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And... They're OFF!!!


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2007 Jan 6, 10:28am   20,679 views  139 comments

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My six saved searches in ZipRealty (covering Cupertino, Los Altos and Saratoga) are up an average of 15% since Dec 31. A realtor friend of mine had said that her agency was asking people to wait for at least a week after the new year, to avoid the dead season. In spite of this, some sellers seem to be jumping the gun already.

The majority of the listings show a reduction in "zestimate" from the peak which appears to have occured around mid-2006. I haven't spotted too many FB's yet - most of these are folks who bought and owned for a few years, although there are a few "extensively remodeled" flipjobs in the mix.

Asking prices seem a shade (sometimes even as much as a smidgen) lower than comparable asking prices last year - still obscenely overpriced, though.

SP

#housing

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1   speedingpullet   2007 Jan 6, 1:20pm  

Funny...I've noticed the same thing here in L.A.

My ZipRealty search for most of Westside and the southern part of San Fernando Valley (SFRs, 2+ beds, no price limit) had a low of around 1750 properties at the end of december, its shot up to 1850-ish since jan 1st.
A lot of what on there seem to be very large houses (4000 sq ft) on smaller lots, or what I like to refer as 'resets' - places that were listed during 2006, taken off, and relisted (with new prices and DOMs, natch).

Interestingly, it seems to be swelling by area - Pacific Palisades (an insanely expensive area wedged between Santa Monica and Malibu) had over 20 new listings on 2nd Jan, with Beverly Hills and Studio City on the 3rd, followed by Santa Monica on the 4th.

As expected, prices have not fallen much - most of the resets are coming back at the same prices they came off on - and you won't find anything near the coast for less than 700K, no matter how small they are. In the 'my homes' section, there's only been 2 price reductions (both less than 5%) since mid-december.

Guess 'Spring' came early to LaLaLand....;-)

2   OO   2007 Jan 6, 2:47pm  

Does one need 30 days for reset on MLS? I remember something about MLS implementing a new rule of forcing relisted properties to stay off for at least 30 days to be considered a "new" listing without showing previous dom.

That sounds like an artificial way to keep the listings off.

3   ozajh   2007 Jan 6, 2:52pm  

SP,

*snark*

It's a good thing that the NAR doesn't seasonally adjust inventory the way they do sales, given that January (and February) are such slow sales months. It sounds like the actual inventory/sales multiples are going to be WAAAAYYYY up there for the next month or two.

/*snark*

4   Paul189   2007 Jan 6, 10:45pm  

Wow, it's already a recovering market - http://tinyurl.com/ygh9ub

5   KurtS   2007 Jan 7, 2:19am  

"...are up an average of 15% since Dec 31."

So you're saying the sellers upped their asking price by an average of 15% in just this short span of 2007? Well, those are some very hopeful House.com stockholders. I can only guess the local buzz means that 2007 will be another year of solid gains. It's fortunate the Bay Area has so many intelligent, like-minded people to confirm our aspirations in one collective wallet-hug.

6   KurtS   2007 Jan 7, 3:00am  

"The 15% growth is in the number of results in saved searches that meet the search criteria."

SP-
Ah...thanks, sometimes I skim things too quickly, and I almost believed my mistake, given local talk how the market will recover for 2007.

7   e   2007 Jan 7, 4:42am  

Ronald Reagan, are you posting as FoodStampCheaters?

8   gavinln   2007 Jan 7, 7:36am  

The Median 401K balance for workers 65 and over is only $53,400.

http://www.usnews.com/usnews/biztech/articles/060116/16intro.htm

If 401k balances are included they will not make a significant difference to the saving rate. The balances are too small

9   gavinln   2007 Jan 7, 9:21am  

Anyone claiming that the currently low to negative savings rate is rational will have to explain why it is different now. From the 1960 to the 1980 the savings rate went from 8% to 12% before falling below zero in 2005.

Why didn't voters earlier assume that Congress was willing to "loot anything that moves"?

