patrick.net

I don’t know if change will be possible if everyone is happy with the status quo.

If by "everyone" you mean rich people and big business, then yes. I haven't met too many taxpaying middle or working class people of any ethnicity who are too thrilled about the status quo. Of course, we "don't count" in such a high-stakes political game, do we ;-).

If by “everyone” you mean rich people and big business, then yes. I haven’t met too many taxpaying middle or working class people of any ethnicity who are too thrilled about the status quo.

But I thought everyone but us make 400K in the financial industry and bid 400K over asking price of a house. ;)

Bubble Sitter, many people assumed the maximum tax benefit as "promised" by the realtors and mortgage brokers when they buy. By the time they realize the situation, they are stuck.

If by “everyone” you mean rich people and big business, then yes. I haven’t met too many taxpaying middle or working class people of any ethnicity who are too thrilled about the status quo. Of course, we “don’t count” in such a high-stakes political game, do we .

Too true
Kind of harkens back to the article you posted about the 30-somethings leaving (Santa Clara?) in droves. Obviously the current status quo is not working for a lot of people. When I said status quo I was referring to the situation on the Ca/Mex border in a micro perspective. That town is happy with the situation, I can't speak for other areas. I know I am not at all happy with a good income not getting squat in this state. I just it was more feasable to move, I have no doubt I could find an affordable area that I would like just fine. Besides, I hate the Sacto heat and the lack of seasons here. I'd happily trade the heat for more rain.

It might start happening a bit in Santa Clara, but here there’s a lot of pretty-well paid tech workers in their 30s that can afford to live here.

The unemployment rate here in the Silliland is still quite high among regular tech workers. On the other hand, I have several ex-coworkers who moved to Texas because of the housing situation.

Welcome back, astrid!
Gee, can't imagine what drove you away for so long... I'm trying to think, but it's iMPossible for me to say. Did someone on this blog show you rudeness or conteMPt?

Does the home market will go down to 1998/99 level. If so how long that would take ?

Yes. It can very easily go back to 1998 level. It may take 5 to 7 years though.

HARM, check your Caps Lock. It seems to be stuck for certain character sequence.

Thanks for pointing that out, Peter ;-) . How strange, my keyboard must have an iMPerfection or something. What an iMPenetrable oddity...

I am amazed about your confidence( you said very easily) that the home market can go down to 1999 level at some point ?

Okay, let me repeat in Greenspeak:

Whether prices will drop to 1999 level is difficult to ascertain, even in areas full of froth and speculative fervor. I certainly cannot rule out such deep decline in the Bay Area, especially in condos.

You're right, Jack --see above:

Zephyr Says:
August 30th, 2005 at 8:25 pm

I believe that we are about to enter a typical cyclical decline which should reach bottom around 2008 or 2009 at prices about equal to what we saw in early 2004.

I think this is unrealistically optimistic. If prices only give back 1 year of gains, this will not restore balance in terms of either PE ratios or affordability, unless of course both median incomes AND rents suddenly shoot up. Just don't see that happening anytime soon...

Peter, that was really good. Do you want a job a the Fed? They have an opening in January, you know.

If prices only give back 1 year of gains, this will not restore balance in terms of either PE ratios or affordability, unless of course both median incomes AND rents suddenly shoot up. Just don’t see that happening anytime soon…

If prices reverts only to early 2004 level, many Silly condos will still suffer 20+% drops.

TestMe, can you describe your condo (location, price range, size, view)? If it has 3 or 4 bedrooms, it "behaves" more like a single family house.

Usually, condo prices are more volatile. However, there are exceptions.

I thought condo prices go up and down in a shorter time frame.

Also, I could be wrong... (should have used the Greenspeak version first).

Mine is a townhome -3 bedroom, with backyard/frontyard and near to BART. May be it is more like a single family home ? I am not sure about condo prices in other parts of silicon valley ?

Ah... if it has an attached garage, yards, and 3 bedroom with no "vertical" neighbors, it is "almost" like a house. It is somewhere between condo and house.

