patrick.net

Jumped off in SF, Is there a link to that SF Magazine article? If not, can you summarize the main points of it? I'm curious what they had to say. (I could take a guess if I had to :-))

Like Bubble Sitter, I believe the bubble is already bursting. Maybe no big signs of it bursting on the peninsula, but elsewhere...

Escaped from DC, I've lived all over, and the BA does have some of the most beautiful scenery around. Proximity to ocean and mountains are huge pluses to me too. I need to be outside a lot, and the weather there makes it easy to be outdoors year round. I agree with you though that I don't think real estate there is anywhere near worth current prices. I'd be willing to pay a few hundred thousand extra for BA intangibles, but not a million extra.

There are some problems too though. It being such a nice place means having to compete with the zillion other people who also think it's a great place when you want to go out and enjoy the area. We were in SF during 4th of July and decided we wanted to go to Stinson Beach for the day, but instead we got stuck in the traffic trying to cross the bridge into Marin Co, inched along for an hour getting nowhere, and gave up in frustration and ended up going to a playground instead.

I love CA but the overcrowding really bothers me. We live in So Cal, and it's possible to get stuck for many, many hours in traffic here, even during non-rush-hour times. Also I don't like how stressed out everyone has become. And I hate that what should be the richest state in the nation struggles with school funding and lots of other infrastructure problems. It feels very poorly run.

Lately I've been thinking of choosing to live in the more desirable parts of CA as similar to marrying a really, really attractive partner. :-) Sure, you get to enjoy the scenery, but you're always having to worry about everyone else who wants to enjoy your scenery just as much as you do, maybe more.

However, if you choose a partner (or place to live) that has less obvious charms, you may have to work harder to find out what's to like about that person (place), but you also may find that the relationship ultimately is far more rewarding. And you won't have to worry so much about the competition.

(I'm joking...sort of.) That's my stupid metaphor for the day.

Jamie, thanks for the post . . .

I thought it was something like that.

I'm glad everybody places values on different things.

I place a high value on fewer people and congestion. I was in DC for 4 years, and, I'm guessing, the traffic in D.C. is not as bad as some parts of Cali. But the traffic in D.C. was miserable. I started to spend my days avoiding congestion.

I wouldn't leave the house between 12 and 2 and 4 to 8 PM. Forget it. Those times were gaurenteed waits in traffic. It got to the point where I would leave for CT for weekend trips at 10 PM just to be sure I wouldn't get stuck in an hour of traffic on the beltway.

When I saw that house in SF on the net, which I would hardly call a house - more like a row house or a town house or somthing - I was just dumfounded that anybody, for any reason other than making money, would spend 1.1 million to live there.

Really. To me, absolutely unfathomable. Life has so much to offer. 90% of what pleases me comes from within and from other people - I can find that in Tibet if I looked there.

So really, at 1.1 million, living on the side of hill with no yard, people packed in and touching your "house" to the left and the right. What the hell?

I hear ultra-discount food stores are doing well, and will probably do even better as there are ever more poor people. Supervalue (SVU) owns the ultra-discount chain Save-A-Lot which are mostly in bad urban neighborhoods.

Not sure it's a great investment, but that's the kind of business that might do well by serving the poor.

Patrick

According to weather.com, the Redwood city average high oscillates between 60 and 80. If the humidity is low, then that is damn good. My kind of weather. Not what I'd call "million dollar" weather, but maybe 500k weather.

:-)

Hey, if you think NYC is bad, Jeez, D.C. was absolutely miserable.

There's so much talk about gold these days, does anyone think that gold might be the next bubble? Just wondering.

According to weather.com, the Redwood city average high oscillates between 60 and 80. If the humidity is low, then that is damn good. My kind of weather.

And, just like everywhere in the Bay Area, there's a number of microclimates, sometimes with dramatic differences. For instance, RC near the bay can be noticeably cool and windy, especially in the summer. Towards the hills it can be dramatically hotter during summer. On the other hand, some hill areas that experience the fog flow from HMB can be quite cool too. The weather.com stats never reflect these differences. For a person moving into the BA, I think they should experience the four seasons (renting and saving I might add), before they buy.

A friend of mine was shocked after she bought a home in Berkeley and perhaps saw as much sunshine as a typical Seattle resident. Microclimates are key. Btw--any coastal area near Golden Gate is going to get hit with as much soupy fog as the worst areas of Puget Sound. That includes Sausalito, Tiburon waterfront, and...the Marina. You could be shivering half the year in these "prime" areas, but I digress. Meanwhile, those living just N. in the "banana belt" (relatively fog-free), enjoy a nice moderation between coastal cooling, and inland heating. I call that "prime".

