By SQT15 follow 2006 Feb 1, 3:22am 5,430 views 66 comments
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From SFWoman's post.
I just had coffee with a couple of friends and of course the discussion turned to real estate. I said I would like to buy a larger place in SF, but since I am comfortable in my place now I’ll wait for the prices to come down. Instantly I got a stern lecture on how San Francisco prices could at most level off, and how ‘there is no place to expand the city, they aren’t making land anymore, San francisco is desirable and everybody is moving here, prices never drop here..etc…’.
I pointed out that I paid $157,000 LESS for my place in 1994 than the previous owners had paid in 1989, but my friends said that was a blip/anomally/earthquake specific. I pointed out that Tokyo had tanked and was a much more important city but thay said Tokyo had run up much more than SF (I have to look into that). Nothing I said about ARMs, interest only loans or even negative amortization could convince them that people hadn’t been rational about real estate for the last few years. I even said San Francisco had a lot of brownfields in which to expand and there were something like 30,000 condos approved in the South of Market area.
Is there a sort of mental illness (in that people can’t recognize reality) that goes along with real estate transactions in California?
It was amazing, they really believe that the real estate bubble is based on something more solid than very easy credit.
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World Savings has a 4.76 APY 8-month internet CD. Is that too long?
It is probably easier to do a CD though, unless you already have a brokerage account that is bond-friendly.
Wouldn’t you be better off with a money market fund? Vanguard’s are at 4.11% now. Or get a tax free one at 2.88% (depending on your tax situation).
MM funds may have significant MBS exposure though. I am not suggesting that this couble be problem.
Sure I sound like a bitter renter but all I’m hoping for is a small condo that I could reasonable afford.
When I was studying there (1995) some condos were significantly below 100K.
Is bank interest subjected to state tax? If it is so, then 4.75% is only less than 4.3% after state stax at the 9.3% bracket (not difficult in California).
In states with high state tax, isn't it better to buy treasury (as opposed to CD/MM)?
Have you thought of checking with payroll to see if they will automatically send part of your pay to a savings account (either with Fidelity or some other institution)? I'm not talking about a retirement account, for use pre-retirement. This would make it easier to build up the nest egg. Say about 10% of your gross? It works well for me. Out of sight, out of mind --well, not really, you still have to work on your asset allocation, but you only do that about once a year.
I'm not a finance person. I'm sure some smarty pants (said as an endearment) on this board could direct you with more sophistication than I.
Well, back to the beginning question.
I was thinking about this the other day, as I spoke with family who were reminiscing on their good fortune in real estate. Their sense of satisfaction over the current situation is palpable, an impervious barrier to any word of caution by me. I don't think it's that they can't recognize reality, but their sense of reality is totally rooted in past, as familar and favorable gains in real estate. It's as if they've painted a rosy future for themselves using colors from the past. If you suggest a more complete "palette" of data, indicators, etc. that would totally ruin their pretty little picture. So, what you're saying is I'm only a multi-millionare on paper? I'm sure many of us speaking with family/friends on this subject have encountered this mental process.
I suspect speculative bubbles linger to the bitter end because people don't want to believe anything but the brightest of futures for their investments, truth be damned. It really is a remarkable person who will open their ears to bad news when the crowd around them is cheering the brilliance of their wise moves. Obvious human nature, isn't it?
So, what you’re saying is I’m only a multi-millionare on paper?
Unless you are physically holding a ton of gold. ;)
Otherwise, in God we trust.
Housing Bubble? What bubble??? Apparently, none of you has heard of this oh-so-wonderful realtors'(tm) magic. Works every time, bubble or not!
Here's how it works: as long as you price your house ending with "888", you'll be doing okay. You'll have 888 bids, and the winner will overbid your house by at least 888%.
Don't be too greedy though. Remember, you want three 8's, no more, and no less. I'm seeing a condo in Cupertino listed at $488,888. It's been listed for 88 days, still no sale. I guess it's because they're overdoing it.
Don’t be too greedy though. Remember, you want three 8’s, no more, and no less. I’m seeing a condo in Cupertino listed at $488,888. It’s been listed for 88 days, still no sale. I guess it’s because they’re overdoing it.
LOL :lol: 888
Perhaps I should offer 444,444, but hat would still be overpriced. What should I do?
Oh no, you don't! There are people who'd rather buy at 666,666 than 444,444. My realtor(tm) told me so.
Well, no. It's just that human beings are apparently having little brain orgasms when they are ignoring the facts.