By the way a Federal Reserve researcher did make an attempt to explain what is different now.

http://www.frbsf.org/publications/economics/letter/2005/el2005-30.html

His explanation uses a behavioral explanation. His factors include

...rapid increases in stock market and residential property wealth, which households apparently view as a substitute for the QUAINT PRACTICE OF PUTTING ASIDE MONEY EACH MONTH from their paychecks.

10   thenuttyneutron   2007 Jan 7, 10:49am  

I wish the RE market would correct it self faster. I am a young 26 yearold with a wife and I would like to settle down. I can't raise a kid in the crap hole I live in now, but I also can't afford anything I would be willing to raise a family in; at least not with the standard 30 year mortgage.

How long do these things take to correct themselves? Do any of the more experienced people know a good answer to that question? I would like any pearls of wisdom that I can get.

11   FormerAptBroker   2007 Jan 7, 11:05am  

eburbed Says:

> Ronald Reagan, are you posting as FoodStampCheaters?

I was going to let Different Sean handle this guy since I know he can't imagine even a single person abusing welfare, food stamps, or public housing...

12   FormerAptBroker   2007 Jan 7, 11:45am  

cruzpo Says:

> To thenuttyneutron, Bought a house in South Berkeley in
> 1989 and it gradually lost about 20% of it’s value by 1995.
> Alameda County even lowered our property taxes in
> recognition of this.

I was not doing a lot of detailed research on East Bay values back in the early 90’s, but on the Peninsula and in the South Bay (where I was looking at a lot of REO property) and in Southern California (where I was watching closely as my equity in some apartments disappeared) the values dropped slowly from the day when I called the top (in January 1991 the same day that GHW Bush started calling “Desert Shield” “Desert Storm”) for over 18 months. In those 18 months the drop in values were so small that Realtors did not have to mess with the data much to say that values were “flat” and there were even a few sales at high prices breaking records that gave me hope (remembering that since I had seen real estate make my parents rich I had 98% of my net worth in apartments). In the next 18 months it got ugly with most of the (25% on average drops in N. Cal and big 50% drops in S. Cal). Most CA markets kept dropping a little in 1994, then 1995 to 1998 were basically flat until the dot com boom kicked things in to high gear up here with S. Cal following (and most markets actually outperforming N. Cal on a percentage basis)…

I think that things will play out about the same with timing. I called the top in October 2005 (the day that GW Bush got Iraq to sign the “constitution” that would be the start to “peace in the middle east”). I’m not planning to see things get really ugly until after tax day this year (when all the people that “had to sell in the Spring” either loose their homes or start dropping prices to move them. Last time we had high interest rates “dropping” (and making homes more affordable and investment property make more sense) this time we had record low rates just before the top with rates in the way up to their historic mean. Last time we had almost everyone with a 30 year fixed rate loan and a nice equity cushion, this time we have almost all new owners with crazy suicide loans and almost no equity (and 24 olds owning multiple homes that will all soon be sold by the lenders). It is going to be fun to watch, let’s hope that thenuttyneutron can get his wife on board so they both agree that now is a good time to be a renter and watch this thing melt down…

P.S. I heard a quote today that “every year a couple statisticians drown in rivers with an average depth of three feet and freeze while hiking in forests with an average temperature of 60 degrees”…

13   FormerAptBroker   2007 Jan 7, 12:09pm  

Person Says:

>> Why didn’t voters earlier assume that Congress
>> was willing to “loot anything that moves”?

> Well, back then, for that generation of savers,
> it wasn’t apparent that the Social Security system
> would be bankrupt and only be able to thrive through
> massive tax increases.

Anyone that has ever looked at the growth of the ratio between people getting Social Security (who have been living longer every year) compared to the people paying in to Social Security knows that the system is just a slow moving Ponzi scheme.

The year after Social Security was enacted in 1935 Republican presidential nominee Alf Landon questioned its solvency and told Americans that the way the system was structured it would fail in the long run.