Paul_from_Oz suggested in the 'Natural Disasters' thread that they do not rebuild New Orleans (at least not on the same site) due to high risk of a flood repeat and rising sea levels all over the world.

I believe this is probably good advice, with the possible exception of the historic French Quarter & Garden District. I don't think it's practical/possible to move every historic building to higher ground, and they could just build higher, more permanent concrete levies around just those areas.

Thoughts, opinions...?

It will be very interesting to see how the rebuilding of New Orleans plays out. I think it would be smart not to rebuild there, except for preserving that small historic area, but then, I can't think of any examples of natural disasters that caused people to have the en masse common sense to just go rebuild someplace safer. Are there such examples?

People continue to live in flood plains, hurricane zones, and regions that have high risk of earthquakes and landslides. Given the magnitude of this latest disaster though, it makes me wonder if it will mark a departure from that.

Perhaps we can just engineer infrastructures to withstand nature?

There have been attempts in Netherland and Venice. I do not know how well they work though.

Perhaps we can just engineer infrastructures to withstand nature?

Doing so for the entire city would require an extraordinary feat of engineering, I'm sure --and extraordinary government spending at a time of massive deficits. It might make sense if limited only to the historic sections (the case with Venice, not sure about Amsterdam), but building billion-dollar floodwalls to protect tract homes & shopping malls?

Who knows, it may happen due to political pressure & misguided sympathy. Doesn't make any sense, but it just might happen.

HARM, we should only protect historical districts. It is not make sense to rebuild homes and malls in the flood plain anyway.

Engineering should be the strength of the US. That should be no problem. Billion dollar floodwalls are much cheaper than future billion-dollar destructions.

@Peter P: Billion dollar floodwalls are much cheaper than future billion-dollar destructions.

Yes, but the costs are borne by different people. : )

@HARM: building billion-dollar floodwalls to protect tract homes & shopping malls?

A lot of the tract homes in NOLA-proper are 1920s craftsman shotguns and camelbacks. The Garden District and the French Quarter were the first-built (highest ground), in the 1700s and 1800s. Most of the rest of the city was built out in the early 1900s. Imagine if Berkeley had a real history (more than 120 yrs)...that would be most of NOLA.

It looks like the "worst-case" scenario did not happen, but one that looks an awful lot like it did. The city will have to be bulldozed. I definitely don't think it's worth building hyper-expensive levees to protect the probable replacement structures. On the other hand, relocating half a million people is expensive too.

Amsterdam and Venice are very very different cities.

@Mr. RIght:

I hope not. I'd take bets that 25% of it will be, though.

A good percentage of the city housing stock was marginal before Katrina, and needed to be torn down or expensively repaired. There was no money for it then, but now there will be. Sort of.

With CA’s population increasing by 500,000 to 600,000 people per year, which translates to a demand of +/- 250,000 homes

I thought 600K people translate to 60K homes. The rule is 10-to-1, isn't it? (At lease for people coming into the state.)

With CA’s population increasing by 500,000 to 600,000 people per year, which translates to a demand of +/- 250,000 homes while we build around 210,000, you could never see 2003 prices again, much less prior.

The market has more than discounted this fact. The reality is that home prices and rent prices are out of whack. History suggests that such divergence will tend to converge.

Supply and demand are not constant and there is no guarantee of a sustained 600,000 per year population growth in California - that is simply a population projection.

This cannot be more true. Taking supply and demand as given is a big sin.

The projection for the sunbelt states was probably made when prices where not out-of-whack. Yet speculators think that demand will not change even if they drive up prices by 200%. Single variable analysis!

Question for the forum: Now that inflation is more of a concern due to Katrina, what do you prognositicators think will be the next step for the Fed?

This one is difficult.

If they raise rate, residents and businesses will find additional difficulties and obstacles.

It they do not, the asset bubble may further overheat and UD dollar may feel yet more pressure.

