patrick.net

New technologies, inventions, breakthroughs are so hard to come by. The economic cycle is too long. NAR fills up the gaps in cycle. They are a good social service organization who’s bona-fide intentions are American dream of House Ownership and to make all poor people millionaires. If we don't get any other growth engine, don't worry NAR will make everyone billionaire. Keep up the good work.

Practicality and yachts have nothing in common.

FHA should be pegged to 2.5 times median income for the county, as should Freddie and Fannie

Buying into a communal mortgage should be the yardstick for comparison?
Hey, don't blame me, talk to the SF Board of Supervisors about their condo conversion lottery. Incidently, this is the decision we made in 2000 when my wife and I bought an undivided interest in a property that had two houses with another couple. But hey, I wanted that old school crap about being able to afford the mortgage on one salary...

Okay, the cranky pants are on a bit tight as the DQ numbers didn't seem to bear out the goodbye jumbo theory of home depreciation. I mean Contra Costa's median was even with a year ago... wtf, we all know they are getting creamed. So its mix, and the higher end (hello, jumbo) appears to be doing all right. I'm willing to give DQ another month for jumbo shock to take hold. If it doesn't, we just currently don't have the excess inventory in the fortress prime areas to drive prices down as buyer sentiment still seems to be hanging in there. Make no mistake, ARMageddon will give us the inventories that eventually turns us downward, but it is a paint drying proposition -- which is no fun when you are trying to convince folks that they should "keep the powder dry". Or tell an SF professional not to buy that TIC when it is just as "cheap" as renting...
@astrid,
How about a luxury train car?

EB, the DQ numbers are trailing. Wait till Septembers come out and you can see what the tightening on the jumbos has done to sales figures. Then you have to wait for inventory to grow, etc.

FHA should be pegged to 0 times median income for the county, as should Freddie and Fannie.

I think private tropical island, uniformed henchmen and laser armed sharks are still the henchmarks to go by.

Peter P,
I agree... but if we have to have them, they should have a better limit cap, one that already has inflation built in so you can't claim fixing problems by 'raising the limit' like they've been doing. Tying to income is better than nothing.

I think private tropical island...

How about an island boat?

http://www.wally.com/jumpCh.asp?idUser=0&idChannel=172&idLang=IT&idProd=100&attivo=4&txtStartRecord=2

Uniformed henchmen are a must. Not so sure about laser-arming sharks. They belong in my soup.

EBGuy and SFBB,

DQ is definitely a trailing indicator. They record closed sales. That means the August numbers are for purchase agreements signed in June and July, some in August. The effects will be seen in September's number more, but October and beyond even more, unless the situation loosens up considerably.

My anectodal MLS searches through areas of interest in the Fortress show a noticeable slowdown, as even more than usual, the same crap hangs around. The previously very brisk areas (Palo Alto, Los Altos, Menlo Park), have noticeably slowed down, but there seem to still be places going under agreement, albeit at a much slower rate.

EBGuy,

I'm not trying to kill the messenger on the TIC thing. :)

I will say though, in response to your "Or tell an SF professional not to buy that TIC when it is just as “cheap” as renting…" that in fact, tell the fabled SF professional - how would you feel if you bought a TIC now, and it turns out in 1-2 years, that same amount of money would have gotten you a nice condo, sans communal mortgage?

henchmark = benchmark

henchmark = benchmark

Henchmen Benchmark.

I am thinking about gray jumpsuits with yellow and red strips for my henchmen. :lol:

I was wondering if anyone read that article on www. sfgate.com about rent prices today. I am new to this blog and reading the various comments have made me more comfortable with my decision to rent for a while. But the article stated that rents are starting to soar and went on and on and generally sounded scary. Does anyone agree or is this some kind of propaganda to make us qualified renters buy now. I think reading here is starting to make me paranoid about the media and real estate, but maybe that is a good thing.

The recession next year will knock rent prices back down.

Okay, will loosen the cranky pants a notch until next months numbers from DQ. I did get a bit testy from the whole jumbos at 15% hysteria.
Now, regarding communal mortgages. Mine was truly communal (with four wage earners at the time), but we are now condoized and down to one wage earner per household. But that was in ye olden times (rates about 7% -- gasp!). Several banks in SF are now writing individual TIC loans so there is none of the risk of signing on the dotted line your co-owners. Plus, the banks tend to require the buyers to have a bit of skin in the game so that adds to the stability of the arrangement. That said, you can really screw yourself up if you don't read the TIC agreement and miss the part that says your share is responsible for paying the taxes and utilities on the entire building.
@sfbb
Great rant about subprime ARM buyers on Ben's about a week ago... to sum up for those who missed it: they can't afford the payments so no amount of bailout will help.
@PCF
Ess Eff is special. Hell, a couple I met recently moved back to the East Bay as it was too $%@#ing cold over there.

