patrick.net

No problem, Pop!

You know, I've been trying to get the CA or nationwide percentage of current homedebtors who have refied, but am not getting very far. The best I've come up with so far is that 36 percent of "luxury" homeowners have refinanced or taken out a home equity loan in the last 12 months: tinyurl.com/blk5d

Gotta be some better stats out there. Anyone...?

@Jack,
Thanks for the continuing saga of our favorite iMPetuous young troll --loved the way you managed to work in butterfish sushi again!

Everyone:

I'm going to be gone until very late tomorrow night, so please BEHAVE YOURSELVES, ok?? I already see a potential flame war brewing between ScottC, Stanman & Jack perhaps...?

Please don't let disagreements over economics & housing deteriorate into personal attacks, guys. Remember the cardinal rule of this blog --attack the argument, not the person. We can all disagree and still be gentlemen, right?

Anyhoo, gotta go! ;-)

HARM-

Cardinal rule? (After THAT opener to this thread?) You are just evil! hahaha

Jack, I have *no idea* what you're talking about! "Mr. Prime" is a completely FICTITIOUS character. :mrgreen:

Mr.Right Says:

Without MP or Zephyr this blog is as predictable as a Denny’s breakfast.
Cheers

But, Mr. Right, what if you've never been to Denny’s before? You might find their breakfast menu to be rather varied and stimulating.

Gotta love that Grand Slam!

Nuts --Jack BEAT ME to it! Drat!!

Then he remembers the “go-go days” a few years back and his eyes glaze over a bit as he slips into a fuzzy greasy memory of tapas, cardgames and butterfish sushi. His little beady eyes begin to tear up as he stares at a militantly beige stucco Marina wall. So pristene. So sterile. So perfect. So Prime.

haha...touché.

What can we say about here--perhaps it's time to compose IJ headlines for 07/08?
Perhaps we'll see...
"Housing Drops in Bay Area--Will Marin Be Immune?"
"Marin Homebuyers Angry, While Realtors Contend "You Were Warned"
"Litigation Against Marin Realtors Climbs"
"Marins Realty Boom Turns to Gloom"
"Marin Retail Posts Record Losses"
"Once Riding The Housing Boom, Many Marin Residents Tighten Belts"
"Marin Foreclosures Hit Record Highs"
"Marin Cities Face Revenue Shortfalls"

I’m glad ScottC is here to bust reality into you pathetic renters

It's JEALOUS BITTER RENTERS, not "pathetic renters"!! Get it right next time, ok?

Alright, this is my last post for tonight.... Really.

I’m glad ScottC is here to bust reality into you pathetic renters

Pacific Heights--Or Marina; where do you live again?"
Seems you say different things depending on which blog you're on.
So, I suppose it's any zip code that gives you that edge over the crowd, right?
Here's looking at you:
http://tinyurl.com/dvbsj

Really, this drivel gets old.

Wow. Pissing contest. Zzzzzzz.

Thanks for trying, ajh. A falling tide sinks all boats.

I wish I had something to contribute. Until then, I'm going to take SactoQT's mom's advice.

...

Home’roids--- The Prime™ Homeowners First Choice
Not long after the massive Real Estate Crash of 2006 speculators were in a frenzy to find a place to put their money. But the RE market had already been played out and the stock market was too volatile. Where was the savvy investor to put their money in hopes of regaining the past glory of massive profits due to blind luck?
Well, a forward thinking gentleman by the name of ‘Roid is Prime came up with the idea of building homes on the nearest asteroid belt X-144. Now, there were plenty of nay sayers who thought the plan too risky, too insane. But ‘Roid is Prime had a weather eye on the market, and knew the intangibles of owning something so unique as a home on an asteroid, or as they later became known, a home’roid was something that was going to have great appeal to those who had to have it all.
Since asteroids do not belong to one country in particular, ‘Roid is Prime was able to lay claim to that Prime™ property and start building right away. Since the asteroids didn’t belong in a blue or red state, there were no building codes or restrictions to worry about, so he built in earnest.
Before you knew it, those home’roids were the hottest ticket on the planet. Everyone had to have one and yoy increase in price was like nothing ever seen before, 50% at least. It was a new paradigm. Virtually everyone who could, had a second home’roid and called themselves lucky if they only paid 75% over the asking price.
Once Prime™ locations on earth no longer had any appeal. Places like the Marina became ghost towns and only those with no vision stayed. The property value losses were so high that most homes were simply walked away from because they weren’t considered valuable enough to keep.
Home’roid speculation became rampant. Every asteroid in all the larger belts were soon being developed at furious rates. Home’roids came to account for 60% of all new jobs, and space brokers became the new lawyers, one on every other meteor shower. ‘Roid is Prime, being the experienced home’roid developer saw the market was being over worked, sold his business for several billion, bought an island in the pacific and was rarely seen again.
Because the building was not regulated, there were all kinds of problems with the home’roids; everything from toxic neon-blue space mold that ate small domestic animals, to leakage problems with the oxygen supply domes. And after the first home’roid owner was sucked into space through a faulty garbage chute, the lawsuits came in an avalanche. But since the home’roids were not considered part of a particular nation, no one could agree on what court system to use or what form of government should be followed. Anarchy soon became the order of the day.
People started leaving in droves. Because the earthbound housing market had been so reduced, many former ‘roid owners were able to buy at bargain prices and put the rest of their savings in the stock market, which soon shot up over 40,000. The home’roid owners who didn’t sell soon enough can be seen on street corners in the Marina looking for handouts.

