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Silicon Valley Prices


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2008 Mar 14, 12:50am   7,812 views  75 comments

by Patrick   ➕follow (55)   💰tip   ignore  

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I hear conflicting reports about prices in Silicon Valley. The official reports have prices in Santa Clara County falling only 4% from last year, but unofficially, I hear of discounts of 10% to 15%, and very slow sales.

Anyone know about how to get the Case-Shiller prices for specific areas like Santa Clara County? They're the only stat I trust these days.

Patrick

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1   SP   2008 Mar 14, 1:11am  

Patrick said: I hear conflicting reports about prices in Silicon Valley. The official reports have prices in Santa Clara County falling only 4% from last year, but unofficially, I hear of discounts of 10% to 15%, and very slow sales.

Possibly because the "official" data is based on sales that closed several weeks ago, and excludes stuff like foreclosures?

I am actually seeing even _asking_ prices down by 10% or more from peak. During the peak, homes were selling above asking price too. So actual sale prices difference must be even more.

Sorry, I don't know about the Case Shiller data for specific Bay Area.

2   revengeofaone   2008 Mar 14, 1:27am  

This post is for entertainment value only. I am not an attorney. Your mileage may vary. I may be completely wrong.

In Michigan, I have been using Zillow to find recent home sales, as you can set it to show last month, last 3 months etc.

There is probably somewhat of a lag until the new owners report the sale to the taxing authority, but then I think it appears as dated the date of the sale, not sure though. Thus sales within a few months may appear "down" but will "pop up" within maybe six months.

The prices appear way down, subjectively and unscientifically to me.

I have no interest in Zillow financially or otherwise.

NOT INVESTMENT ADVICE>

3   revengeofaone   2008 Mar 14, 1:27am  

Also, I am familiar with local school districts, so I like searching geographically with Zillow's map interface.

Read Above Disclaimers!

4   StuckInBA   2008 Mar 14, 1:38am  

The price drops vary in micro-markets. The problem is, i have documented before, foreclosures are not considered by Zillow in coming up with their Zestimates. This may be the case for median price, even when they constitute such a large portion of sales. And yes they are considered in sales numbers !

On top DQ has discontinued weekly updates to Santa Clara statistics. The latest data is from 01/28/2008 and it shows a 15% drop in price per SQFT for Santa Clara. I know it has shortcomings too, but it's much better indicator than median.

5   revengeofaone   2008 Mar 14, 1:52am  

I am not referring to Zestimates, I am referring to actual sales listed.

I do believe that they include foreclosures in the sales listed but these typically seem to have sales prices that are wacky like $234,581 rather than sales prices like $234,900. So I have not too much trouble sorting them out, and actually gives me a nice visual display of just how much pain is out there, and how many sales at what price is out there.

It is possible to cross check many sales in my area with the local city's web site as most make the public data available for free on their site and also by driving by the homes. Foreclosures often have warnings in paper that are posted on the window that the houses' water systems are not potable, because they have been winterized (it's been a snowy winter, so much for global warming and low lake levels). The unmaintained look also helps.

If the owner is "BANK OF ____" you have a pretty good idea it's a foreclosure, although sometimes the city web site is not updated for a long time.

Again, not investment advice, I may be wrong, what the hell do i know.

6   revengeofaone   2008 Mar 14, 1:55am  

OT: as an aside, I don't know if global warming is real or not. I tend to want to believe it's real, because we use so much gas, and plastic and energy etc., but I don't know how we can really ever know for sure, as we have been monitoring sea temps and weather for such a short time.

My question is: is it too late to buy gold? Is this a commodity bubble? I wish I were clairvoyant...

7   revengeofaone   2008 Mar 14, 1:56am  

oops, last post is not investment advice...

sorry about diarrhea of posts, i'm done for a while

8   StuckInBA   2008 Mar 14, 2:09am  

revengeofone :

It definitely seems like it's a bit late to buy gold. I am holding to what I have but not buying anymore. My cost basis is pretty low compared to today's price.

But no one has a f8cking clue in this market. I really mean it. More than the cliche, no one knows the future. But you can make some logical predictions. What I am saying is I don't think logic will have much chance in succeeding in this type of economic situation. The whole thing is so f8cking bizarre.

Hence I remain diversified.

