?

Playing contrarian is a good way to hear someone’s point of view, and to ascertain the solidity of it.

I agree with that. I also suggest that you ignore the namecalling from our troll-hunters and not reply in kind.

Everyone needs a foil and thus I think it's wrong to scare away borderline bulls like yourself. What you should realize is that bear crowd here is just somewhat tired of fighting the same battles here and with their co-workers, friends and inlaws. It's always us admitting that we could be wrong and that we need to pay attention to the data and to weigh the numbers between buying and not buying. Then we get lectured to by someone in a 1 year adjustable ARM who's been paying the negative amort amount every month and yet has scored a cool $200K of paper wealth (and used half of that on their cars).

Yes, you could keep the place and work like a dog to be able to upgrade when the cards come crashing down. With a 6% exit fee, I'd probably stick it out myself, but fortunately, I'm not in your shoes.

It was that cell that spurred me to think about what it is actually worth, and if that can be as simple as $/month. Seems to almost be more of a philosophical question.

It is nothing philosophical, perhaps just emotional.

On the original topic of Groupthink:

From the "groupthink wiki",

"antecedent conditions" likely to encourage groupthink:

* High stress from external threats with low hope of a better solution than the one offered by the leader(s)
* High group cohesiveness
* The persuasive strength of the group's leader

- This group is not highly cohesive.
- This group has no de jure or de facto leader. Patrick is the originator and technical/legal owner. Admins are appointed by Patrick, largely based on their authoring contributions and luck of timing.
- Anyone may take up the call to author, without implied or explicit censorship by any "leader".
- External threats would be the continued housing bubble itself. This group offers no direct protection from that threat. This group offers indirect support for others who similarly decide to attempt to avoid damages from the housing bubble by taking personal action, not by submitting to the group which promises to take action on their behalf.

His/Her eight symptoms indicative of groupthink:

1. Illusion of invulnerability
2. Unquestioned belief in the inherent morality of the group
3. Collective rationalization of group's decisions
4. Shared stereotypes of outgroup, particularly opponents
5. Self-censorship; members withhold criticisms
6. Illusion of unanimity (see false consensus effect)
7. Direct pressure on dissenters to conform
8. Self-appointed "mindguards" protect the group from negative information

1. Some here have the illusion of invulnerability. My own judgment counts exactly one in that group. Everyone else has expressed reservations, fears, doubts, and realism to greater or lesser degrees.

2. I don't think anyone here believes this group to have superior morals to the outgroup. There may be some self-righteousness held by savers, when comparing themselves to debtors. But that is not exclusive to this group. Probably 100% of the population over age 50 in the Midwest also 'fails' that test.

3. This group has no shortage of devil's advocates, internal contrarians, and even anarchists.

4. This group does tend to share stereotypes. But #3 above always comes to play when such stereotypes become broadly dangerous. I myself ran a heated thread on the value of treating future f-d buyers graciously.

5. Self-censorship is rarely the case here. This is the positive, for all its negatives, of anonymous participation. We have also recently relaxed our Troll-banning rules in order to prevent just such self-censorship.

6. There is no illusion of unanimity here. We can't even agree on whether there will be a soft/hard, sticky/not-sticky (it is sticky now, damnit!), deflationary/inflationary/hyperinflationary resolution. We can't even mention gold without raging debates about how the Federal Reserve system is illegitimate.

7. There may be direct pressure on dissenters to conform. But this seldom, if every, occurs with unanimity. I cannot recall a case where at least one, if not a few regulars will come to the defense of a dissenter -- even a rude or obnoxious one.

8. There are self-appointed would-be mind-guards here, as with any popular blog. But such mind-guards are only dangerous when they are all equally aligned. Here, mind-guards often argue directly against one another. And when one of us starts slipping into the mind-guard role, as I have done myself, we are not so gently reminded by the community that such intellectual bullying is not welcomed.

people like me who with creative financing can afford $750K

That's just the point you myopic twit, you can't afford the house if you had to use creative financing. You can afford the payment, not the house. That's ok if you're scared little buddy, as long as you have at least 6 months of cash on hand sufficient to cover all your monthly nuts, you should be just fine. You do, right? Then move on, I am sure there are any number of blogs that are “BA real estate never goes down” focused, why not find one of them? Your type comes by here periodically to boast, troll, and just generally bother people with inane bullshit. Why not just spend your time on craigslist, you are sure get all the attention you so desperately crave there.

Fuzzy,

Fair enough. I put that cell in particularly for that reason, valuing intangibles. It's very hard to do; I don't think anyone is capable of doing it for themselves. I know I can't. But it's always good to at least think through such things so you can "plug" the number into that cell that justifies your price, and see just what you will be paying, like it or not, for all that quality of life. Then you can ask, "is it worth it?"

I'd love to encapsulate complex loan structures. That is insanely difficult, and I won't engage in such a project unless I'm somehow strongly motivated. And most people here know I'm a hard-core capitalist, so you can deduce said motivation.

Btw, it is the very complexity of things like interest-only, option payment, adjustable mortgages that confirms for me this is all reached a level unsustainable hysteria. It would take me many days or more to fully model such a loan package in Excel, if I include opportunity costs. If you add in piggy-back loans, cash at closing, and HELOCs, MEWs, etc. that one might bake in, I'm not sure I can model it without writing an old fashioned computer program to brute-force it.

And someone watching a Ditech commercial at 11:15am on a Tuesday while flipping through People is supposed to understand what they're getting into?

dryfly,

I recall your mentioning this chap (and his quandry) before. Over at Ben's Blog 3 out of 5 articles are about FL! Mind you, Ben doesn't write 'em, he just posts 'em. They along w/Vegas and San Diego are so far advanced some are now re-calculating their market tops to have been in 2004. Yeah. Believe it.

So wether you're Heliben, trying to salvage the ship or a gold bug waiting the apocalypse there are far more interesting things going on right now than the BA. Squeaky wheel gets the grease.

Bryan,

Welcome aboard! Is FL as messy as we're being led to believe over on Ben Jones' Blog?