GC:

That's essentially a Robert Adam knockoff with the exception of the frame around the mirror. If you like that style and the inlays, then R. Adam copies are what you're looking for. Near-contemporaries are Chippendale, Hepplewhite and Grinling Gibbons. English 18th c. up through about 1825.

Also, I haven't noticed rents shooting up on the peninsula. And my rent would have to shoot up by over 100% to make buying and renting equal.

That's a good point. I have classmates who just graduated from law school and running out to buy starter homes. I think I'll continue to rent and pay down my loans and maybe I can buy where I want in a few years. They love to throw house warming parties and BBQ's anything to get you to see what they just bought.

Folks, go to Calculated risk and watch that "Every Breath You Take" parody on Bernanke. Good fun (nothing more).

One Zillow poster is infuriated by Patrick.net.

http://www.zillow.com/site/ViewThread.htm?tid=6234

PCF, you can also rent in a city with rent control such as San Francisco and Los Gatos

Indians and Chinese families would pay almost any amount for good school districts. Why not open private indian and chinese schools, like jews or christians. That way cost can be managed, and you don't have to pay over a million dollar for some 50 year old home in Cupertino.

I bet you that Newton and Einstein had better genes than better schools. You kids will be as good or bad as you. No more and no less. It's all in the genes! Why waste you lives away for your kids' education???

PermaRenter, certainly smarts is mostly genetic, but you have to give the kid the right opportunities to develop the "intelligence" into "educated", as well

"I know a few of these people, it’s nothing but greed, the grants are options, but people tried to save on taxes so they exercise and held. When you do that you are taking a risk, maybe it’s not explained to them."

You missed my point. Yes they deserve to take the loss, however what is unfair is that they are not allowed to deduct the losses at any reasonable rate, whereas the government taxes all gains fully. Thus if you lose 100k followed by a 200k gain, you can recapture the tax fully, paying only on the net 100k gain, whereas if the gain preceeds the loss, you can recoup the 100k loss only after 33 years of tax returns. It's not fair, and if there must be some limit, the $3k limit is clearly out of step with the times, not having been adjusted for 3 decades of inflation. Re. owners not being able to deduct their losses, I was not aware of that. That also strikes me as unfair, though it must be weighed against the unfairness of giving owners a large one-time exemption from any cap gains on their homes. A fair system would allow losses to be deducted but fully tax all gains. A really fair system would adjust the cost basis for the asset to account for inflation, but tax it at the same rate as other income. A really really fair system would eliminate the mortgage interest deduction. OK, I'll climb off my soapbox now.

Off topic, but chilling to see lines of anxious customers outside of Northern Rock bank branches in the UK. This was not a matter of a handful of people trying to withdraw their deposits. The BBC News showed huge lines of customers with worried faces, desperate to get their money out. Maybe it's their Countrywide. Or maybe it's an adumbration of future events on both sides of the ocean.

@Unalloyed,

That was nothing short of a good ol' run on the bank. I didn't think ever I'd see one in real life, but there you go. Did you see the story about a retired hotelier and his wife who barricaded in the bank teller because she wasn't able to immediately withdraw their 1M pound account?

It looks like George Bailey's gonna have to cancel his honeymoon!

I have to say the increase in listings in the fortress is quite alarming.

Just 2-3 weeks ago, Palo Alto had only 40ish listings, now it has 70. Los Altos had below 40 listings, now it has 69. Los Altos Hills' 65 listings sound like a substantial number for a small community with houses on an average lot of 1+ acre. Cupertino and Saratoga went slightly up, but old inventory just sit there without moving.

Even the coveted Hillsborough has 53 listings, not an insignificant number for such a tiny city. Burlingame has 93 listings. I remember looking up Burlingame heading into April 07 with only 30 listings.

I don't recall any cities mentioned above having so many listings in Sept 06. The tide has turned in the fortress, hang on and enjoy the show.

I took the following from a realtor's website for houses listed and sold at Rivermark area in Santa Clara, I know you guys hate McMansions, but these prices reflect stickness almost to the fortress level. These folks probably got the last "cheap" jumbo loans. I predict they will get hurt the most in terms of overpaying.

MLS List Price Sold Price sq. Date
----------------------------------------------------------------
741339 1,089,000 1,108,000 2083 8/21/2007
737987 889,850 895,000 1590 8/7/2007
737725 1,335,000 1,335,000 2645 8/15/2007
736900 1,239,000 1,234,000 2408 8/1/2007
734011 1,259,000 1,276,888 2408 7/12/2007
733480 1,050,000 1,082,000 2117 8/2/2007
732492 1,419,000 1,377,000 3395 8/6/2007
731682 868,888 865,000 1590 8/27/2007
729160 868,000 872,000 1657 6/29/2007
728725 959,999 947,000 2036 6/21/2007
727569 848,000 826,000 1590 7/18/2007
726142 1,239,999 1,240,000 2627 6/20/2007
725285 849,900 830,000 1590 5/29/2007
724816 975,000 1,035,000 1754 5/31/2007
724376 989,000 985,000 2036 5/18/2007
723435 878,000 865,000 1657 6/28/2007
722393 898,000 900,000 1657 6/15/2007
721885 1,449,000 1,410,000 3395 6/28/2007

It’s not fair, and if there must be some limit, the $3k limit is clearly out of step with the times, not having been adjusted for 3 decades of inflation

The AMT limit has not been adjusted since 1969, everyone knows it's unfair yet I don't see any meaningful movement to repeal it either.

