patrick.net

The home ownership facts site cracks me up.

They start off saying in their Prices and Trends page that there was a huge run up, and the market has cooled off :

It’s no secret that Californians have been faced with record high housing prices and a market that is challenging to new homebuyers. However, the frenzied market of the past few years has slowed, which means the dream of buying a home can become a reality if you do your homework and understand how to make the buyer’s market work for you.

What’s a buyer’s market? It's when the buyer has the advantage over the seller, which is usually the case when there are more homes on the market than there are buyers. That’s the case today, and sellers have to price their homes attractively. But nobody knows how long these market conditions will last.

Then they publish a graph of uncorrected for inflation prices... showing two previous bubbles and how THOSE bubbles had downturns lasting 5+ years.

Noone KNOWS how long it will last, but we can guess it'll be at least 5 years.

TOS :

1- Ha ha ha… So tell me, do you really believe that inflation will be at 2.5% for the next 17 years

Of all the numbers is that the only thing you found laughable ? Take a look again. The calculation assumes 5% annual appreciation of home prices from this point onwards.

6- And if you need to buy for family reasons, so be it, especially given that it is a pain in the a$$ to move every couple years when you have kids.

Yes, Congress should repel the law that requires renters to move every couple of years. But I agree. NAAVLP is a much needed relief lotion for the pain in the ass move every renter has to endure.

7- And finally, the only thing standing between you cheap rental ($2500!!) and having your family on the street is the ability of your landlord not to default (except if he bought a long time ago and you cover his costs !!!)

Absolutely ! At the Sunnyvale Home Depot, I have seen hoards of renter families living on the parking lot - they say the parking lot is only marginally better than the streets. When young flippers come to purchase stuff to remodel their home, these would-be-again-renters run to them and beg to be accepted as tenants. Pathetic I tell you.

7- And finally, the only thing standing between you cheap rental ($2500!!) and having your family on the street is the ability of your landlord not to default (except if he bought a long time ago and you cover his costs !!!)

If only corporations could own rentals...

OO Says:

> FAB, I am not talking about Portola Valley, Hillsborough,
> Woodside part of SM, we all know why they are priced
> that high. I am more curious about why the shady parts
> of San Mateo, Redwood City, Menlo Park, etc. are sold
> at such an astronomical price.
> For example, why would the following house on the wrong
> side of El Camino with no lot and no view go for $1.5M?
> http://tinyurl.com/2dg4ju

Over the past 10 years almost everything between El Camino and the railroad tracks has been getting nicer, but the area around the streets Rosewood and Laurel (on the wrong side of El Camino) south of Central Park (near the URL above) have always been real nice. There are a couple streets in Burlingame (on the wrong side of El Camino) Cambridge and Oxford that have also always been real nice (my older sister graduated from HS just up the street from Cambridge and Oxford since she could never get along with the stuck up debs at my HS)…

P.S. A friend from the East Coast who paid over $1mm for a home east of El Camino in Burlingame told me he gets a big kick out of telling his neighbors (who also have tiny little $1mm + 3x1 homes with 1 car garages) that I’ve told him that “only poor people used to live east of El Camino”…

I can’t think of a better place to raise a family than San Mateo County. Some of the reasons include great weather (SC county is hot in the summer and parts of Marin like Tam/Tennessee Valley get an almost daily fog blast), easy drive to SF or SJ, and overall great demographic profile…

Do you include RWC in that claim?

Sanity check please: Am I just being a snob for finding the neighborhood of "652 STANFORD AV, Redwood City, CA 94063" to be very unappealing?

Oops, looks like you just posted a primer for SMC. Bad timing on my part.

@theotherside

1. This is my thread.

2. I'm not in the mood for your shit at the moment, being I've been patient and others and me have taken time to quantitatively correct your calculations twice now, only to have you disappear and reappear with the same old crap.