"If you go a couple hours north of BA, property prices seem a lot more reasonable last time I checked. Any idea how long that is going to last?"

The entire State of California has gone up A LOT - doubled and then some - since 2000. From the toniest Bay Area city to the crappiest hole in Central Valley. That said, the Bay Area will ALWAYS be more expensive than places a couple of hours north, which will ALWAYS seem like a bargain compared to the Bay Area. Even though those locales have increased just as much percentage-wise as the BA.

SactoQt:

Go buy as many houses as you can, right now. Why do you troll? If you really think there is no bubble, vote with your wallet. There is a discussion to be had for those not buying into a perceived bubble. There is much to discuss. As for those who think property can never go down, you have an agenda (realtor, recent buyer) or you should not be talking here, but scheming every which way to get into real estate. Loan brokers are giving money away, run , quickly to them and buy many many houses!

Are you kidding me? I've been a very vocal bear. Think there is a housing bubble to beat all bubbles. Have you ever read one of my posts?? Btw, I'm the blog moderator, I can delete your comments if they get really rude. Why would I be here if I thought there was no bubble?

"I can delete your comments if they get really rude. "

Please, don't do that Mr. Moderator. We can all deal with rude. I'm guessing we'd all prefer not to deal with selective reduciton of words.

Hey John Haverty, I found your post very enlightening. Thank you for pointing out the bad things about Cali. You don't get that from a lot of the prideful folks.

I don't want to delete, I'm simply trying to keep the thread from disintigrating into a flame war. When that happens you might as well delete the whole thread as there ends up being no discussion only insults.

Economist

Thank you.

John Haverty

I think you may be confusing me with our resident troll, Pacific Heights Prime, aka, Dr. Doom, aka Marina Prime. He has been repeatedly voted for eviction from the blog but keeps coming back under new identities. The thread moderators have basically agreed to delete his comments in hopes that he will go away. He knows I am doing this and takes shots at me when he can. I can only assume you have seen some of the back and forth, and gotten confused by the gaps left by deleted comments. Hope this clears it up.

"I am thinking of towns north of Santa Rosa till Garberville (too north?). Salinas and even central coast (SLO) seem to be catching up with BA/LA. But north of BA there seem to be still significant discount? Job argument should apply to both?"

Again, in proportion to each other, nothing is new. Monterey County, San Luis Obsipo down to Santa Barbara have always been on the pricier side of California. LOts of wealthy retiress ahve long flocked to these areas eliminating their need to depend on the job market but keeping prices high for everyone else. These are medium sized metropolitan areas. North of Santa Rosa gets pretty rural, but even as far north as Eureka has really gone up. There are less jobs and people in this area than the central coast.

Moonvalley:"I think they’re just all overleveraged and scared stiff"

Yeah, that's it exactly.

My daughter's friend visited. His parents came. They plan on selling in spring 06. When I mentioned the dramatic ramp up in inventory in Fairfax (DC), they said all the right things . . . "won't go down, desirable area, blah blah blah." But I could see the muscle tone of their faces just disappear. No grins, no frowns. Just slack muscled numbness. The concept, for them, who have been planning to sell and move for 5 years and were just waiting for the son's graduaiont - the concept for them that they may have missed the peak and will be selling in a glut was a lot for them. I can imagine. As I once said, for them, retirees, the difference bewteen 600 and 700 is a lot of good steak, or tofu, whatever.

A $hitbox in SLO will set you back ~650K. The average wage is ~$10/hr, go figure.

Makes little sense, does it? I can't see why retirees will plunk down their life savings for a hovel in SLO when they can get much more elsewhere. Of course, I'm speaking of in normal market terms (outside of the recent boom/expectations). The wealthy aside, most retirees have a limited income source, and still: everyone likes value/money. That's why I suspect job-poor retiree areas could see a major correction in a bust. There will be far fewer "wealthy" people after this scenario is played out.

Central coast not only has a lot of retirees, but the market from Santa Cruz to Santa Barbara is loaded with vacation and second homes. Prices notwithstanding, I can see why. Close to beaches, near perfect climate and outside the hustle and bustle of LA and Bay Area.

I’ve mentioned before, we rent in Sonoma now and won’t be buying up there until things go down.

Moonvalley, do you follow prices/inventory in Sonoma? I was there this weekend, and at casual glance of listings, I saw a lot for sale. Last month, on Sonoma square, one realty office had a big article "THERE IS NO BUBBLE" taped to their front window. Gotta wonder if they've changed their tune now.

the sharks are so mean and nasty that they will actually follow you back to your SUV to attack you.