BTW your paragraphs are starting to resemble ScottC’s “early work”!

Thanks a lot. :razz:

I wrote it out on microsoft word and transferred it, and for some reason I lost my parapraphs. I didn't notice until after I posted. So there.

All the stories end up with people panhandling in the Marina?

Oh well.

It's my story and I'll make them cry if I want to.

Btw, I made you a billionaire, with an island. That has to count for something.

So what do you think about this new thread Idea of HARM’s? And then having the audacity to tell us to behave! Sheesh.,/i>

Why dont you just throw some gasoline all over the room and then say “here children, have some cigarettes”. Now behave! Oh, by the way, I am LEAVING FOR TWO DAYS NOW, ta ta!

Oops. Didn't close my tabs properly.

I think the biggest problem is that the reasonable people seem to keep getting driven away. Only the few, the stubborn, the foolish bubbleheads like me keep hanging around to deal with the bs. Actually, I'm trying to stick to talking to the polite posters these days and ignoring the rest.

I was trying to forget that I posted as a Roid of any kind I guess, and it went right over my head I guess. I just laughed and kept reading without realizing that you were referring to me. So THANKS! …..I guess. I always wanted my own island.

Too funny.

I admit nothing.

I think the biggest problem is that the reasonable people seem to keep getting driven away.

One possible explanation is that the reasonable people are seeing more confirmation of the turning market out there than in here.

Perhaps more creative writing will help. ;)

I think he did this on purpose, probably emailed you and Peter P and said “Watch this! And you all placed bets on different possible outcomes..

Huh?

I think Harm's just poking fun. Maybe if we actually do what we say we're going to do (ignore) then we'll finally get some peace.

Jack

Oh no, you're catching on to our evil plan.

Actually, you give us way too much credit. Ok, you give me too much credit. I think Harm and Peter P could have cooked this up. :twisted:

I think Harm and Peter P could have cooked this up.

Huh?

I rarely cook...

Jack, now you are the conspiracy theorist. Perhaps Greenspan and I cooked up this housing mess? :?

But sleepy? Very.

Me too, stayed up too late last night. I'm turning in.

Btw, Peter P. You don't cook? Is that why all the passion for sushi?

Btw, Peter P. You don’t cook? Is that why all the passion for sushi?

Yes, passion for raw chicken and pork too.

(Not dietary advice)

Jack, Marin is Prime. If I want mountain and water views, is Greenbrae or Larkspur any good?

My Marin example is somewhat of a realistic-worst-case scenario. In fact, I don't expect Marin to drop by more than 0-10% in real terms, but there may be a significant drop in nominal terms, depending upon all that other mumbo-jumbo we're not supposed to discuss in this thread.

I did some pretty heavy modeling of Marin a while back, and I affirm your observations. The last 2 cycles caused a

...don't know what happened.

But I seriously doubt you’re going to get that kind of drop in Marin County... Marin weathered both very well, hardly even dipped.

Maybe not that far down, but I'd say this recent boom is nothing like the previous few. And...Marin housing has spiked just as steeply as the rest of the boom areas--so I think whatever happens elsewhere, will happen here too. How immune is Marin?

Perhaps Marin will be an "island of value" while everything drops, but that could also be a liability. Given the internal perception that Marin is "special" (to a degree), I think sellers might hold out and wait for the "right buyer". So if a "price stickyness" props up Marin, while sellers in other nice areas anticipate the market and undercut to sell, what happens to the external perception of Marin housing? Buyers might consider it way overpriced (even w/ intangibles), and decide to buy in Petaluma, Sebastopol, Sonoma, Berkeley, etc; their dollar will go much further. To some people, Marin will be the only place to live, but to many others who don't understand this perception, Marin is just one community amongst many. Of course, people who can afford to live in Ross, Belvedere, or Tiburon waterfront--that's a different story.
Sure, I love this place, but if I can get 50% more house in Sonoma for the same price, I just might consider it someday.