3. You know damn well that "And finally, the only thing standing between you cheap rental ($2500!!) and having your family on the street is the ability of your landlord not to default (except if he bought a long time ago and you cover his costs !!!)" is categorically false if the tenant has a defensible lease on good terms and knows how to have his/her attorney draft a letter for about $200. Here in Marin, which isn't very tenant friendly, absolutely no one is going to chase me out of this house in under 90 days, even assuming an implied month-to-month lease condition, unless the place is red-tagged by a mudslide or burns down. With my current lease I could force a new owner to contend with me for 15 months or pay me a healthy premium to move out.

4. This is your one and only warning. Either defend your specific claims without simply reasserting things which have already been proven false, or have your subsequent comments deleted from my thread.

Really, responding to someone else's model with "Ha Ha Ha" is childish. If you really are a former IB you should know how to at least make an attempt at analysis. You're not one of those who'd initiate coverage at a hold with a target 10% below the current market are you? Or do you just wear pink leather knee high boots...

It seems like guerrilla warfare.

Or do you just wear pink leather knee high boots…

Huh?

FAB,

not long ago (3 or 3.5 years ago), I drove by El Camino in San Mateo and witnessed the aftermath of a gang shooting (someone lying in blood). I am just having a problem with this street by street kind of "niceness", because I can't predict how this niceness can be safely contained in a 4x4 block zone, what is preventing the problems beyond the 4x4 block from invading such a "safe haven"?

I think Hillsborough and the part of San Mateo surrounded by Hillsborough (San Mateo Park area?) is nice, Belmont is fine, because they represent a substantial enough size of enclave to keep the bad elements out. The part of San Mateo bordering RWC? Not so sure.

Unbelievable. "Last week, civil rights groups called for a six-month moratorium on foreclosures resulting from high-risk loans given to people with shaky credit, arguing that lenders could face lawsuits if they don't help borrowers. "

A lawsuit? Based on what? Since when is stupidity illegal? Millions of Americans have become indebted to the credit card industry, charging evermore outrageous interest rates. That's legal, but an ARM is not?

Now, I could understand a suit based on illegal practices, like this one: http://www.washingtonpost.com/wp-dyn/content/article/2007/03/19/AR2007031901798.html

Sallie Mae overcharged borrowers via a computer glitch. Fair enough. That's fraud. Perfectly reasonable lawsuit.

I need to get onto Brand's idea and email my representatives.

Can someone please do something about gang violence? What is the point of that?

I hate petty semi-organized crimes.

“Last week, civil rights groups called for a six-month moratorium on foreclosures resulting from high-risk loans given to people with shaky credit, arguing that lenders could face lawsuits if they don’t help borrowers. ”

What does foreclosure have to do with civil rights? It may be Social Darwinism, a necessary process in civilizations.

Now, I could understand a suit based on illegal practices, like this one

They should put law-breakers away but stupidity must not pay.

I think we have terrible ethicists, they can't figure out what to do with poor stupid people (let them starve? sterilize them? let them take over?)

We should euthanize ethicists.

I think I may be catching whatever Peter P has...

Muther fuckers just can't get their fucking real estate cheerleader uniforms off

From NY Times

In much of the country, including large parts of the Northeast, California, Florida and the Southwest, recent home buyers have faced higher monthly costs than renters and have lost money on their investment in the meantime. It’s almost as if they have thrown money away, an insult once reserved for renters.

Ok, lets go through it again, recent home buyers have faced higher monthly costs than renters and have lost money on their investment in the meantime

then It’s almost as if they have thrown money away, an insult once reserved for renters.

huh? Is this the 1900s? Is this a Hearst Newspaper?

I saw the aftermath of a gang shooting in Rome many years ago. Not pretty. :(

I think I may be catching whatever Peter P has…

Multiple Persona Disorder?

My bioethics TA said that I probably should not become an ethicist in a hospital though.

What city is Oxford st in?

I think we have terrible ethicists, they can’t figure out what to do with poor stupid people (let them starve? sterilize them? let them take over?)

Another perspective: the anti-evolutionary aspect of humanity (some like to call it compassion) is a solid case for Intelligent Design. :)

What city is Oxford st in?

London.

Or just a short run snafu soon to be resolved via evolution.

"It’s almost as if they have thrown money away, an insult once reserved for renters."

No worries. They can just sue their lenders and claim their civil rights were violated.

