patrick.net

good sweet water

It does not exist in the Bay Area.

We have a choice of bad water or awful water.

Even that seems like a crime.

Honestly, that area is relatively safe and crime-free as a ghetto.

Joe_renter,

If it's abandoned and overpriced homes you're after you've simply got to get over there! You know in time we should be able to piggy back off of his model. With SAC being the epicenter for the NorCal meltdown it was only logical it start there first. Give it time......

Oh and boycotthousing has really picked up where Mr. Overpriced Blogspot left off! Simply hilarious overpriced POS postings complete with "colorful" commentary!

SFWoman said:
OK, my friend who bought the $2.1 million house last October told me she is having trouble keeping up with her bills. It is really going outside the sub-prime market, right here, in my ‘hood.
Do you think they'll try to sell?
What goes on the chopping block first -- the kids private schools?
This is too bad... if they can hang on by their fingernails they should be okay in 30+ years. You might want to refresh folks on their LTV (I believe they put down a sizeable downpayment).

Lower LTV is not necessarily helpful. The final T and I in PITI do not change even if you put 100% down.

Look what heli-ben has to say:

Fed officials have often argued that the combined $1.4 trillion investment portfolios held by government-sponsored enterprises, or GSEs, such as Fannie and Freddie, are so large and unwieldy that they present a systemic risk to the broader economy and so should be curtailed.

Really?

"The size and the potentially rapid growth of GSE portfolios, combined with the lack of market discipline faced by GSEs, raise substantial systemic risk concerns," Bernanke said in a speech via satellite to the Independent Community Bankers of America bankers' conference in Hawaii.

No kidding!

EBGuy,

I would imagine the first to go would be club memberships and bar tabs at the club. Vacations have already gone,as have expensive restaurants and fundraisers. I think they'll be OK if they jettison one club (with its fairly good sized bar tab). But they are living paycheck to paycheck, and not saving, in a $2 million house that needs work.

The financials, almost 1/2 down, remaining mortgage 5x income.

Doesn't heli-ben realize that there were entire books written several years ago documenting just that?

Are there any housing bull sites left to go visit?

Are there any housing bull sites left to go visit?

If not, we can start a bull thread. :)

Oh and boycotthousing has really picked up where Mr. Overpriced Blogspot left off! Simply hilarious overpriced POS postings complete with “colorful” commentary!

Hey! He's stealing my readers!

http://burbed.com was the original in housing mockery. Boo.

I will have to disagree with most of the posters here. Stickiness will NOT go away unless JOB MARKET in BA cracks first.

I am strictly talking about the more desirable neighborhoods that most people on this forum target. I am sure Oakland is already dropping like a stone but you won't want to live there anyway.

As long as there are still bullshit web 2.0 jobs floating around, housing price will continue to be sticky. In reality, there are no shortage of double-income families with $200K+ savings and $200K+ household income targeting the better parts of BA where supply is relatively limited (200-400 SFHs on the market each year, and the neighborhood has lots of long-time owners who own their homes free and clear, think FAB's parents).

Only when layoff and gloomy job reports of BA start to instill fear in these high wagers will the housing price start to spiral downward swiftly. Taking on a 30-year loan is all about expectation, you expect your income to be steady and rising. Such an expectation is the main pillar for the purchase, because most people still place a big premium on home ownership, even if they know the housing price may go up and down in the next 30 years.

Jobs will have to go first, or you will continue to see the stickiness all the way down.

eburbed,

Good stuff! I don't know why I get such a kick out of that stuff? I always love to see the "ready to re-model" listings. Why? Because other than having to re-do a foundation I've pretty much had to do it where houses are concerned and it all SUCKS!

Unlike Flip dat' thang shows most of these sales prices pretty much imply that the new "owner" would have to live there during rehab. Drywall dust in your pancakes anyone? Sucks.

In reality, there are no shortage of double-income families with $200K+ savings and $200K+ household income targeting the better parts of BA where supply is relatively limited

A 200K household with 20% downpayment cannot afford a 800K house comfortably.

Jobs will have to go first, or you will continue to see the stickiness all the way down.

Hopefully, jobs will go away soon. I hate circling for parking spaces.

OO,

This time last year I would have probably agreed with you without reservation. So much has transpired since then that I can barely stay on top of it. Jobs aside, bubble-sitters aside this is really now between FB's and their lenders.

Jobs will have to go first, or you will continue to see the stickiness all the way down.

They will, recession around the corner!

Peter P said :
A 200K household with 20% downpayment cannot afford a 800K house comfortably.

That's what caused me to find this site in the first place. My wife and I started looking, and we are priced out of 'starter homes' anywhere near where we work. I hadn't paid attention to housing until I started looking for one. And ouch. Just ouch.

I think OO is right to some extent. And I do think the job market will slow down as well when people realize that yahoo or google is not gonna gobble up every web 2.0 startup in sight.

Regardless, the housing market has to start spitting back due to the other factors like speculative buying, foreclosures, stated income and other related nonsense.

