patrick.net

The straw bale houses HARM suggested looks like they’ll have a great future, as soon as stupid local zoning boards start opening up to the idea.

The word straw is just difficult to accept. Perhaps we should call it "energy efficient natural fiber"? :)

Why must we work so hard to work AROUND scum like Marina Prime?

I welcome cogent arguments from those more "bullish" than I--it keeps me real. But, this endless ad hominem, disquised as "discourse" poisons the well for everyone. It's like a little brat screaming for attention, and when he gets none, starts breaking things.

Environmental building materials, ie straw, etc. Sofar, the straw/concrete constructions I've seen have been rather blockish, but I'm sure they'll get more creative over time.
I understand that these straw constructions are excellent insulators, and that interests me. Overall, I think there's a lot we can do to improve homes to suit specific environments, vs. building the same tract style homes across the nation. For example, I think homes in desert areas should be partially underground to stay cooler in summer/warmer in winter. Just the tip of the iceberg, (so to speak). If I find articles, I'll pass them on.

I am sad to see MP revert to his old ways, it was nice to see the earlier progress. However, New Attorney did provoke some responses as well. But the attacks on Astrid were uncalled for and if behavior like that continues we should evict just to prevent the further deterioration of the blog.

Mr.Right, are you trying to preach?

No sir. Just read the activity. That is not a pretty site.

Might be preview to RE fallout?

Peter P

When the blog starts dying it's probably time to pull the plug on sub-prime posters who are driving off all the people who have 'invested' quality time here IMO.

Well... I sure picked a fine time to take the night off. Lots of quality posts tonight, *sigh*. Now I feel like I need a shower.

What to do, what to do?

The last time we had a vote on MP when he was acting this way, more than half voted to keep him, so I doubt majority rule will provide a solution here. The problem with evicting only MP is of course that nasty exchanges have two sides. Those who have been reacting to, provoking & goading him share at least some of the responsibility and blame here.

How about this:
From this point on, the next clown to post a personal attack, insult or gratuitous taunt directed at another blogger gets his post deleted with a warning. Same goes for anyone who repsonds to it with another taunt/insult. Do it twice and you get banned.

How does that sound?

After scrolling through all the nasty exchanges from tonight, I went back through one of my very favorite threads, "On a Personal Note", and re-read many of the comments people had made about why they chose to spend more time here vs. other blogs. The answers I found should give everyone here plenty to think about (I hope):

Waiting in Vegas:

I never really read the blogs until recently and glance on occation at Ben’s but this is the only blog I have ever responded to. I enjoy reading everyone’s banter around here.

SactoQt:

I started researching online and found Patrick’s website a few months ago. I mostly read the links at first, but I liked how civil the posters were, so I started posting too.

Josh:

I was oblivious to the bubble until about 6 months ago. I found this blog through Ben Jones’ blog, and I find the conversations here really interesting– I’ve become addicted…

Jack:

This is my only blog. I have never done anything like this before. I enjoy arguing with most of you here much more than I enjoy NOT arguing with my friends at the coffee shop! (But I like them too.) I really do feel like I know many of you better than I know them. I really do love everything about the interactions here. I love you guys!

Yakim:

I’m a relatively new lurker, enjoying the catch-up reading and community vibe here.

Kurt S:

I’m really a novice in real estate, but this site has provided some education–and challenging viewpoints.

C F:

I’ve posted to a number of sailing related BB’s but for stimulating reading and intelligent conversations, I’ve found nothing that is as friendly and informative as this site.

Zephyr:

The blog world appeals to me because I greatly enjoy discussing issues relating to economics and real estate. I also find new sources of information, hear differing views and learn new things.

long time lurker:

I’ve been visiting your website almost daily for I don’t know how long - quite some time before you had the links and blog links. I use to visit several other sites but have found yours to be all that I need now, especially with all of the improvements that you’ve made this last year. You’ve really done a fantastic job.

Astrid:

I really enjoy the banter here. I love being able to engage in serious and lengthy conversation about economics, money, architecture etc. I follow thehousingbubble2 blog too, but the conversation here is a lot more interesting.

I don't know what Sunnyvale is like, but here in Noe Valley, I know all the homeowners within sight of my house and most of the tenants, too. The guy next to me and his wife are good friends and will be attending my wedding in two months. The ones two down went to school with my fiance and I met a new neighbor bicycling back from work today.

So not every neighborhood is like that. I am sorry you didn't get to know your neighbors, but everyone here has been sociable.

I ended up getting to know the guy across from me when the FBI came to ask me about him. He pretty much keeps to himself, but it turns out he works for NASA and was getting a Top Secret clearance, so they asked me about him. So we have all types here!

^Josh: And it's continued unabated except for a slight hiccup in 2001-02 for TEN YEARS. Can you believe it?

Shmend Rick,

Thanks for the excerpt from Genesis about Egypt's seven-year feast/famine cycle (to be correctly interpreted by Joseph). Very apt story and holds an important lesson for what may soon unfold in the RE market and broader economy.