After FDR won in what may have been the most lopsided presidential victory in US history most Republicans (along with the Dems.) decided never to mention the solvency of Social Security ever again…

14   gavinln   2007 Jan 7, 12:29pm  

Person:

I am curious what you would call massive tax increases to fix social security. See the table on the top right of the following link Options to Restore Solvency - Table 1

http://www.factcheck.org/article309.html

An increase in payroll taxes by 2% would fix problems in social security for 75 years. Not exactly a massive tax increase

Gavin

15   Michael Holliday   2007 Jan 7, 12:47pm  

Haiku for the McDebtor:

BLACK HOLE HOUSING

That McEdifice
is a McOrifice. Fool!
It will suck you dry...

16   OO   2007 Jan 7, 1:20pm  

I checked out Cyberhome, it actually gives HIGHER valuation than zillow in the west side of Bay Area. My home is "worth" $170K more on CH, can I ask for a check for that extra $170K please?

All these free valuation sites are just entertainment sites, both zillow and CH are showing values of homes in 2006 higher than 2005, which we all know is not the case for most homes in most neighborhoods in the Bay Area. I have no idea what their algorithm is, but that algorithm is certainly NOT working in a down market.

17   Doug H   2007 Jan 7, 1:53pm  

If you want to "fix" SS, simply raise the taxable earning ceiling. It used to be around $84k and now it's a little over $92k. Simply have all wages/income subject to SS taxes and the problem goes away forever.

It will never happen, but it's a easy fix and those paying the most can afford it......

If someone has an AGI of $1M, they pay a bucket load of taxes; especially if they work for their own Corp.

18   e   2007 Jan 7, 6:07pm  

OT- Education Related:

This is a pretty interesting article that relates to the conversation in the last thread about how -some- HS kids are over prepared for college, and how college application has become dramatically more competitive.

I'm not sure if I would've gotten into the same sub-Ivy League that I did under the "new rules"

http://www.nytimes.com/2007/01/07/education/edlife/07prepared.html?ei=5070&em=&en=14bd9acbda0244eb&ex=1168405200&pagewanted=all

Scary stuff

19   e   2007 Jan 7, 6:10pm  

Dr. Watt’s students are anything but lazy. He has had to turn students away from this course — last year, only students earning a 5 or a 6 on a 1-to-6 grade scale in Physics 380 could enroll; this year, only those with a 6 got in. He also turns away applicants for his “post-A.P.” course on quantum mechanics and relativity, limited to 16. What’s more, students take the quantum mechanics in spring of their senior year, when it’s too late to impress admissions officers. “They don’t need to burnish their transcripts,” says Dr. Watt, a Harvard Ph.D. in physics who says the course is what a physics major would take sophomore or junior year. “They are just voracious.”

This is High School. What the heck?

20   FormerAptBroker   2007 Jan 7, 9:45pm  

Doug H. Says:

> If you want to “fix” SS, simply raise the taxable
> earning ceiling. It used to be around $84k and
> now it’s a little over $92k. Simply have all wages
> /income subject to SS taxes and the problem
> goes away forever.
> It will never happen, but it’s a easy fix and those
> paying the most can afford it……

Many people (including myself) think that this may happen very soon. The problem is that despite living in a little world where even assistants make over $90K in the rest of the country over 95% of Americans make less than $90K.
http://www.suntimes.com/news/novak/201590,CST-EDT-novak08.article

This will not be a “fix” of the problem, but it will push it back a little bit so many people in office today will not have to deal with the big fight that is coming when we have to tell people like myself that I’ll never see a penny of Social Security after paying the max contribution for most of my working life…

21   astrid   2007 Jan 8, 2:01am  

Overstuffing the high school curriculum is overrated. The most observable effect is to creates a bunch of know-it-alls and know-it-all burnouts.

22   EBGuy   2007 Jan 8, 3:23am  

First, you should max out 401k, if you can afford it. That’s free money b/c it’s about the only thing you can deduct. Once that’s maxed, figure out your tax strategy to invest another chunk (529s, Roths, etc.)
I am going to disagree slightly here. Especially if you are young, I would say get your employee match for your 401k, then max your Roth IRA, and then max out the rest of your 401k.

FAB,
For the curious onlooker.... Are your parents cashing out any of their rental homes during this boom cycle? Do they move into them and take the $500k deduction or do they just sell?
Also, since you are the closest thing we have to a Robert Kiyosaki, what do your think about the small investor owning a 4 unit building as part of their retirement (long term, not some flip-o-matic)? Of course, someone wouldn't invest until GRMs and other metrics are a bit more favorable.