I don't get it? Why are we debating this?

What makes the defaults and rise in inventory so remarkable is that WE ARE at or near full employment! Prior to the new paradigm in personal finance foreclosures were almost exclusively confined to plant closings.

Most of the people in default have not lost their jobs.

Most recent buyers are idiots… IDIOTS from the East coast
who believe you must overpay for homes in Bay Area.

From the east coast?

SFWoman Says:

> OK, my friend who bought the $2.1 million house last
> October told me she is having trouble keeping up with
> her bills. It is really going outside the sub-prime market,
> right here, in my ‘hood.

When I said “creative financing” and “crazy loans” I was not just talking about the sub prime market I have many friends who are over $2mm in debt and heading for trouble due to the loans they have. I am not friends with idiots like Casey who bought six homes but smart kids with just one home. I’ll change the names so no one will know who I’m talking about but take a hypothetical kid who grew up in “Pacific Hollow” and went to “Cathtown” grammar school and “UHSI High”. After undergrad at “Calford” he got a job at “McBain” and worked his ass off for a couple years kissing ass so he could get a get a couple good letters of recommendation and get in to “HSB”. After graduation in 1997 he was making about one HaHa and working for a big company, but didn’t “buy” until 2003 with a loan that got a lot more expensive last year…

Let’s look at what it would cost to “buy” (aka rent the money to get your name on title) a typical home in the Marina that a young professional would want to live in:

1997: Price of home $400K
2000: Price of home $800K
2003: Price of home $1.2mm
2006: Price of home $1.6mm

The typical way that most people bought these homes are below:

1997: Payment on a 30yr FRM (after 20% down) at 7.75% = $2,292/month
2000: Payment on a 30yr FRM with 5ys IO (after 20% down) at 7.50% = $4,133/month
2003: Payment on a 10% down 30yr VRM with 3ys IO fixed at 3.00% and 10% 2nd TD w 5% start rate = $3,200/month
2006: Payment of the 0% down no doc IO 20/80 Voodoo loan with 24 months of Neg Am at on the 1st and 2nd at 4% = $5,333

NV Says:

> Most recent buyers are idiots… IDIOTS from
> the East coast who believe you must overpay
> for homes in Bay Area.

I’m sure that there are some people from the East Coast overpaying for some homes, but it seems to me that it is my fellow Bay Area natives (who have watched the value of Mom & Dad’s home go from $100K to $3mm in their lifetime) that are overpaying even more often so they won’t be “priced out forever when prices continue to increase by “at least” (according to their Realtors) $100K a year…

FAB,
You worked in the rentals AND got NO allowance...
I was going to apply to the food tester and crossing guard job in 2010 but am starting to believe it might be too dangerous.

For those interested, SF Bay Area Craigslist ReduceOMeter fell slightly to 122 listings for March 2-3.

The latest round of delinquencies has not been because of homeowners losing their jobs. They haven’t even been caused by mortgage rate resets.

The mortgages that have been giving the most trouble were originated in 2006. These mortgages are at most a little over a year old and buyers are still defaulting. The best explanation I have seen is lax lending standards and fraud.

This could include buyers lying about their income and planning for a quick flip of the property. Another possibility is inflated appraisals preventing refinancing into a more affordable mortgage.

I have been surprised at the increase in defaults in the central valley even without a recession. Could it happen in the Bay Area?

OO

I agree with you entirely. So long as people feel like

a) have "good" jobs they feel "good" about, and
b) believe their jobs are secure and their incomes will keep rising

the stickiness will persist. A lot of folks on patrick have a tendency to underestimate the "creativity" of people (especially working professionals in the bay area) when it comes to making ends meet _just a little longer_.

As long as Web2.0_worker_023 believes better times are ahead, (s)he will continue eating raman noodles and borrowing from mom and dad to get by.

And Web2.0 is a full-on bubble at this point, even if it is still small by 90s comparisons. Just look at those dorks running Digg. For you guys not immersed in things Silicon Valley, just go here. There's so much 1999-esque bullshit starting to pop up that even run of the mill web designers are getting $100/hour if they call themselves web2.0 designers.

> Most recent buyers are idiots… IDIOTS from
> the East coast who believe you must overpay
> for homes in Bay Area.

I’m sure that there are some people from the East Coast overpaying for some homes, but it seems to me that it is my fellow Bay Area natives (who have watched the value of Mom & Dad’s home go from $100K to $3mm in their lifetime) that are overpaying even more often so they won’t be “priced out forever when prices continue to increase by “at least” (according to their Realtors) $100K a year…

I agree with both and add "First Gen immigrants" to the list.

I will have to disagree with most of the posters here. Stickiness will NOT go away unless JOB MARKET in BA cracks first.
(snip)
As long as there are still bullshit web 2.0 jobs floating around, housing price will continue to be sticky.

OO,
I couldn't agree with you more. That's a big part of the BA home price stickiness. Am I the only one who looks at all of this Web 2.0 crap and thinks the vast majority of these startups are all about bull$hit?