Now, isn't that better than trading insults?

SIM,

Interesting anecdote about it being much more expensive to move OUT of CA than moving in. I wonder if that's true of most cities in CA now --can anyone else out there corroborate that?

Paul,

Thanks for the story about Queensland. I wonder, do Aussies also have NIMBY-style anti-development laws that restrict new building and exaggerate the up/down cycles there as well, or is it mainly overdependence on the powerplant & mining operations that matter?

I started noticing real estate take off in SF in 95-96. People in 96-97 were talking about how high real estate prices were getting and how houses were being bid up with 10-20 multiple offers over asking. It was shocking at the time.

I'm surprised it picked up so quickly in Palo Alto. Things recovered VERY slowly down here (SCAL/LA). Didn't really bottom until 1996.

How about this:
From this point on, the next clown to post a personal attack, insult or gratuitous taunt directed at another blogger gets his post deleted with a warning. Same goes for anyone who repsonds to it with another taunt/insult. Do it twice and you get banned.

How does that sound?

Sounds fair to me.

95-96 was still slow RE-wise in the Sacto area too. RE didn't really start heating up until after the stock boom/bust cycle.

@HARM, Josh
I’m surprised it picked up so quickly in Palo Alto. Things receovered VERY slowly down here (SCAL/LA). Didn’t really bottom until 1996.

the house my parents sold in 90 had appreciated 10x since they bought it in 71

I remember bay area RE prices rising during the tech boom, which back then was attributed to worker influx. Since prices kept going after the dot-bomb, I'm guessing speculation was a large factor during the boom time. Palo Alto has always been above-median housing, but it really took on status appeal during the boom. From Josh's comments, it sure looks like the curve began earlier. Funny, there was a mild tech-related recession in the late '80s to early '90s, but prices kept going up. Back then, it was generally assumed that demand drove the prices; we didn't consider the investors too much.

Sacto. will follow SF by a year or two, both in declines and gains. If you live in Sac., be awake and fully alert to the SF market.

That's one of the reasons I follow this blog. I think it helps to hear anecdotally what's going on in the BA in order to gauge what's likely to happen here.

But isn’t everybody who rents out a condo, the owner of the condo? I don’t understand how all condo owners are exempt from rent control? Should there be no rent control then?

Many own multi-unit "apartment" buildings. They are "structurally" similar to condos but the type of ownership is technically different. Am I right, Jimbo?

BTW- If Hedgestreet is bunk, are there any locale-based RE derivatives available for the private investor? Many disagree with me, but in the case of a collapse, then REITs will be greatly undervalued…

We are waiting for MARCO securities. There will also be tracking futures contracts. I think the liquidity will be a lot better.

The only other "locale-based RE derivative" I know of is a friendly gentlemen's bet.

BTW, many apartment REITs may not collapse at all. Mortgage REITs will see blood.

(Not investment advice)

I’m surprised it picked up so quickly in Palo Alto. Things receovered VERY slowly down here (SCAL/LA). Didn’t really bottom until 1996.

I think it was related to the tech boom.

OT: Does anybody else find it curious that Patrick doesn't seem to EVER post on these (his own!) BLOGS?!

Man, the rate of growth of this thread is.
Well.
Well, it's bubble like.

NEast good for weather, not for taxes and COL. Grrr. I'm already looking for the final resting place.

Here are my requirements -
1. San Diego Weather
2. No State Tax
3. Low property Tax
4. Arable land
5. Not too many people.
6. 100 acres for less than 500k

Any suggestions welcome.

If Peter P wants a trademark, I'll submit it to the USPTO for free. His filing fee would be about 300 bucks.

BAY AREA DATAQUICK REPORT JUST RELEASED:

http://www.dqnews.com/RRBay0805.shtm

re: dataquick report, I noticed this side comment:

Indicators of market distress are still largely absent.

Hmm....are they expecting something? Or: "Does that mean the market is turning? Probably not."

If Peter P wants a trademark, I’ll submit it to the USPTO for free. His filing fee would be about 300 bucks.

Wow, you must have super power or something. Thanks in advance. ;)

Shmend Rick, we did have a thread about hedging and MACRO securities:

http://patrick.net/wp/?p=27#comments

Analyzing past RE cycles using median prices may understate the magnitude of the downturn. This is from Ben Jone's blog:

"Thus I can have median price increase yet everyone of the home that sold can decrease in price. ( Sale composition just shifted to high priced home.)"

This is very true. During the last SoCal bust, the median price only fell about 15-20%. However, individual homes were down as much as 50% and condos even more. When affordability improves (as prices decline), people may spend the same money for a home, but get more home for the money. Thus, if people spend the same, the median stays the same, just the pool of homes sold changes.

Thanks deb!

Mr, Right, I'd like to answer a post you made before the recent "troubles":

Re: rent vs. own ratios. It’s funny that some think that is a cast in stone indicator that prices will “revert to the mean”. Much like equity p/e’s of the S&P 500 from 1980 to date, which have increased 3 fold (disregarding the 5 fold dot.bom high), ratios sometimes change and do not “revert”, it seems. Unless, are we expecting the equity markets to crash again as well?