Or just a short run snafu soon to be resolved via evolution.

Humanity is that snafu.

“It’s almost as if they have thrown money away, an insult once reserved for renters.”

LOL :lol:

That's what I meant.

theotherside clearly didn't even bother to look at the NYT model before slamming it, or she'd have seen that it doesn't allow 0.5% precision on rent inflation, only on the discount rate.

Well, I just ran the NYT "bubblizer" for my situation. I even cranked up annual home appreciation to 5% per year, and rent inflation to match at 5% per year, which is twice the rate it's been for the past decade. I also assumed I'd take all my equity-in-waiting plus every other liquidatable dollar I can find, and plow it all into the home (making the payback period shorter).

The result is it is NEVER better to buy than rent over 30 years. The interesting thing is my curve peaks (narrowest spread between renting and owning) in year 9 with renting being $40,335 better per annum than owning (year zero is $178,089). But then it falls, ending back at $57,571 in year 30, showing that the holding costs of the home are greater than the costs of renting, even assuming I build a full equity position.

This model accounts fully for taxes, CAPM and transaction fees if you hit the Advanced Settings tab. Though changing those for Northern California circumstances will deteriorate the Buying case considerably from the default.

The conclusion: the NYT model is marginally harsher than my Bubblizer at default settings, and much harsher if you change the values of advanced settings. I think this is mainly because my model is conservative with inflation differentials (assumes rents inflate, but not CAPM costs, for example) and because my model allows for "Present Value of Intangibles". That is, I allow the buyer to say "hey, I'll pay $20K/year to not worry about renter headaches".

BTW, if they really do hold bond investors liable, financing will dry up even more quickly. Any bailout of this sort is likely to be a money pit. People tagged for non-renewal in social evolution will get into financial trouble again as soon as the new loans are settled.

Randy, ToS does not bother to care what you say. Calm down already. :)

What are the best ways to play the market right now?

Not seeking investment advice

I think this is mainly because my model is conservative with inflation differentials (assumes rents inflate, but not CAPM costs, for example) and because my model allows for “Present Value of Intangibles”. That is, I allow the buyer to say “hey, I’ll pay $20K/year to not worry about renter headaches”.

Randy, perhaps you should have a formula for Implied Present Value of Intangibles given other standard assumptions.

Just like the Implied Volatility of an option, the value will tell how expensive a house is.

Another perspective: the anti-evolutionary aspect of humanity (some like to call it compassion) is a solid case for Intelligent Design. :)

Actually, as a social animal, it helps to have idiots around that you can talk into doing the dangerous jobs.

Getting rid of the dangerous jobs is what puts us awash in idiots.

There is no case for Intelligent Design. Evolution is a better case for the existence of God than Intelligent Design.

No worries. They can just sue their lenders and claim their civil rights were violated.

Their lenders, the MBS holders, and the President of Antarctica! :o

I would recommend that all mortgages require a demonstration of English comprehension, an essay on the math involved and then an IQ test. But then some activist group would sue me for discriminating by refusing mortgages to people who couldn't read the loan docs, don't understand the math or aren't smart enough to open a pickle jar.

If you protect stupid people from their own stupidity, just remember that you are discriminating against them.

I gotta HELOC! Woo hoo! My equity is liberated!
But Dad, you wouldn't know a full recourse negative amortization loan from a Krusty Burger!
Mmmmm... Krusty Burger.

It’s almost as if they have thrown money away

The operative words here are highlighted. The MSM wants to say it but cannot say it. I don't remember anyone using those qualifiers while insulting renters.

I need to get onto Brand’s idea and email my representatives.

Brand,

I in fact emailed Schumer, Boxer and Feinstein (and a while a go Christopher Dodd, Connecticut senator) about this. It's easy to do. I won't post links to all their sites, but each one has a similar "email me" page (Boxer's below):

http://boxer.senate.gov/contact/email/policy.cfm

Feel free to use my letter, although take it with caution since it might not be to your liking:

**********

Senator X,

I am writing to voice my opinion, which I know is shared among many, many Americans. I am highly concerned about your proposal currently making the news to provide financial relief to those under threat of home foreclosure due to the fallout from the subprime mortgage crisis. While I feel sympathy for those who may have been misled by unscrupulous lenders, I believe that any proposal to provide financial or other relief to this group is misguided.