I do agree that some engineers are very bad with money, but I don't seem to understand why that is, the tax implication is not that difficult for someone that either has a CS or an engineering degree. I would have to say greed is a major factor.

During the dot com boom, a few engineers at my company sold just enough options to cover their down payment for a house, because they believe their stock will go up forever. Diversify and sell on schedule are not in their vocabulary.

Remember cb, anyone who could spell e-Commerce or say IT was hired as an "engineer" during the boom.

CS degree or not though, I agree that greed was the root of many of an evil during those heady days.

Remember cb, anyone who could spell e-Commerce or say IT was hired as an “engineer” during the boom.

The ones I knew all had Master's degree from top-notch universities (Big 10, MIT, Cal etc.) Yet many exercise and held. Exercising and hold is not risky when your spread is small, but many took the risk trying to avoid short term cap gain. The Z8 and M5's owned by the early engineers probably made them do it :)

Off topic, but chilling to see lines of anxious customers outside of Northern Rock bank branches in the UK.

It's interesting to see the kick-on effects and the interconnectedness of world lending and finance markets.

These are like the bank runs of old, and other precipitates of recessions and depressions.

Come back randy, we need you :cry:

surfer-x won't be posting too much anymore either, being a new homeowner'n'all... this will be the signal for all the trolls to come pouring back :(

Here's a one-off blog on boomers and house prices, people might find it interesting for the comments and the international perspective with similarities and differences to US situation...

Blame it on the Boomers

I would thank the Zillow poster for the link to the bubble blog. Perhaps we should post a link to the daily news articles?

Bruce,

I'd add that it's important to buy stuff made before 1830 because the mechanical saw came out about then. Any of the Victorian stuff is going to probably be mass produced. I think that's why the Victorians started over decorating everything- suddenly the middle classes could afford ornament.

DS,

That's an interesting take on Sydney harbo(u)rfront pricing v Paris or New York. I see apples, kiwi and anjou pear comparison, but I'm sure the intent was to help Oz buyers imagine they're looking at 'good value'. True, in a way.

SFWoman,

I agree that's a great divide. Was unsure how far the Jungle Cat is inclined to go in the way of fineness. After all, Biedermeier comes later but some find it very handsome. On the other hand, there's that great blast of case goods from Cedar Rapids which makes the case perfectly.

The exercise and hold strategy was also aggressively promoted by brokerage firms that handled the options of these companies.

The largest hi-tech public companies in the Bay Area often had their brokerage firms come on campus to do "financial management" talks to employees in which the "finance gurus" touted their options program. Engineers were not familiar with tax law, it was the brokerage firms that were making the trade off between income tax bracket and long-term cap gain bracket so well known. What do they gain? They offered you the bridge loan while holding for another 18 months to qualify for the cap gains at 7-8% per annum.

Even for my company which was a smaller IPO'd startup, our brokerage firm, Smith Barney, came in right before the IPO event and talked to us about tax strategies. My wife works in finance, so we did some modeling and we knew the stock was over-valued, therefore resorted to exercise and sell. I had a colleague who exercised at the same time that I did and ended up with nothing because he held.

It teaches me about one thing. When the world is crazy and drops money from the sky, take it off the table immediately. Don't worry about the tax, you only worry about tax on predictable, stable income. IPO lottery doesn't happen very often in one's life.

It is only the engineers, marketing and sales worker bees that were / are disillusioned. The execs never drank their own cool-aid. Of all the companies that I followed closely, the execs always exercised a very significant amount of options before the stock dipped, they would even do a stock buy-back using company cash to support the stock price as they themselves cashed out.

When I buy stocks in hi-tech companies, there's only one thing that I follow closely, the insider trading data. Whenever the CEO or VP of Sales starts to cash out a significant portion of his position, I sell as well.

I wonder how long it will take before companies looking at the bottom line decide degrees are totally worthless.

I repeat. The most successful people on this planet are nearly all dropouts.

Degrees are just a form of kool-aid. And that beverage is getting increasingly expensive.

The execs never drank their own cool-aid. Of all the companies that I followed closely, the execs always exercised a very significant amount of options before the stock dipped, they would even do a stock buy-back using company cash to support the stock price as they themselves cashed out.

It's called options backdating. Look where that's going now...