I noticed you picked 1980 as your starting point, which was actually the low point at the end of the long 1970's bear market. Actually, while the S&P 500's current P/E is somewhat high (22.5) relative to its 65-year historic average of around 15 (tinyurl.com/b672o), it's also well below extreme highs reached at the end of the tech bubble (high-40's). While I don't think historic PE ratios are the very last word on everything, I think they are pretty reliable indicators of when asset valuation is way out of line with fundamentals.

A lot of economists, bulls & bears alike, think rents are one of the best ways (if not THE best way) to determine a "PE ratio" for housing prices. Simple cash-flow analysis works fine for me too. If I buy a house or condo at todays prices in City X, would I be able to rent it out for what it's costing me in PITI, maintenance, etc., assuming a non-voodoo amortizing loan? If it's not even close, then something's out of whack IMO.

Jack,

Over the long run, rents have always moved pretty much in tandem with housing prices --the very notable exceptions being periodic housing bubbles. This makes sense when you think about in terms of renting being pretty much the only alternative to buying. When the premium for buying greatly exceeds the cost of renting an equivalent house/condo, then you would expect that some buyers would shift back to renting, depressing demand for housing, while increasing demand for rentals.

That's what would happens in a rational market anyway. I don't think most buyer's expectations today are rational ("it never goes down/20% a year forever"), nor are most of them really paying attention to things like PE ratios, affordability, speculation, loose lending standards, yield curves or most of the topics we cover in this blog on a daily basis. I see the the very high housing demand right now as primarily comprised of speculators and people who are basing their decisions on emotion (greed, fear of being priced out forever, herd mentality, etc.).

HARM-
Traditional “Investment models” dont work with real estate, because real estate is not ONLY an investment. It is as simple as that.
No new paradigm BS either, just a fact. Real estate is not an investment.

Jack, for people who are flipping condos a dozen at a time, real estate most definitely IS "just an investment". You and I are not like that, but these people are creating an environment of greed and fear (of runaway prices) that is driving the market for everyone. When the easy credit dries up and the market turns, this same herd psychology will work in reverse.

No new paradigm BS either

Ok, Jack, so you're not saying it's a "new paradigm". Just that traditional investment models, which used to work with RE, don't work anymore. And that the RE boom "is different this time". And maybe we've reached a "permanently high plateau". *wink, wink* ;-)

@jack
So at age 37, I was not the least interested in “trading up” to bigger debt and property taxes, etc. I was more in survivor mode, attempting to minimize my mortgage..."

Smart man--and a big difference from then to today, eh?

But why cant it simply be that so many people are looking to own instead of rent? Even without factoring in “investors” it could well be the stituation that the cheap credit has brought so many more people into the buying pool that the rentals are standing empty.

Good question. Wouldn't that suggest a steep trend of renter-->owner? Can we find any stats to support that? I know--that's my job! ;) Yet, when I read that investors comprise 20-30% of home buyers in the Bay Area, I really begin to wonder about the rental glut. Already, some regions are reporting a excess of homes that invetors can't rent (much less cover their monthly costs). This is one example, but of course it's not in Marin: http://tinyurl.com/982uy

Btw: Median prices in Marin--
Here's that Marin trend graph I did for 93-05:
http://tinyurl.com/c959f (sources cited on graph)

And here's a mean price graph '65-'04
http://tinyurl.com/7wrb5
(credit to Marinite and his Marin bubble blog)

business as usual, anomaly, or insanity?

But why cant it simply be that so many people are looking to own instead of rent?

Because they are convinced that housing prices can only go up.

And I didn't say permanently high plateau! I lived through two busts, remember? Going on three, and we will all live through this one too. Excuse me, correction, not bust.

I know you didn't Jack --was just giving you a hard time. :-)
Personally, I usually say "crash", but I've heard that gentlemen prefer busts.

Although the Bay Area as a whole didn’t break another record, SAN FRANCISCO did at $776K (up another $16K from the month earlier), based on my quick glance of every month’s data this year.

I made some (beer) money on HedgeStreet because of this SF number. Will continue to bet that median price in SF will be up for the rest of the year. This is not a bet on the housing market. Just a bet on the mechanics of median prices.

@Jack,
PS I just told my brother in law NOT to buy a house right now. For the first time in 15 years I said “dont do it”. (Happy now, Bubbleheads? hahaha)

I always suspected you were wise, if a bit bullish. Now I'm convinced.

I always suspected you were wise, if a bit bullish. Now I’m convinced.

Seconds there.

I always suspected you were wise, if a bit bullish. Now I’m convinced.

Jack is a wise guy of course. Never doubted that.

But he favors granite over corian... hmm...

I was trying to say that the urge to buy might define the game for some people- to the point that they would rather buy someplace ELSE –than rent HERE.

If they would rather buy someplace else than rent here, the intangibles argument will be weakened, no?