Kurt S is also someone whom I believe is very familiar with these properties, as he is living on or near the water with a view of Tamalpais right now.

Yeah...I'm right there: water, views, etc.
I'll comment on the market, houses vs. condos, intangibles, etc...
First off to hike around Bon Tempe lake.
Enjoy the day!

I wasn't going to go on about price stickyness, although there is certainly a lot of transaction friction in the RE market, so there will be price stickyness.

There is another factor which drastically affects RE markets in down-cycles. That is the proportion of wealth to income. It is for this reason, much more than reasons of the overall market, that "islands" exist. Two examples of this historically come to mind:

(1) RE in the NorthEast during the Great Depression. In both upper class and borderline upper-middle neighborhoods, most RE held its value because turnover suddenly halted for almost a 20 year period. People with wealth just simply don't _have_ to sell, even during the worst down cycles.

(2) Exclusive neighborhoods of Flint MI held most their value while the rest of the area deflated by over 60%. Again, it's not stickyness, but it's wealth that determines seller-side sentiment in RE.

I'll extend this argument beyond Marin. We use Marin because it's the only example of an entire county which has such a high wealth-to-income ration (excluding North Marin and Marin City). The same affect will be present in Woodside, Atherton-Menlo-Palo (excluding the unincorporated areas), Los Altos & Hills, Los Gatos, Sarratoga, and similar areas in the East Bay.

---

I was going to say that I did some heavy modeling of Marin County RE a couple years ago, based on statistical deviation from median-trend of broader median trends. In fact, Marin has been closing back to it's historical "premium" over the past 10 years. Marin held it's value during the past two down cycles in real-terms, and only lost 10% or less in nominal terms. But, at the end of these cycles it is far above it's historical premium, and thus it doesn't participate evenly in the subsequent up cycle.

If this cycle is worse, which I would agree it could well be, then we'd expect to see nominal drops by 25% at the most. The reason being that a drop of 25% in Marin would require an almost 100% drop in the greater area. This just isn't going to happen unless we're in an environment where we're all fleeing for our lives.

I posted this as a response to the suggestion in the title that nominal prices would drop by 92%. I looked up what data was available for the Great Depression, and it seems that SF RE (the only major urban area at the time for which there is accurate data) only dropped by about 25-30%, and rebounded by the early-30s. In fact, since this was a deflationary cycle overall, the price drop is overstated.

The Great Depression was devastating to all assets. General deflation was significant, and contributed to the decline in GDP, which dropped by 54% from the peak to trough.

Real estate got clobbered as well. Prices dropped from 1930 through 1934. Some have estimated the average decline in price at about 80%. Stocks dropped by 90% from their peak in September 1929 to the bottom in 1934.

The wealthy were not at all immune from this financial disaster. Many of the estates of the very wealthy, and super wealthy were not sold at lower prices because there were no buyers at all. Instead many estates were actually abandoned during the 1930s. Prices on many of these properties dropped so low that some eventually were bought for only the back taxes. Of course they were in need of very expensive repairs.

Many of the larger “McMansions” of that era were later divided into apartments. Many of these wealthy neighborhoods never recovered, even to this day.

There was some discussion yesterday about investing. I have a few follow-up comments.

To beat the market averages you must deviate from the average investment mix. This means you must increase your bets on selected segments or investment classes at some or all times. This also increases your risk and reduces your diversification. The extreme case is to put all of your eggs in one basket. This will be the most volatile position, with the possibility of abnormally good or bad returns.

I agree with SactoQT that most people should not put all of their eggs in one basket. The one basket strategy is for people who know what they are doing and can afford the risk that comes with trying to outperform the market. I believe most people should NOT try to outperform the market because they are very likely to fail. They should just put their money in a few diversified mutual funds that are very plain vanilla, such as an S&P 500 index fund.

Most people should focus on increasing the amount of money they save. This is the single most important thing for the average person to improve upon if they are to accumulate wealth.

Re: STOCKS vs. REAL ESTATE

Do stocks and real estate move in the same direction or opposite each other? Sometimes stocks and real estate move together and sometimes not. Stocks tend to lead the cycles while real estate tends to lag. They both tend to do poorly during times of economic weakness. Mostly, they both go up but at differing rates.

Do stocks outperform real estate? This depends on the time frame. For this comparison it is best to look at the broad national markets, not local areas or limited stock subsets. Stocks and real estate both did well during the 1960s. For about 20 years starting at the end of the 1960s, stock returns were disappointing while real estate had record-breaking appreciation. By the late 1980s, anyone looking back in time would conclude that stocks were terrible and real estate was magic. During the 1990s real estate did poorly (on average mostly flat) while stocks appreciated dramatically. So by 1999 people thought stocks were magic and real estate was terrible. Since then real estate has been magic again and stocks have declined. However, stocks have come back nicely since March of 2003, along with continued strong real estate appreciation.