First, the truly misled likely comprise a small portion of those subprime borrowers facing foreclosure. What about those who knowingly abused the system, taking advantage of "liar loans," using these loans for investment properties, or who used the extra cash gleaned from serial refinancing and home equity extraction to buy luxury items? Do you plan to "bail" these people out as well? I refer you to a particularly egregious example at www.iamfacingforeclosure.com.

Second, I applaud your efforts to help those who may have been duped by unethical members of the real estate/mortgage industry. However, please bear in mind that your efforts as I understand them absolve many of these people of financial obligations they willingly signed onto. This presents a significant moral hazard. So should we all now obtain subprime mortgages with the intent of not paying them off, in antipation of a bailout? I hope not.

I also ask you to look beyond the political posturing to present yourself as a champion of the working class and to realize that many, many upstanding voters find your proposal appalling and misguided. We do not wish to have our taxpayers' money going to bail out those who are too irresponsible to manage their own finances.

Thank you for you time and consideration.

Randy H,

RE: the NYT rent vs. buy calculator, I've been wondering if they got the idea from your bubblelizer. I am getting the distinct sense that more and more of the MSM are lurking in this and other bubble blogs. Bill Gross' latest newsletter speaks of Second Life (!?!!) in relation to the subprime mess, and now this.

Makes me wonder. If so, they should give credit where credit's due.

I refer you to a particularly egregious example at www.iamfacingforeclosure.com.

What is the probability that Casey Serin runs for Senate in the future?

Another perspective: the anti-evolutionary aspect of humanity (some like to call it compassion) is a solid case for Intelligent Design.

But compassion and team-building and co-operation is what helps the tribe survive. Lack of compassion means that chimpanzes just walk away from orphaned chimps in the tribe and leave them to die.

Between social animals (bees, ants, some primates and people) and asocial animals (such as cheetahs), the social animals often get a better time of it, which is why they have evolved that way.

(Of course, once man has become wildly successful and tamed the environment, evolutionary pressure decreases -- when the environment no longer presents a challenge, biological evolution slows down. However, there is a further social stratification process that tends to select for intelligence, for instance.)

Of course, people show many abilities chimps do not, for which we should also be grateful -- the ability to make and appreciate music, do mathematics, build things, demonstrate advanced learning skills and communicate effectively for joint effort. We would not have buildings and PCs and space shuttles if not for the ability to write things down and pass them on and learn and therefore produce far more with joint effort than any individual ever could acting alone.

No man is an island, entire unto himself... so send not for whom the bell tolls, it tolls for thee...

So thievery, fraud & misrepresentation = Capitalism? Maybe this is true to some (DS), but I like to think we can do a little better than that.

But we aren't... :P

skibum,

I am getting the distinct sense that more and more of the MSM are lurking in this and other bubble blogs.

If I was an MSM editor or producer today I would have at least one staff member scanning the blogs (and not just the bubble blogs either) on a full-time basis looking for leads.

And I reckon I would have a watertight business case if management queried what the scanner was doing.

Oh, and while watching CNBC a couple of hours ago (7:15pm our time) there was a segment based around the NAR prediction of a Calendar Year Median price FALL in 2007, albeit only of 0.7%.

One of the guest analysts pointed out that there was no way the NAR would make such a prediction unless they were certain that a fall was inevitable. It was also stressed that this would be the first such decline since the NAR started keeping national statistics in the 60's, and probably the first since the Great Depression.

My take from this analyst's words was that he felt any refinement of the estimate would be to the downside. The 3 CNBC co-hosts (this is a US/Europe/Asia segment, maybe you don't get it) didn't challenge the estimate and analysis at all, just asked the analysts some questions about the implications of such a fall on the wider economy (and got 'bear lite' responses more or less ending 'we have to wait and see').

The WSJ has run an article on this NAR estimate.

I suspect every housing bubble blog in the world is going to be putting up a thread on this one. :)