Take a look at this piece about the so-called "hottest" Web 2.0 companies:

http://money.cnn.com/magazines/business2/nextnet/2007/

IMO their collective productivity, utility and inventiveness is nil. Ironically, the Web 2.0 moniker fits better than people realize. This is pets.com all over again, and I think after this wave of M+A activity, there will be a big stinking pile of BS sitting around Silly Valley, yet again. I mean, c'mon, does anyone really think a startup to organize photos better online or yet another myspace wannabe is going to save our economy?

Here are some numbers on the South Bay Job Market. It clearly shows job market lower than 1990.

True - but that data only goes to 1/2005. Hiring is really picking up. A few of my friends are being cold called again, and interviewing good candidates is hard to find again. 2006 was really a turning point.

a) have “good” jobs they feel “good” about, and

Do engineers feel good about their jobs? I feel really pathetic.

I mean, c’mon, does anyone really think a startup to organize photos better online or yet another myspace wannabe is going to save our economy?

But to be fair, isn't that what a lot of Google's detractors said in 2000?

My wife and I started looking, and we are priced out of ’starter homes’ anywhere near where we work. I hadn’t paid attention to housing until I started looking for one. And ouch. Just ouch.

That's why I started burbed.com :)

I have enjoyed your site from time to time and I watch the alleged housing bubble like a slow train wreck. I live in Castro Valley/Hayward east bay and have noticed one thing indicative of price correction : many for sale signs in comparison to the past few years. As I drive around I see three or four for-sale signs on some streets, condo complex have stacks of for-sale signs outside the gates. This is the same thing that happened in the bay area 1989/1990. On a normal day we could drive a one square mile area and see maybe one house for-sale, now it is five houses or more. My opinion is that it is nothing more than a simple cycle. sometimes there are alot of buyers, sometimes not. One thing I notice never discussed in bubble discussions is the value of housing as an inflation fighter over the long term. A person who pays $500.00 per month on mortgage because they bought in the 1970s is doing far better than ANY renter today. So much is discussed about the absolute monetary "price" value compared to rents or incomes, but it DOES NOT MATTER WHAT YOUR INCOME IS , since you can still get a loan. There fore the absolute price has less meaning as far as what is a bubble. The Bay Area prices will not ever need to come down to get buyers. If you can afford a house and you know what the expectation is, then you would be more of a fool trying to wait for the magic low-ball day -- aint gonna happen. If the price goes down to 250,000 I will gladly step in and bid up to 300,000 -- and the cycle continues. Thank you for this web site it makes for fun reading.

But to be fair, isn’t that what a lot of Google’s detractors said in 2000?

Google's current success IMO is well above their product value. Sure everyone and their brother uses Google as a search engine and their related spin-off products, but that IMO doesn't justify their current market valuation. On top of that, their current business strategy appears to be to move into and/or supercede the traditional media. They may very well succeed at that, but that is a new morph outside of the original business plan. Sure, they've been successful so far, but how many of these current Web 2.0 startups will be able to do that? It's the same rational all the dot bombs had 8 years ago: "look at Yahoo and Netscape. Let's do the same and make lots of money too." Only, they turned out to be pets.com and webvan.

I went to http://www.viewfromsiliconvalley.com/id134.html - I don't see any 2006 numbers.

Just to be clear, i'm not saying that employment/population is the reason the prices spiked like they did. Easy credit and psychology was.

But to be fair, employment is definitely on the uptick. Try hiring anyone in tech lately? It's hard. Personal experience.

No but at price at $1.5 Billion the VCs did very well. Im talking about
YouTube as prime example.

NV,
Exactly! It's the "look at these guys that hit the lottery - let's jump on the bandwagon" all over again. And I'm not only talking about the people at YouTube, but the VC's too. How much of their money comes from hedge funds etc who are more and more eager to take on high risk ventures? And how much of that cash also comes from all this liquidity we have due to artificially low rates?

Dont forget those hot mobile software companies that at the end create
games for cell phones… BAHAHAHAHAH… Yea that real all right

Uh, those sorts of things sell really well internationally.

If you can afford a house and you know what the expectation is, then you would be more of a fool trying to wait for the magic low-ball day — aint gonna happen. If the price goes down to 250,000 I will gladly step in and bid up to 300,000 — and the cycle continues. Thank you for this web site it makes for fun reading.

What if you don't have a job?

But to be fair, employment is definitely on the uptick. Try hiring anyone in tech lately? It’s hard. Personal experience.

Allright then, H1-B visas for everyone!

Sure, they’ve been successful so far, but how many of these current Web 2.0 startups will be able to do that?

Well again to be fair, Google didn't have a business model at first. There were some who believed they would eventually resort to using banner ads. But then they found contextually sensitive ads (well... Y! folks would argue they cloned Overture) and that was the homerun they needed.

That's why startups exist - you create a product, create an audience, create a market and then find a business model. or you fail.

Again, I'm not saying all the 25 on that list will succeed, but some of them might. And then you'd have another 4000 millionaires like at google.