WatchI do not see why people are even debating when home prices are going to bottom. For those who think we have already bottomed nationally, why the heck would one of the top housing forecasters in the US believe it will bottom in two decades!!!! That is 20 YEARS of declining home prices!!!
Unless you are an expert like Robert Shiller and co-founded an indicator to track home prices (Case Shiller Index), you might stand a chance against his predictions.
There is no way home prices have bottomed on a national level when foreclosures are still skyrocketing and the debt crisis is upon us. My point is, if Robert Shiller believes prices will bottom in 20 years, I would think calling the bottom in 10 years would be optimistic!!!! It is common sense!!
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waiting_for_the_fall says
That's a California thing.
I know plenty of people who buy homes to live there basically forever but they don't live here.
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rootvg says
You really should consider leaving California since you hate it here so much and can't stand Californians. I can't think of a better way to have a miserable life than living somewhere you hate.
Why not move to Kentucky? It's filled with like-minded conservative folks, and with all the Usenet experience I'm sure you can get a job maintaining the website of the Creation Museum.
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Pleasanton, CA
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clambo says
They have many ways to get the downpayment
1. Steal money or goods directly from you
2. Be given free money by the gov't to prop up housing prices. Then in 2 years they will default and your taxes will bail them out.
3. Sell drugs to your kids who eventually start robbing from you to pay for the drugs
4. Make a fake insurance claim at their crappy work and collect disability money for years causing your premiums to rise. In effect stealing directly from you
See, lots of ways. The crafty ones will apply a mixture of all and end up with a McMansion in Berkeley.
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HousingBoom says
Yah, but Shiller doesn't live in the Cupertino, Phoenix, Las Vegas, Fremont, San Francisco, etc. He is also not Asian and sends his kids to private school. He has no clue about housing. He needs to go to all the overcrowded open houses and witness all the cash in people's wallets. 600K listings going for 550K! 1.2 million dollar listing sitting on the market for months with no bidders! How can he explain all this housing mania. All the record sales and price increases in all these cities mentioned. Landlords and flipper are making a killing. Just in Cupertino alone the medium house price is enough to bail out Greece. