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Real Estate A Good Investment - Elsewhere!
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2007 May 24, 9:08am 15,006 views 129 comments
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you have to pay through the nose for private schools, and you have to put your kids on a stretchy leash while playing in the park for fear of sundry unsavory characters lurking about.
There are unsavory characters lurking around Marina Green and The Presidio? You are kidding right? The only unsavory slightly characters I ever see around there are lost German tourists, in their Birkenstocks.
There are many good public schools in San Francisco. It is true that you are not guarateed entry into any of them, including the neighborhood school, and I have heard stories from people who love the public school their child is in and also from others who send their children to private school, so it is a mixed bag. I guess if it is important to you that your children only be around other wealthy children, then private school or a wealthy suburban school district is the way to go. For some reason, even Marin has a large private school component, 19% of the student population and the second highest in the state (after San Francisco at 29%).
B.A.C.A.H.
2007 May 27, 6:12am
skibum & Peter P:
http://web.mit.edu/ntan/www/articles/saratoga.htm
If you don't have time to read about the cheating scandal at the elite & covted Saratoga High School, you can also read this quote from it:
"... The cheating scandal put some parents who moved here from Hong Kong, Taiwan and India in an uncomfortable spotlight because the students who were caught were all from Asian backgrounds...."
I have near 200K in 401K. What do you think a reasonable retirement target. Should it be 1 million dollars?
$1M in 2007 dollars is probably enough for a modest retirement for a single person, more than modest if your home is paid for. Retirement counselors say you should spend no more than 4%/yr, if you don't want to risk running out of money.
To do this right, you need to have someone run some Monte Carlo simulations for you, to see what your risk of running out of cash before you die is.
When my youngest was in elementary school, her kindergarten teacher went to Stanford. Seems like overkill. Her pay was no higher than if she had gone to the local Junior College and transferred to a State School for her upper division classes.
I guess, it would have paid off if she met Mr. Right there who had money or had the potential for money.
Peter P says: Can someone please tell me what is keeping Europe together? No offense, but what is the competitive advantage of Europe?
I think taken as a whole the EU has a diverse set of industries. London rivals or beats New York as the financial capital of the world. Germany has world-class engineering (not just BMW and Mercedes, mind you, think Siemens, Zeiss, etc). France has excellent civil-engineers, as well as exporting foodstuffs, and gourmet goods. Switzerland has Novartis, Nestle and a host of others. Netherlands has Shell. The list goes on.
What's interesting is that the U.S. has comparable companies or products for each of the above listed. When people bemoan our loss of manufacturing, they forget our depth and breadth as a nation.
Regarding Stanford, I went there for undergrad and master's, and I would agree that any pressure cooker mentality is self-imposed by students. Many choose to lead a balanced life, though many others spend all their waking hours in the library or studying in their dorm. There is also a large segment of the population that spends a moderate amount of time studying, but then supplements that with an insane number of hours playing a sport, keeping up a hobby/talent, or playing music. Usually (but not always) the motivations are internal and based on a love of whatever the student is involved in.
It is true that in comparison with East coast schools Stanford is much more laid-back. However, whether you consider Stanford students "lazy" or Harvard students "overworked" is really a matter of norms (personally I think Stanford has it right). I've lived in Boston for the last seven years and have a spent a lot of time with MIT and Harvard students, and what I would say is, there is a bell-curve distribution of "work-ethic" at all schools, but that at Harvard and MIT their is a fat tail on the right-hand side that really overdo it.
Regarding getting in...I was home-schooled in Mendocino county, so I may have benefitted from some rural affirmative-action (slight sarcasm). But if there is one commonality that characterizes the students I've met at top schools, it's intellectual curiosity. When encountering a new idea or field...does the student want to find out more and more, even when their peers are bored to tears? Couple that with attention to detail, and I believe a student is well on his/her way to a top school, even without a national figure-skating medal.
Oops...there I go discrediting Stanford...
"...at Harvard and MIT there is a fat tail..."