23   astrid   2007 Jan 8, 3:45am  

Actually, for higher income bracket folks, Roth IRA (and Roth 401K where available) and 401K is a bit of a wash. Roth IRA is marginally better because a $4,000 cap is worth a bit more (since you're putting in post tax dollars rather than pre-tax dollars) and if you believe we're in an extremely tax favorable environment right now and expect dramatic rises in tax rates in the future. The lack of forced withdrawl in Roth is a nice bonus.

For a certain demographic - 40+ high income people without huge savings, 401K actually works out to be a much better tax deal.

24   e   2007 Jan 8, 4:22am  

What is this thing you call an “employee match”?

Some companies match your contributions up to a certain percent -- say 6%

Let's say you make $100k - and you contribute $15k into your 401k.

Your company then contributes $6k.

On the other hand, let's say you make $100k - and you contribute $1k.

Your company then contributes $500.

Moral of the story: contribute at least the max your company matches. Free money!

25   DinOR   2007 Jan 8, 4:41am  

dryfly,

Good stuff, after it's all said and done this HAS been a monumental waste of resources! I was reading a link (somewhere) that is already addressing decor that is falling out of fashion! So..... I guess we'll learn to live with that ultra hip pedestal sink, nah! We'll give it the "deep six" along with that bamboo flooring and pergraniteel!

Just incredible. A sink should last a good 20-30 years, no? We once kidded that the granite counter tops could be recycled to make tomb stones for FB's!

26   DinOR   2007 Jan 8, 4:52am  

I must admit it's encouraging to even see folks debating the merits of various tax def. accounts again. Gosh that is SO refreshing! After oh....gee about 7 years of total RE dominance just hearing this stuff is music to my ears.

All this time the flippers have been guffawing the whole notion of "saving" or retirement accounts b/c they KNEW RE would be their ticket our of the work force!

27   astrid   2007 Jan 8, 5:09am  

I think it is highly unlikely that the US government would double tax Roth IRA savings. The US gov't has historically been very wary of retroactively taxing and Roth IRA is not a big enough pot of money to bend the precedents over - esp. since Roth is only available to relatively low income people.

I'm actually more wary of 401K tax risks.

However, this is just my personal opinion and not investment/savings advice.

28   e   2007 Jan 8, 5:12am  

I’d love to hear what others think about that strategy - sounds reasonable to me.

I'm all in 401k Regular.

I've thought about a Roth 401k (my company offers it) - but I'm not convinced that my tax rate will be higher in the future than now.

Of course, I'll probably be wrong as we'll need to pay for the Iraq War somehow.

29   HARM   2007 Jan 8, 5:17am  

On Roth vs trad IRA

If you believe tax rates applied to you will be higher in the future AND that the gov’t will continue to honor the ‘after-tax contribution’ status of the Roth & never ‘double tax’ than a Roth is a very good choice going forward.

But if your income is high now and expected to be lower in the future s.t. your tax rates decline, then a traditional IRA is the thing to do (avoid taxes now - worry about later, later).

Another wrinkle to the Roth vs. traditional IRA is whether or not you are itemizing or just taking the standard deductions. For now, my wife and I are childless, don't have a mortgage or business, so we must take the standard. Outside of a few tax-free govt. bonds and the occasional educational credit, we basically have no non-retirement itemized deductions to speak of. For us, the traditional IRA & 401k deductions are pretty much it.

Personally, I seriously doubt our effective income tax rate will go up during retirement. In fact, I pretty much expect it to fall, as it does for most retired seniors (living on fixed incomes & retirement accounts), so a traditional Roth makes the most sense in our situation for at least two reasons. If and when we buy a house and/or have children, this situation could change.

30   OO   2007 Jan 8, 5:43am  

Zillow stubbornly lists my neighbor's house $200K above the last transaction, which happened about 5 months ago. Sometimes, I can even find it listing valuation $100-200K higher than transaction record just a month ago.