THIS COULD BE A VERY BAD INVESTMENT ADVICE. USE IT AT YOUR OWN RISK.

9   HARM   2008 Mar 14, 2:16am  

@SIBA,

“the market can stay irrational longer than you can stay solvent”
–John Maynard Keynes

10   Glen   2008 Mar 14, 2:29am  

My question is: is it too late to buy gold? Is this a commodity bubble? I wish I were clairvoyant…

I have no idea, but I am somewhat skeptical about the goldbug case. I understand the case for commodity inflation when it comes to industrial, agricultural and energy commodities---it is a play on global development. The first thing that newly middle class people in China or India will buy is food. Next, they will increase their consumption of energy. To some extent, gold price inflation can also be explained by demand factors---such as the growing global demand for gold jewelry by women in India, but I don't think that most goldbugs think that there will be a spike in demand for fancy jewelry.

I think the goldbug's main thesis is that all "fiat currencies" are systematically debased and that gold is the only form of currency which can not be manipulated or debased. It is true that cental banks can not manipulate the gold supply. However, there is a steady and growing supply of gold in circulation. If the supply of dollars increases at 4% per year and the gold supply increases by 5% per year and gold demand is steady, you would expect gold prices to fall in dollar terms over the long term. The higher the price of gold in dollar terms, the stronger the incentive to dig more of it up. With gold prices at $1000/ounce, which is much greater than the cost of extraction in dollars, you can be that a lot of new gold supply will be brought to market. So gold supply will start to grow at a faster and faster rate until prices fall.

Finally, even if you believe that Bernanke is a serial bubble blower, does it follow that all of the world's central banks follow the same M.O.? Brazil's fed has in recent years finally started to get serious about their inflation problem. Brazil is a fast growing economy with a slow growing money supply. Accordingly, when Warren Buffett recently decided to speculate in the currency markets he purchased Brazillian Reals, not gold.

11   Duke   2008 Mar 14, 2:42am  

No Case-Schiller for the Bay Area.
SFO shows 13.34% decline from Max of 218.37 to 189.23.

Asking prices are falling - even more than 15%. Looks closer to 17%.

At the very leaast, mortgage rates have gone from 5.5% to 7.25% which means a needed 16.8% discount on price to maintain monthly affordability.

As long as rates stay high and the expectation of loss persists, then those who must sell will have to discount.

Remember the BA has a great many people who are retiring and they have plenty of margin for 'giving up' 20%. This is the 'elect to sell close to the peak crowd.'

Real fortress price destruction will not occur until job-loss.

Sadly, prices need to come down at last 20 additonal percent (40% total off peak) - but this is seeming more and more likey every day.

12   revengeofaone   2008 Mar 14, 2:43am  

thats an interesting point about digging up more gold.

All I need for retirement is a gold laying goose or those gold coins from that violent movie about the spartans and persians

13   Peter P   2008 Mar 14, 2:50am  

I am not a gold bug.

One thing: it is counter-productive to analyze a bubble with reason because markets are completely driven by psychology.

Another thing the housing bubble taught us: prices move up with demand but prices really move up with investment demand.

I believe gold may enter a bubble if it is not already in one. I do not know how high gold prices will be, but I am certain it too will have a price crash.

Caveat emptor.

Not investment advice.

Disclosure: I own GLD.

14   StuckInBA   2008 Mar 14, 3:02am  

Glen :

Gold prices can fall in other currencies while rise in one currency - that is USD. What we should look at is the ratio of Gold price to USD.

I think it's best to treat gold as a currency - a tool for exchange - without much intrinsic value. So faith in USD may fall vis-a-vis gold. That's how I treated gold and bought MERKX - the currency fund. It's not that demand for gold is rising, but demand and faith in USD is falling.

Eventually, IMO, US economy will regain footing in 5-10 years. So depending on such individual projections, one can decide what will be a good time to become bullish on USD and bearish on gold.

Usual disclaimers apply.

15   Peter P   2008 Mar 14, 3:04am  

So it seems JPY has finally crossed 100?

It also appears that there is quite a bit of profit-taking resistance in the metals.

Not investment advice.

16   Peter P   2008 Mar 14, 3:09am  

Another way to look at this...