Muggy: Your friend is obviously young and has little interest in historical reading. People always believed that tech went up, particularly those who didn't remember the 80's when an engineer competed against a field of dozens for every single job opening. Then the bust happened, and a new generation was indoctrinated into the understanding of market cycles.
Real estate will have its bust. It has commenced in some areas already. But to those who haven't seen one before, the ensuing burst will seem incomprehensible, as it defies all the "rules" of their very short sample period.
CB,
I am glad that you like propertyshark.
It works great for me because I have been targeting lots in the western foothills with absolutely no idea how much they were worth 5, 10, 15 years ago. This site has amazing info on lots dating back as much as 30 years ago and most importantly, the financing options these buyers took on, so that I can have better idea of the seller's bottom line when the time is right.
Now, turning the table around, how do we game the system to hide our own transaction info? This is what I discovered. When you conduct of gifting transaction between your trust to a particular person, or a particular person to a trust, or husband to wife, or wife to husband involving no change in loan terms, the loan info of the LAST transaction then disappears. Perhaps when we are ready to sell, we should do such a transaction just to hide the loan info.
who cares what your loan was??? that kinda thinking is just naive..... the house price will be determined between what a buyer is willing to pay and a seller is willing to take, nothing else, in my experience (15 years realtor, investor, professor of finance) those who worry about days on market or what the seller owes or whatever are in love with analysis because of the anal part, not for any particular financial advantage.
@ Muggy,
NYC RE still defies all laws of sanity. Maybe when we're not the finance capital of the world any longer (which is happening as we speak), we won't be such a fortress anymore. 1 out of every 3 of my acquaintances and friends in the city moved here for some fancy job in finance and thinks $3k in TriBeCa for a 4th floor walk-up, with views of the back of a brick building, is "reasonable".
That being said, numbers are finally flattening out even here. Housing Tracker reports 2.4% decline in median YoY with a ~12% increase in inventory YoY. Mortgage:rent ratio is down to Q1 2005 levels. I'm hopeful this is a trend and not just a one-off.
Peter P
2007 May 28, 3:52am
NYC RE still defies all laws of sanity.
NYC luxury RE still defies all laws of sanity.
HaHa,
I guess it depends on how well you want to live. Considering you can probably get 7% real returns in your 401k, you should be fine, at least if you don't plan on retiring early. I find the Smartmoney calculators useful for helping me determine these things, but I am hardly a pro. I am pretty sure a couple of them post here and would be happy to help you manage your money.
http://www.smartmoney.com/retirement/planning/index.cfm?story=intro
You should always be able to make more money in the stock market than in residential real estate, over the long run, since the returns are higher in the stock market, but life is about more than just dying with the most money in your bank account.
You have to decide what the right balance is for yourself, of course, but I think you certaintly are able to buy now if that is what you want.
PS. If you are really making one HaHa and your wife also works, you have to be careful about the "excess contribution" tax on your Roth IRA contributions.
@Jimbo,
Somone FINALLY brought up the Monte Carlo simulations! Good for you! While I've long since given up on ever finding "the Holy Grail" MC is about as close to "all seeing" as we'll ever get. What they also provide is at least something of a guideline as to short changing yourself on the lifestyle side of the equation. If you have it at your avail, why not take advantage of running a MC projection?
@Jimbo,
Someone FINALLY brought up the Monte Carlo simulations! Good for you! While I've long since given up on ever finding "the Holy Grail" MC is about as close to "all seeing" as we'll ever get. What they also provide is at least something of a guideline as to short changing yourself on the lifestyle side of the equation. If you have it at your avail, why not take advantage of running a MC projection?
Randy H
2007 May 28, 7:15am
azrob pontificated:
who cares what your loan was??? that kinda thinking is just naive….. the house price will be determined between what a buyer is willing to pay and a seller is willing to take, nothing else, in my experience (15 years realtor, investor, professor of finance) those who worry about days on market or what the seller owes or whatever are in love with analysis because of the anal part, not for any particular financial advantage.
In my experience, people who resort to appeals to their own authority ie."15 years realtor, investor, professor of finance", only to then offer an "it's just that simple" argument are in love with the sound of their own curmudgeonry.
Mister Professor, does the loan you so smugly dismiss have any weighting upon the behavioral economics of the transaction? Or have you discovered in your profound practical implementation of 15 years of practice that marginal costs no longer are an input into microeconomics?
...but not as annoying as someone who intentionally drives slower than the flow of traffic to satisfy some warped sense of personal suburban vigilantism.
By the way, the statement the house price will be determined between what a buyer is willing to pay and a seller is willing to take, nothing else is about as inane as "What goes up must come down, therefore people who study kinetic physics are in love with their own equations".
In any situation, I believe that the more I know about the other side, the more of an upper hand I have. The less I let the other side know about me, the less of an upper hand he has.
Loan amount and terms are just one aspect of the data that I would like to collect.
The pressure must be getting unbearable for some of these FBs. We had Police choppers circling over our neighborhood, this weekend!
...he missed the For Sale sign in the yard, but now has some presale "fix-it's" to take care of.
Here's the story:
Police: Man fired gun negligently
Deputies arrested a 52-year-old Windsor man Saturday night, accusing him of negligently discharging a firearm after neighbors reported gunfire and investigators found bullet holes in the side and interior of the house.
As of Sunday night, Thomas Dean Tollefson remained in Sonoma County Jail, where bail had been set at $250,000, Sonoma County Sheriff's personnel confirmed.
Deputies responded at 5:35 p.m. Saturday to the 300 block of Winemaker Way, investigating a report from a witness who saw one bullet exit the wall of a neighboring house, spraying stucco into an adjacent back yard, the sheriff's department reported.
Upon arrival, the deputies found two holes in the side of the house and two spent bullets on the ground outside.
Aided by the CHP helicopter, they surrounded the house and called inside, but no one answered the phone. As deputies prepared to enter, Tollefson came outside and was detained.
Tollefson refused to answer questions, according to a Sheriff's Department statement. Inside, investigators said they found bullet holes in the home's ceiling, walls and floor.
-- Katy Hillenmeyer
Press Domocrat
For current purposes, 1HaHa = USD 150,000. The precise definition of 1HaHa is 3x National median family income*,
Cupertino is approaching having a median income of 1 HaHa
http://money.cnn.com/magazines/moneymag/bplive/2006/snapshots/PL0617610.html
Median family income
(per year) $123,32
Oh, well this is interesting:
Median incomes:
Cupertino, CA $123,320
Sunnyvale, CA $90,857
Santa Clara, CA $87,308
Mountain View, CA $89,159
Palo Alto, CA $132,903
Naperville, IL $112,258
Sugar Land, TX $101,168
OK, I can sort of understand Sugar Land, TX. That's where Tom DeLay was from. But what's in Naperville?
Also, I'd argue that the CA median incomes skew on the -low- side due to the huge numbers of PreProp 13ers who are retired and pay $2 a year in property tax.
The median income of the "in the market to buy a home" is likely dramatically higher.
B.A.C.A.H.
2007 May 28, 3:37pm
In some coveted neighborhoods, median income doesn't matter.
Most of the houses are not traded in any given year, just a small percentage of them. If say,for example, you're the progeny of a senior partner in dynastic law firm in Singapore or something like that, green card by marriage, well, you could have zero income but be a buyer for Monte Vista or Lynbrook or something like that. Your folks have the money and help you out. YOu have the green card. Your income doesn't matter.
THere's not that many homes bought and sold in a given calendar year, and there's other people like you, so it is supply and demand.
It's a reason some neighborhoods, the sky's the limit, but in other neighborhoods that are not coveted, it's doom and gloom.
B.A.C.A.H.
2007 May 28, 3:55pm
ebubed,
In the late 1980's there was a phenomenon called the John Hughes movies. Some of them were supposed to be set in an idyllic suburban neighborhood that might evoke the fantasies in Leave it to Beaver or the Ozzie Nelson venue, but they're supposed to emulate the Chicago suburb Park Ridge.