Some people have all the fun. :-(
The investigators hypothesize that emotionally biased reasoning leads to the "stamping in" or reinforcement of a defensive belief, associating the participant's "revisionist" account of the data with positive emotion or relief and elimination of distress. "The result is that partisan beliefs are calcified, and the person can learn very little from new data," Westen says.
The study has potentially wide implications, from politics to business, and demonstrates that emotional bias can play a strong role in decision-making, Westen says. "Everyone from executives and judges to scientists and politicians may reason to emotionally biased judgments when they have a vested interest in how to interpret 'the facts,' " Westen says.
New thread: Vallco, Condotino
Please continue to post in this thread as well.
The 1980s were the wildest ride for real estate of any time during the last 70 years.
After rising strongly in the late 1970s, nominal prices for homes largely held up with very little decline through the difficult period of the early 1980s, largely because the high inflation masked the real decline in housing values. During the late 1980s we had price increases that were greater than what we have seen this time, combined with banking fraud and bank failures even while prices climbed. Normally these problems manifest after the peak. However, in the 1980s the bubble was so severe that we had the Savings and Loan Crisis which started about four years before the real estate market peaked. We had many savings banks already going insolvent at least three years before the real estate market peaked. The market was so bad in the 1980s that the Federal S&L Insurance Corp. bailed out so many S&Ls that it was also declared insolvent – TWO YEARS BEFORE the real estate market peaked. And the bubble marched on.
The prolonged decline of the 1990s was the inevitable result of that historic excess.
Please, please stop arguing that b/c Japan real estate fell, so should US real estate. If you have ever lived in a different country/big city, you will know that US coastal cities are still MUCH MUCH cheaper than other larger international cities.
. :!: :!: :!: ATTENTION: STRAW MAN ALERT! :!: :!: :!:
It has just come to my attention that certain bulli$h posters are making exaggerated claims, drawing false conclusions from them, and then attributing these fabrications to Bubble-theory supporters.
Do not be fooled by such transparently dishonest ploys. Instead, always carefully inspect such arguments for the official Bubble Posse™ logo. That's how you can always distinguish a fake Bubble argument from the genuine article.
I NOW RETURN YOU TO YOUR REGULARLY SCHEDULED BLOGGING...
Ummm, data please...
According to the Economist Intelligence Unit (data service of the Economist magazine), San Francisco ranks 38th in USD terms, internationally, and is within 40% of the cost of #1 Tokyo and #2 Osaka. #3 is London, #4 is Moscow. Moscow!, how can that be you ask...
These figures are distorted by exchange rates. The PPP adjusted list shows San Francisco at #8, with Moscow falling off the list (of 50) entirely.
Sorry HITMAN, you MISSMAN again. C'mon man, you're a b-school grad (I think), log onto your alumni library and pull the data.
By the way, they used the "Burger Index" for PPP, so spare arguments that "you can't measure PPP against non-convertible currencies".
I went to Osaka/Kyoto recently. 1000sf+ condos can be had for less than 500K USD.
Tokyo can be compared to Manhattan. San Francisco is a rather small city (size, population, economy) in comparison.
Hitman-Thanks for the info on the Tokyo run-up, but I would dispute that all major foreign cities are more expensive than here.
Hitman's statement was categorically false. No reason to discuss it further. Reference EIU data. In 2004, SF was only 40% off of Tokyo in USD terms. Since the USD weakened in that period, you have to measure the purchase-power adjusted (called PPP), which puts SF at #8 globally.
I just got back from living in Paris and the apartments there seemed like a bargain in comparable neighborhoods and the construction there was much nicer.
Very true. They do not have stucco-on-cardboard shitboxes. :)
It’s a fucking joke! Thieves roam the streets at night. And I predict it will get worse.
Downtown SJ is bad enough at night. The east part is a no-go-zone for me.
What do you guys think of buying in to the BA market in a quality location this summer if I have a 5+ year horizon? Versus staying on the side lines and hoping for materially lower prices….do you think it will matter given a 2011 minimum reversion?
Since I don't subscribe to the more doomier predictions of some here, I think that you'd be well within a "quality of life" decision to buy with those parameters. I'd add, if you can stretch your revesion longer if circumstances are dire will help you sleep at night. Just make sure your total net cost of ownership burden is reasonable (my definition of such is
Downtown can be pretty bad too.
True, especially at night. During the day, the engineers (Adobe) and accountants (PWC) dominate and the city looks all right.