All the gold ever mined can fit inside a 19 m^3 cube. Gold is also a tiny market in terms of volume so it responds violently to any supply or demand surprise.

http://cogweb.ucla.edu/Chumash/Goldrush.html

17   GammaRaze   2008 Mar 14, 3:16am  

>Another thing the housing bubble taught us: prices move up with demand but prices really move up with investment demand.

Very true. Which is why cheap, flimsy dinner plates are sold on TV as "collectible" plates for many times what they are worth!

18   DennisN   2008 Mar 14, 3:33am  

Dumb question time.

The IRS has a loophole for "collectables". The capital gains rate for proceeds of sales of "collectables" is HIGHER than that for normal items.

Is the sale of, say, Kruggerrands considered "collectables" for the purpose of capital gains rates? :confused:

19   Peter P   2008 Mar 14, 3:41am  

Is the sale of, say, Kruggerrands considered “collectables” for the purpose of capital gains rates? :confused:

I believe so.

Not tax advice.

I believe gold futures contracts are taxed 60/40. There are always gold mining stocks. :)

Not investment advice.

20   Peter P   2008 Mar 14, 3:42am  

IF I am to buy gold coins, I may consider the Krugerrands. They do not cost much over spot.

Gold is gold.

21   e   2008 Mar 14, 3:43am  

>>Remember the BA has a great many people who are retiring and they have plenty of margin for ‘giving up’ 20%. This is the ‘elect to sell close to the peak crowd.’

The problem with that is it's rational thinking.

These people aren't going to "give away" their houses for "free".

Plus, their Prop 13 status isn't going to encourage them either.

22   HeadSet   2008 Mar 14, 3:45am  

All the gold ever mined can fit inside a 19 m^3 cube

You could store it all in your small 1800 ft house!

23   DennisN   2008 Mar 14, 3:48am  

Hmm...maybe I should get out my pan and head out for some creeks in the Owyhee mountains this spring. At $1,000 an oz even getting a few nuggets a day could supplement my income. I presume "found gold" has a cap gains basis of $0.
http://pubs.usgs.gov/gip/prospect2/prospectgip.html

24   Peter P   2008 Mar 14, 3:49am  

You could store it all in your small 1800 ft house!

Only if it has a 130-foot ceiling. :)

25   BayAreaIdiot   2008 Mar 14, 3:50am  

The problem with that is it’s rational thinking.

These people aren’t going to “give away” their houses for “free”.

Plus, their Prop 13 status isn’t going to encourage them either.

eburbed,

I believe that's so 2007 type of thinking. There still are rational people out there, perfectly capable of reading the writing on the wall and cutting their price early enough to get out of dodge with a great nest egg. They're your 70 year olds who are moving to Colorado/Arizona/Florida/Texas to be closer to the grandkids. It doesn't take too many to get the ball rolling. I think.

26   HeadSet   2008 Mar 14, 4:03am  

Only if it has a 130-foot ceiling.

Oops. That was 19 cubic meters, I was thinking feet.

27   DennisN   2008 Mar 14, 4:05am  

I wonder how many toilet tanks it would take to store 19 cubic meters of gold.

28   DennisN   2008 Mar 14, 4:09am  

There still are rational people out there, perfectly capable of reading the writing on the wall and cutting their price early enough to get out of dodge with a great nest egg.

I did this in May '06 when my friends thought I was nuts. Funny how quiet those guys are nowadays.

29   StuckInBA   2008 Mar 14, 4:11am  

BAI :

I will add more. People might start thinking that if they wait, they will have to "give away" their houses for "free".

Who is realistically expecting house prices in BA to start rising ? The best case scenario according to bullest of bulls is for prices to remain "stagnant".

A real estate agent told me last week that all these "jumbo mortgage problems" will go away in 2009 and RE market will be fine. I asked him point blank, if he thinks banks will start lending at 0% down ever again ? When he sheepishly said no, I asked him, so what will happen when banks start demanding over 20% down payment ? It hit home, and hit very hard.

Look guys, this whole debate about interest rates, seller stickiness, pent up demand in Fortress etc is so 2006-7. The mantra for 2008 is "Show me the money". If you cannot bring money to the lending table and prove that you will be able to service the loan for the foreseeable future, please don't bother.

I have mentally put a limit order for 2001 prices. When it triggers, I buy. I can wait forever, as I am getting paid to wait.