I have some inlaws who are professionals (physicians) hocked up to their eyeballs to buy-in to that Park Ridge fantasy.
For those who won't (or can't) pony up, those Park Ridge wanna-bees settle for Naperville. I've been there once recently, it does look nice if you like that sort of thing. But if you can't afford Park Ridge, then the property tax and winter heating bills for your Naperville McMansion will knock the wind out of you.
I'll be a contrarian and say that the modern Chinese hypercompetitiveness is perfectly in line with classical Chinese hypercompetitiveness. From Sung onwards, the energy of the literati class went towards testing into an impossibly difficult and arcane set of state exams. It's like spending a lifetime trying to test into a Harvard with 1/1000th the admittance rate.
And I think that's why Asian kids also have higher suicide rates. They're working so hard to get to a place that many don't even understand the reason to, it's their parents who are pushing them (in many cases, the parents also have no idea what real value may lie in a Stanford or a Harvard education, they just think they've succeeded by placing their kids there).
Private v. Public really depends on how rich the parents are. Generous private colleges and universities normally offer better financial packages to the "poor." If you're from a state without a great state college system, going to an out-of-state public university is almost certainly going to cost as much or more.
In state is another matter. Some of my friends did get fullrides + pocket money to University of Maryland and I understand this is quite common elsewhere.
How someone found enough "material" to make "a" movie about bored, mean, rich suburban kids is beyond me? Let alone turn it into a franchise? I've never been able to sit through Ferris Bueller once.
After seeing the powder puff initiation/hazing incident and the blatant denial from the parents afterward I'm convinced those affluent suburbs have completely lost it! At least the kids from Cicero, Berwyn and Stickney stuck together.
Peter P
2007 May 29, 1:18am
From Sung onwards, the energy of the literati class went towards testing into an impossibly difficult and arcane set of state exams.
Sung was quite modern relative to I Ching and The Art of War, right? :)
Peter P,
Yes, I suppose some (like my Chinese history professor and the Chinese History establishment) would call Sung the start of Early Modern China. However, Classical China, if defined as the East Zhou (a time period that encompass the Spring-Autumn period and the Warring State period), is very alien from modern China indeed.
On the other hand, if you take Classics, as interpreted and understood by Sung and Ming Neo-Confucian scholars, then we might understand modern China as a somewhat unnatural outgrowth of all that.
Lake Tahoe Renter Says:
> Just dropping in to say hello, and to say thanks
> again for the informative website.
Glad to have someone from Tahoe on board…
> I am a renter in a very nice neighborhood on the
> South Shore…
Tahoe Keys?
> many of my friends would tell me I should beg borrow
> and steal to get into a house before you get priced out.
I don’t know how long you have lived in Tahoe, but when things slow down in the Bay Area they really slow down in Tahoe. Back in 1996 I knew a realtor (one lady not a firm) that had almost 200 listings with almost 100 under $100K…
> I’m looking forward to prices dropping at least another
> 20 percent and so I can say I TOLD YOU SO.
They will drop way more than 20% in the Tahoe basin before this is over…
> The West Shore is defiantly more desirable than South Lake
> Tahoe, it cracks me up, one time a gentlemen from the
> West Shore actually told me that people from South Lake
> Tahoe are of another breed.
When I was a kid growing up on the Peninsula many of my neighbors had family places on the West Shore that had been in the family for years (and cool pre-war Rivas, Chris-Crafts and Hackers that had never been in any lake except Tahoe). Back then the South Shore was mainly full time residents and rental cabins. As prices on the West Shore (and other prime areas like Sugar Bowl, Squaw Valley, Glenbrook and Lakeshore Blvd. in Incline Village) have gone up a lot more Bay Area people are buying in South Shore (and forcing lots of former full time residents over the hill to Carson City).
If you get the chance check out the KGW link Patrick provided! Hysterical story of a total idiot going into default on his Oregon home and letting three PIGS live inside! Well I guess that's one way to deal with a default!