I will raise rate to contain inflation anyway but special aid and loan programs to NOLA is a must. (Well, even though I can talk Greenspeak, I am not AG himself, so I am irrelevant.)

This is off topic, but I have a question and wanted to know your opinion.

As a result of the wide spread effect of Hurrican Katrina, some "experts" believe that the Fed will stop raising interest rates. Does anyone here believe the Fed will stop raising rates due to the aftermath of Katrina? Will Katrina have an indirect effect on the housing market that will be felt all the way to California?

Thanks, and God help those people affected by Katrina (I can't believe some of the pictures I've been seeing coming out of the gulf region, f-ing terrible).

The one thing I do know is that since 2000, there has been consistent out-migration of existing California residents to other states, but this has been offset by international migration to California.

There are three main types of immigration:

1) Wealthy people
2) Foreign students / Professionals
3) Illegals

(1) will only buy million dollar flowerboxes (as opposed to $hitboxes) in Prime(tm) locations.

(2) buy normal houses that "everybody" buys. However, the number of quota for H-1B visa has been slashed a while ago and the inflow of this group will definitely slow.

(3) ???

Does anyone here believe the Fed will stop raising rates due to the aftermath of Katrina?

It is possible, but not necessarily. Whether they will stop or pause raising rate is difficult to ascertain. The FED is not "tasked" to respond to regional distresses. Unless it is clear that the entire economy is threatened, the FED ought to stay out of it.

Isn’t the threat of more inflation more of an indicator that rates will keep rising??

This will be the new conundrum. Higher oil price can be deflationary because it behaves like taxation. It is indeed very difficult to ascertain. ;)

Hey Peter P,

Thanks for your response. Sometimes I have the chance to watch the stock market on CNBC, and the big story (of course) was what kind of effect Katrina would have on the stock market and further rate hikes. Some of the guests on the show said this was end of rate hikes for a while due to Katrina.

I think you're right though, it is difficult to ascertain what the FED will do.

"Isn’t the threat of more inflation more of an indicator that rates will keep rising??"

Exactly what I thought.

astrid,

Looks like we've got something else in common. Last year a friend let me borrow his Firefly DVD set and I got hooked too --became something of a Browncoat myself. Interesting side-note: went to a pre-screening for Serenity in L.A. in May and got to meet Joss Whedon. Let me know if you want spoilers ;-).

Oh oh oh, I have the firefly DVD set too. Does that mean we're a bunch of hybrid bubblehead/trekkie type geeks? If so, I can live with that.
And I am not ashamed to admit I am psyched that there is a movie too!

I need to see if I can find a family moving into Ca who would be willing to sell me their home. ;)

I just got done watching coverage of Katrina's aftermath. I'm unsure how this is going to affect the economy at large, but they're predicting the rebuilding costs at a minimum of $25 billion, saying it could go twice as high. Because New Orleans has such a high population of poor (30% is what the newscast said) the number of uninsured claims will be very high and that means more taxpayer money to pay for the recovery.

New Orleans also had one of (if not the largest shipping port in the U.S. and that is shut down and shipping costs will rise as ships have to be diverted. And of course the cost of oil. Since this is going to have a national impact I just don't know that the fed can lower rates in what is surely going to be a rising interest environment, but I am certainly no expert.

@TWIT: I would add to the above: A surplus of information creates just as many disparities as a lack of information, given that the general public usually lacks the knowledge and wisdom to discern the valuable from the valueless. So the people would have to be perfect too.

SactoQT, I prefer to think we’re smart enough to appreciate non-lowest common denominator thinking

Works for me. :)
I'm going to start watching my DVD's again soon so I can bone up on my Serenity lore. I did the whole Buffy/Angel thing too right after they took firefly off the air. I need some kind of fix that had a Whedon feel to it. But enough digression...
Simple Life ....bleeeach. ;)

zepyr, you are getting your law degree, correct? In ten years you and your husband (whoever he may be) will almost assuredly be able to afford a house in the Bay Area. What kind of job are you looking for, that will have you jetting back and forth across the Pacific? Some kind of International Law?