Last summer (I think), I swam out to the end of Avila beach pier, and one week later a woman was killed by whites in the same spot. yikes.

that fool woman was “communing with nature” dressed in a black wetsuit, trying to swim with a bunch of harbour seals, while dressed like a harbour seal

That's right, sounds like the sharks were following the seals, and she was picked off. Still a little shocking for such a busy beach. Entering the ocean food chain isn't my kind of "communing".

Central coast not only has a lot of retirees, but the market from Santa Cruz to Santa Barbara is loaded with vacation and second homes. Prices notwithstanding, I can see why. Close to beaches, near perfect climate and outside the hustle and bustle of LA and Bay Area.

And, I think we're seeing a high degree of speculation-driving pricing on the coast, due to the impression that "everyone wants to live there, they're not making any more land, bla bla bla". However, I'll also throw in that until a homeowner experiences coastal living first-hand, they might not realize how much money and work it takes to maintain a coastal home. That nice summer weather turns into a beast come winter, and I think many retirees will find themselves over their heads with constant pre-emptive maintenance. The coast gives the impression of endless leisure, but it's not as easy as it looks. I'm guessing the surprise factor will give some owners second thoughts.

@investwith6s & Surfer-X,

Thanks for the great laughs!

RE Agent Leper Community (REALC)...
It’s going to be a gated little community where former RE agents can escape the humilation that their family and friends...
There will be playgrounds with slides for the kids. I’ll name the playground slide ‘The Property Ladder’ because you climb to the top only to slide down and fall into a sand pit at the bottom (6′ below from where you originally started — the kids have to scatch and kick their way out of the sand pit — which I may nick-name the ‘debt pit’ — it’ll be good fun and educational too).

you drive by on any given weekend and over 70% of the $hitboxes have no open windows. So either no one is occupying them or they are doing their Silence of the Lamps tributes...
It pays the mortgage or it gets the hose.

Gotta respond to this. . .

I said that "I seriously doubt many" people benefitted [made money] from the depression.

Somebody wrote back . . .
"You are incorrect. My great grandfather bought a lot of oil stocks during the depression and held on to them. As a result he became very wealthy."

First, I didn't say "nobody," so I'm not incorrect based on your grandpaw.

If what you're saying is that your grandfather bought at the trough when he stock was undervalued, then hung on for some years until they were worth more, then, OK , he's an example of somebody who made out. But I'd guess that very few can be said to have "benefitted" from the depression.

In other words, had there been no stock ramp up and no crash, I think that virtually everybody alive in 1925 would have been better off without the depression that with it. Barring the people who bought stock and assets low and waited years to cash out, most people who made money during the depression would have made more money without a depression.

That's all.

1935, that is.

SactoQt:

sorry - i though you were an anti-bubble troll. please ignore, i havent read enough of your posts to know one way or the other.

My post got cut short.

John Haverty

I meant to say thanks.

When the bubble burst open... or perhaps in other words when credit supplies finally shrink..

People over extended in real estate with no other diversification will suffer. Even if home values stay flat (unlikely, but if they do) people will have $100,000 doing nothing for them for 10 years or more. Imagine if you could pay half of what you pay into a mortgage into an IRA or Brokerage during that same period.

International Stocks will probably do well... some say gold, not to sure... others say it is time for large caps to come back... who knows, anyone?

I am sick, can't talk much.

Patrick, thanks for stopping by.

Peter P

I am sorry you're not feeling well, hope you get better soon. And yes it was very nice to hear from Patrick.

Experts at business schools banish the housing bubble and claim prices are reasonable:

http://www.inman.com/inmannews.aspx?ID=48000

hi Kurt, I’m living ‘on the coast’, less about a mile from the water.
I don’t see that it takes more maintenance. Or were you thinking of homes right on the beach?

Hi Peter--that's what I meant: water/beach front. I realized that distinction was lost after I posted. Glad to hear your house doesn't get beat down that much. If we move, that's all we'll miss, there are many positive "intangibles" after all.

The best scenario for us is, we will have a huge crash over a period of 1 year and be done with it. Move on to the next boom.

However, I don't think US will be left off the hook so easily this time around. This country has lots of structural problems, our persistent budget deficit (which is only a symptom of something deeper underneath), our school system, our industry competitiveness, our out-of-whack consumer debt and consumption habits which brewed these debts to start with... name it. I am afraid we will have a very tough ride ahead, for at least a decade.

However, I don’t think US will be left off the hook so easily this time around.

I tend to agree. We got off very easily after the tech boom thanks to the Fed and extrememly low interest rates. But this bubble is a different animal altoghether. With 70% home ownership there's a lot more people invested in this bubble, which is why I think the bubble deniers are still at it. How scary is it to be paying at least half your income in a house only to have people start talking about a housing bubble and how your main asset is likely to lose value? And if you were so foolish as to take money out against your home, further ratcheting up your debt, you'd have to be shaking in your boots. If you had a brain you would be.