It's actually only a few miles from here so I may go check it out? No, I don't think so, I get the idea. This guy is crazy.
sfbubblebuyer
2007 May 29, 4:35am
“knows why carbon mattersâ€
Huh? Because silicon steak would taste funny?
It's because of bonding. Silicon can form 4 bonds, but it can't do double or triple bonding easily. I'm pretty sure the triple bond hasn't been discovered outside of some esoteric laboratory reactions. Anyway, the bond angles are very important in the three different types of bonds as they are what give protiens/DNA/RNA a large part of their shape, and the shape of a protien in its active areas is critical. (As are the charges, but carbon doesn't directly affect that.)
When you cook a steak, you break a lot of carbon bonds apart, forming different molecule shapes (and occasionally different molecules as larger ones break apart) which tastebuds on your tongue and, more importantly, scent receptors in your nose can tell apart. Replacing carbon with silicon in a steak (assuming you could) would result in an mostly tasteless steak as you wouldn't be forming many molecules that your taste or smell could detect. Mostly it would taste like oil or butter or whatever you tried to cook it in.
I don't even want to go into how unhappy you'd be several hours after you ate it.
sfbubblebuyer
2007 May 29, 4:39am
Also, Randy, I have a MS in Biophysics and a BS in Comp Sci. scrubbo at that gmail dot com place would reach me.
SFBB,
I vaguely remembered that carbon was superior to silicon, though I forgot how. 10th grade Chemistry (taught by a man name Formulak) was a long time ago and I don't remember much of it, except being pissed off that he didn't let us burn magnesium ribbons.
SFBB,
I vaguely remembered that carbon was superior to silicon, though I forgot how. 10th grade Chemistry (taught by a man name Formulak) was a long time ago and I don't remember much of it, except being pissed off that the teacher didn't let us burn magnesium ribbons.
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Dear Patrick,
I enjoyed your housing crash article. It made me feel very good about renting in NY at rent stabilized prices since 1993 and having used the savings to invest in American commercial property, residential property Latvia, Bulgaria and Panama. I have never actually lived in a house I owned and think Robert Shiller's housing puts are a great investment.
I think you were not quite explicit about your principle point: that the US housing market has become a Ponzi style casino in which the commission grabbing mortgage bankers and Wall Street are the house and the retail buyers the naive punters. And anyone who doesn't count his cards and get out in time loses.
Real estate can be a great investment, if you:
1. Invest without emotion and at or below replacement cost, as in Latvia in 1998.
2. Buy where others are too scared because of perceived risk, as in Eastern Europe 5-10 years ago.
3. Buy where prices are the same as 23 years ago, like in Tokyo now.
4. Buy where the rental yield far exceeds bond returns, like in Tokyo now.
5. Buy in growing, cheap resort areas where the yields are close to or in double digits, like in Bulgaria, Turkey or Malaysia now. Beach apts in Malaysia can be bought for 500 euros/m2 with yields of 8-10%. Real estate taxes per year in Bulgaria cost less than dinner at a good restaurant in
Riga.
6. Buy where rapid construction cost inflation + the introduction of a mass mortgage demand will juice demand, as Rumania, Turkey or Bulgaria.
7. Buy in small stable countries with no income tax and good financial services and legal systems right next door to big, disorganized corrupt countries with lots of money to launder, like the Baltic States from 1995-2005 and Panama, Singapore, Turks & Caicos and Malaysia now (next door to Colombia/Venezuela, Indonesia/China). Buy in condotels with in-house rental management companies, so your rental revenue is at per day hotel rates instead of by the month, while the per square meter purchase price is at a normal local market rate.
8. Buy REITs with good yields (Singapore, Japan, Eastern Europe) in fast growing markets and leave the work to Cohen & Steers or the REITs' managers.
9. Invest in areas where EU infrastructure funds are producing wage and construction material inflation and raising replacement costs by double digits per year while the overall CPI is 2-5%.
10. Invest with my brother in the Baltics. My brother's fund is Baltic Realty Partners. His first fund was Latvia Realty Fund (www.latviarealty.com).
Best from sunny Riga and
Kind regards,
Lester G
#housing