To make a fair comparison of stocks to real estate, one must consider total return, not just appreciation. For stocks this includes dividends, and for real estate this includes rent, net of expenses. Over very long periods of time (such as 50 year blocks during the last 200 years) in the broad market stocks outperform real estate by about one percent per year. Of course, this is without the use of any debt for either asset class, and I have ignored income taxes. Using debt we can leverage these returns to be higher, especially with real estate. Using prudent levels of debt leverage, real estate provides a higher return on investment than stocks in the long run.

Looking back over the last 50 years, stocks and real estate have both beat the growth rate of GDP.

If I want mountain and water views, is Greenbrae or Larkspur any good?

I think the area has a lot of positives, including:
>More clear, warm days than Tiburon or Mill Valley, which are in the GG fog belt.
>Just a mile from the Larkspur ferry, and quick access to 101. In fact, I walk to the ferry.
>Fresh air, water, views of Tam and natural setting. Perfect place if you like exercise...kayaking, bike trails up Ross Valley to Tam, lakes, etc.

Housing: Things are pretty high right now, but inventory is also way up, and few people are biting on the asking price. Waterfront 2BR condos are around $700K; 1BR $550K.
By contrast, you can rent a waterfront 1BR at $1400/mo., 2BR at
Smaller waterfront homes are $1.2-$1.7M. A few of these housing developments are unimpressive; the shoddy construction stands out. And despite realtor confidence; I'd wait for a shakedown, it's the same story as elsewhere.

If there's a downside to living on the water, your home will take a serious beating, due to storm exposure and salt water. Most of the hit comes to paint, exterior wood, and our dock.

Quick observation for Jack:
Driving through Fairfax today, I noticed an explosion of "for sale" signs; one street corner had about a dozen (no joke). They've sprouted like mushrooms over the past few month.
Is this a normal, seasonal trend? Either way, it's quite dramatic; I don't recall seeing this last September.

‘The Tipping Point,’ by Malcolm Gladwell is spot on!

I like "Blink" by the same author better. "Thin-slicing" is very useful indeed.

Jack, thanks for the information about Marin. I will go there and check it out next week.

To beat the market averages you must deviate from the average investment mix. This means you must increase your bets on selected segments or investment classes at some or all times. This also increases your risk and reduces your diversification. The extreme case is to put all of your eggs in one basket. This will be the most volatile position, with the possibility of abnormally good or bad returns.

Excellent advice Zephyr. I haven't looked at the diversification picture quite this way, but it makes a lot of sense. Regarding stocks and RE, I guess you really have to look at what the market is doing NOW, rather than at any time in the past. Clearly both can be great investments if done correctly. I think you said in the past that you buy RE when the market goes through the downturn and then holds steady for a year or two. Again, that makes sense. Do you have any stock strategies or are you primarily a RE guy?

Just returned and have perused the posts made in my absence.

Jack Says:
Thats why Im wondering why Harm did this. I thought maybe it was his way of getting payback for all the extra deletions he had to deal with lately. But that guess is most likely wrong. Anyway, I promise I am done with MP too.

SactoQt Says:
I think Harm’s just poking fun. Maybe if we actually do what we say we’re going to do (ignore) then we’ll finally get some peace.

I think I can settle all speculation as to my motives by clearly stating that this thread was meant to BE FUN! Essentially, it was a creative writing-slash-housing prognosticator exercise. I thought with all the recent posts on rather esoteric subject matter, it was time for a bit of levity, that's all.

No, Jack, I was NOT trying to bait you, or even MP for that matter, though I was clearly having some fun at MP's expense. As you said, isn't a little satiric 'payback' appropriate for all the pain he's put this blog through (especially thread moderators)? Funny how he keeps turning up anyway, considering that he declared he was "banning himself" just 2 weeks ago. Would anyone BUT a troll be this persistent at annoying everyone on this blog?

Whatever --as you say, ignore & move on....

What precident is there for a 92% nominal drop in RE over a widespread area, short of massive devastation from disaster or war? I like the premise, but you’re simply not going to be able to buy a $2.5M home for $200K, even in real terms.

Guys, once again, this topic was meant to be one part comedy/satire and one part conjecture. Never meant a 92% drop virtually anywhere to be taken seriously. This would require a level of housing market pessimism far beyond even my resolute Bearish-ness. Interesting though, that Zephyr noted RE did broadly decline up to 80% in many areas during the Great Depression.