8 means get rich in Chinese. Usually Chinese would like to end a transaction with good luck numbers like 888 (rich rich rich), or 288 (easy rich rich), or 388 (lively rich rich). 6 is not a bad number if used in the following sequence, 168 (one road rich, which meansing all the way to become rich), 668 (road road rich, every road leads to becoming rich). Now, avoid using 4, which means death, unless it appears AFTER 8, for example, 84 (rich to death). Any house number with a bunch of 4s will be hard to sell.
OK, enough for Chinese numerology.
"My question is “based on what?” "
Why, looking in the rearview mirror of course! We've had all these wonderful appreciation percentages for the past X years, therefore it must continue just as it is forever! That is their (weak) rationale.
SQT: Knowing you're in Sac, I thought you may want to know that Lyon Real Estate has basically stopped updating its market statistics pages by county. Hmmmm...
Yeah, it's nice they're predicting a good spring, but the problem is we're in February now - Spring is only 2 months away! Can't imagine things turning around that quickly...
Ok, now it's my turn to be clueless. What's "PPP"?
In the I.T. world, of course it's "point-to-point protocol" or occasionally, "PowerPoint Presentation". Since we're talking finance/prices here, I'll go out on a limb and guess you mean "purchasing power parity (PPP)"?
You’re entirely too intelligent to get stuck working the bond desk. They’re looking for “soldiers”.
DinOR, I am probably not as intelligent as you think. However, Trust Departments do sound like fun. I will look into it. :)
Yeah, it’s nice they’re predicting a good spring, but the problem is we’re in February now - Spring is only 2 months away! Can’t imagine things turning around that quickly…
I do predict a spring blip. ;)
It will be more anti-climatic than their own little version of "soft landing".
It was amazing, they really believe that the real estate bubble is based on something more solid than very easy credit.
They HAVE to believe it. They have to because they are so in debted. It's called denial, self-justification, cognitive dissonance.
HARM, ppt is powerpoint, sorry I've been doing mindless ppt's all day
There are days where I'm not so sure how smart I am either. Every time I've called a bond desk they are so frazzled they just give you a quick schpeel and then either you buy or you don't. They can't wait to get you off the phone b/c they have 2 other lines ringing and now you're holding them up. It's just not a healthy environment for anybody and your exposure is so limited.
What I would love to see from all of the "techies" out there is a software program where some stock jock like myself can log on, plug in some rudimentary data and be able to tell clients with certainty if owning an income property makes more sense OUTSIDE of their IRA (take the depreciation) or (B) own it within their IRA and be exempt from cap gains. Age, tax bracket, years to retirement, years to Req. Min Distribution etc. Has anybody heard of any platform or calculator that can "tame" this situation? The status quo is to get the client's CPA, the client, property manager, lender (if UBTI is an issue) and myself in the same room at the same time. Everyone thinks they have the client's best interest at heart but it becomes a big dog and pony show with little resolved. I just need a nice tidy package the guy can bring to his CPA etc. If the client doesn't move forward, no big, at least we didn't put a lot of time into it. Anybody?
Other folks on the blog have contacted me personally, I think they contact the Administrator and they will give you my email address. If you have a solution that would save a lot of time (and face) I'm open! Please feel free to contact me, Many thanks,
Thank you! That would be great, sorry about the delay.
Okay. A Realtor™ was stepping out of her BMW to set up for an open house when a truck that was doing 50 smashed into the door of the BMW, ripping it off and running over her foot. After the hit and run, a worried neighbor came over and said, "do you need an ambulance?" The Realtor™ yelled "F#%K YOU!, look at what he did to my beamer!" The good neighbor replied, "You Realtor™s are all selfish, self-centered, materialists. Can't you see your foot has been crushed?" Then the Realtor™ screamed "OH F#%K, MY GUCCI SHOES!"
SQT, Yes the BMW joke is a recycled lawyer joke.
I would like to post things like "Regression analyses on the Keebler-Palmolive model have shown that a 37% decline in RE prices contradict both the Bernanke Flipper hypothesis and the NAR estimate for Q1 of '06," or "The assertion that the NorCal condo market is 43% over-valued is supported by the Bubblicious Dirigible Theorem, a widely alluded to but not so widely understood metric," but alas I don't possess the education in economics.
RE is so over, how do I know? Watch the super bowl? Did you pay attention the ameriquest commerical? The one that said "don't judge too quickly, we won't". Nice. I recall with fondness the dot.com superbowl and the implosion the next year.