I mentioned the bubble to people at work with homes. They get angry at me.
“You are a fool!”
“It is the best investment you could have made in the past 20 years”

Did these people happen to buy in the bubble (last 5 years)? And if so, how far did they analyze their risks?

http://mwhodges.home.att.net/exchange_rate.htm

Here is a site that summarizes some major problems that we have as a country. A bit more on the negative side, but full of empirical facts. I can deal with an one-time hit of exchange rate correction, or a realty crash, it is not like this country hasn't seen any of these before, and we have come out alright. But what bothers me is, it seems like some of the underlying cornerstones that made us a great country start to crumble. I am usually not a nay-sayer, and I try to look at everything from a positive angle (including how to benefit from a depression, as an example), but I do think this country needs some serious reflections on what we have done right and what we have done wrong.

For one, the RE bubble is consuming too much of everyone's energy. People are either griping about it, or bragging about it, all this energy and attention is going into something that does not generate value. Real estate is a derivative of the collective economic value the local community can generate, not the other way around. A commercial real estate is only worth as much as the gross revenue it can pull in, and a residential property is only worth as much as its owner's earnings can soar, from non-property sources. RE is also occupying too many resources, talents, that can be allocated elsewhere to ensure a long-term, sustainable growth of this country.

I think the bubble will burst in 2011, after this decade is over.

What do you think will happen in the meantime?

What do you guys think? I can wait, no problem w/ good rent.

But I thought you already own a nice house in Marina? I must have mistaken.

Margie,

the FDIC can just print money, that is what our government has proven to be really good at in the last 5 years. I have 100% confidence in the core competence of the US government, printing money, that is.

The question is, how much will the $100,000 be worth post-bubble compared to pre-bubble? The $100,000 question is where do you stash away your pre-bubble paper $100,000 so that even after our government prints another trizillion after the bubble bursts, my money will still retain its buying power prior to the crash.

A response to Margie read . . .

"Certainly don’t keep more than 100K in any single bank account. Not sure why you think FDIC won’t be able to insure everybody. Their ability to give you back your nominal account value is infinite."

I think Margie's concern is a valid concern. Yeah, sure, I'm a paranoid nut and what the hell do I know?

I know this . . . To think that it's impossible that a bank will simply stop paying out is ridiculous. I think it is more likely than not within the next 5 years. With a fracitonal reserve of about 1% and banks lending out more and more to risky lendees, I think it's only a matter of time before you see the first bank go under. Smaller, local, etcetera.

But if and when it spreads, and people start to think, "hey, I don't want to have to deal with the Feds to get my "insured" money back," - in combination with more defaults and bankruptcies, then the crap is really going to hit the fan. In the event of monstrously widespread bank failurees, the government will not simple hand out the money. It will not simply print more money to hand to people.

So me? I don't keep much money in the bank either. The way I see it, you're better off having a bit here and bit there - that way, when the crap starts flying, you won't get shut out all at once. Better yet, cut your costs to the bone. Get rid of all excess. The fat will die first.

Forget the illusory 100k gaurentee - it's only as worth as much as the dollar, which is dying.

I disagree. It doesn't take time to bring down a house of cards.

I think it's much like the room full of mousetraps.

The whole floor is covered with mousetraps. Each mousetrap has a pingpong ball on the moving part so that when it's triggered, the ball gets launched into the air.

That's the housing market. The article cited by Inquiring Mind is disturbing. It's dead on, however. It's the worst case scenario unfolding - everybody who has been planning to hold on for a bit longer, who is speculating, who is retiring, is now running for the door.

A single ping pong ball has been dropped into the room, as it were.
I predict nationwide drops in house values of at least 10% by spring, yoy.

I am so freaking sick to death of this type of crappy quote . . .
"Mortgage broker Klingsheim said the community's falling prices doesn't mean the proverbial housing bubble is bursting, rather the market is correcting itself after years of exorbitant growth."'

Here are two more anecdotes.

I was speaking with my mail man the other day. Just shooting the shit about nothing. Out of the blue, he says, "yeah, with the way the economy is going . . . '
Tonight, I'm talking to a guy at a college conference. He's a blue collar guy working for a municipality. Says he lives in an 1100 sf house. I wonder if he got the number wrong. It's possible. He wasn't sure if we were in Iraq or Iran . . . So I asks him, "what do you think of the economy.?" He looks at me, looks down, thinks on it a bit, and says, "I don't think it's doing too good, with housing so expensive and interest rates coming up."

More writing on the wall.