I have no idea why a house deserves to "appreciate" 10% or more of its value within 4 weeks of its most recent transaction in a DOWN market.

But cyberhome is even better, according to CH, your house "appreciates" even faster. Both service must be taking in advertising dollars and sponsorship money, you can well imagine where the revenue source of these guys is coming from.

31   SFWoman   2007 Jan 8, 5:48am  

Did anyone else see today's lead story in the WSJ? "Speculators Helped Fuel Florida's Housing Boom" (No, do you really think?)

"The frenzied run up prompted economists at banking concern National City Corp. and economic consulting firm Global Insight Inc. to label Naples "the most overvalued housing market" in the U.S. in the second quarter of 2005, a dubious honor it retains. Today, prices are dropping, the number of unsold houses on the market has swelled to more than twice the national average and investors are scrambling to unload their properties.

Such a crescendo of activity might have prompted some to pull back*. But plenty of investors, who continued to purchase homes to rent or flip, continued to buy or sell through the height of the boom..."

*-yes, the intelligent.

32   DinOR   2007 Jan 8, 5:55am  

HARM,

You might be glossing over the fact that a great many FB's can't even afford to make ANY contributions at all! So now that their home appreciation has flat lined they're shackled to a PITI payment that precludes divesification of any kind.

We've crossed a critical juncture here. This could be where renters pull away and not even bother to look back! Can you imagine making a $4,000 + mo. payment to fill a black hole while your renting co-workers are socking away $100, $200, $500 a payday? Wow.

33   e   2007 Jan 8, 6:01am  

The summary is that over 1 in every 3 houses (38%) nationwide, their Zestimate is off by more than 10%. In the Bay area 1 in every 4 homes (24%) is off by more than 10%.

Despite this, many people cling to Zillow as if it were the end all be all of valuations.

What's funny is that Zillow has developed a rep.

Some feel that Zillow grossly overestimates.
Some feel that Zillow grossly underestimates.

Zillow can't win.

34   e   2007 Jan 8, 6:10am  

From WSJ forums:

http:/s.wsj.com/viewtopic.php?t=185&autoredirect=true&sid=f528b338399fe3c9459afdc3564ee429

The value of my home has skyrocketed, thanks to President Bush and his wonderful economic policies. The recent soft landing has only slowed the increase.

This is the greatest economy in US history - enjoy it while it, and the Bush presidency, lasts.

Tom Boucher

Uh... um...

35   SFWoman   2007 Jan 8, 6:13am  

I prefer looking at propertyshark. They have previous sale records and grant deed sales, so you can see when couples are flipping a property back and forth between each other (I am assuming for equity extraction, maybe there is another reason?). You can set up a free account and get an amazing amount of information on properties.

As far as Zillow having incorrect info on properties, I am assuming it is the info that is on file with the municipality. Zillow has my city place having one fewer bathroom than it actually has. I am assuming the other was added after 1908 an it was never recorded. Propertyshark has the exact same info on the place, so I assume they both sourced it from an inaccurate city record.

36   HARM   2007 Jan 8, 6:13am  

@DinOR,

Yes, we can debate the relative merits of 401k vs. Roth vs. trad IRA amongst ourselves all day long. But for the large majority of FBs, this is all moot because they are saving nothing. Actually, less than nothing, hence negative national savings rate.

37   SFWoman   2007 Jan 8, 6:18am  

eburbed,

So when the price of his house comes down it will be because Nancy Pelosi is Speaker of the House and her San Francisco values?

38   e   2007 Jan 8, 6:20am  

So when the price of his house comes down it will be because Nancy Pelosi is Speaker of the House and her San Francisco values?

It's because of those hispanic muslims gays.

39   SFWoman   2007 Jan 8, 6:21am  

HARM,

Yes, but the FBs are enjoying life. You wouldn't want to be in your 30s or 40s and be a solvent RENTER, would you? Better to be a McDebtor homeOwner than face the shame and embarrassment of having to admit that you do not participate in the American Dream. Remember, debt makes you rich.

40   SFWoman   2007 Jan 8, 6:21am  

eburbed,

Yes, they are troublesome.

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