30   BayAreaIdiot   2008 Mar 14, 4:18am  

Funny how quiet those guys are nowadays.

Perhaps they're contemplating that you weren't as nuts as you seemed! Eventually it may dawn on someone that you weren't nuts at all and they'll follow suit.

31   Peter P   2008 Mar 14, 4:23am  

I wonder how many toilet tanks it would take to store 19 cubic meters of gold.

Let's assume each toilet tank holds 1.6 gal, that is about 0.006 m^3. So about 1.1M toilet tanks can hold all gold.

See, all the gold in the world can be "hidden" in a small city like San Francisco. :)

32   BayAreaIdiot   2008 Mar 14, 4:36am  

A cursory examination of trulia "sold homes" in San Jose with a filter on for older homes *seems* to indicate they are selling for below avg prices. Some of that is because newer stuff tends to command a premium for all kinds of reasons. But - I believe - some of it is because these are the types of sales (other than distressed sales) which are marching things down - people with low cost basis. I wish there was a way to see a 2007 spreadsheet for non distressed sales of homes with last purchase/extraction refi more than 15 years ago.

33   DennisN   2008 Mar 14, 4:39am  

See, all the gold in the world can be “hidden” in a small city like San Francisco.
Talk about a "fortress". ;)

34   Duke   2008 Mar 14, 4:58am  

My point exactly Dennis.
Some can get out and now is better then lter.
The boguht recently crowd who does not want to realise a loss of 15-20% (today, so far) can either hang-on or lose their home to foreclosure, or HELOC it fully, then get tax amnesty and a nice paydy. Sorry, was thatcynical?
Others will have to move do to job-loss (probably coming, but who knows), divorce, job-relocation, etc. They will have to realize a loss.

I would say the hang-on crowd is by far the largest so we pick up marginal buyers pretty quickly for the relatively small crowd electing to or being forced to sell in a depressed market.

Higher rates are every savers friend. Presumably it means you have a very large down payment, and thus can finance your small (or 0) mortgage after taking advantage of the price declines that must follow the near-absolute truism of homes being sold on monthly affordability.

Cough cough. Not that liar loans, 0 down, teaser rate hyper speculation is out of the housing market.

35   Duke   2008 Mar 14, 5:02am  

By the way, the normal real estate addage is that market timing is not an good bet in RE. The cost of closing, RE fees, movig expenses, then renting expenses makes it a very difficult process to come out ahead.

Not so in this market. At least for the Bay Area.

The run-up was so huge, and the prices were so high, that given a run-down of 30-50% means you can be pretty far off the edges and still time this market.

Not advice. Determine for yourself if renting through the storm is right for you and your family.

36   EBGuy   2008 Mar 14, 5:21am  

People might start thinking that if they wait, they will have to “give away” their houses for “free”.
Definitely will be interesting to see how people respond. That is why I used the term critical mass when referring to the fact that 1/3 of the transactions in SoCal involved foreclosures. Retirees waiting for the end of the housing Gold Rush are getting some pretty clear signals now. You can't stop the REO speedwagon, so get on board.
BTW, for those of you who have feared that Used Home Salesperson's would put their photoshopping skilz to more nefarious uses than touching up their headshots, you must check out Socketsite and their latest thread on 2221 Baker Street. Well, maybe it will draw some buyers to the property, but its not exactly generating goodwill.

37   StuckInBA   2008 Mar 14, 5:34am  

You can’t stop the REO speedwagon, so get on board.

Good one EBGuy. Keep the fire burning ...

38   GammaRaze   2008 Mar 14, 5:47am  

2221 Baker Street? Wasn't that Sherlock Holmes' address?

39   BayAreaIdiot   2008 Mar 14, 5:51am  

good catch sriram (almost)
http://www.sherlock-holmes.co.uk/

it was 221b

40   StuckInBA   2008 Mar 14, 5:58am  

Duke :

I would add that the advice to not time the RE market is for non-professionals and against using your primary residence.

For the first time buyers, I would say that timing is very important. And it's not hard - if you don't care for the "exact" bottom. RE cycles are long. It doesn't do an intra-day reversal.

For the first time buyers, it's very important to understand what part of cycle they are in. What are the price-rent ratios, what are the prince-income ratios, what is the economy (job market) expected to do over the medium term etc.

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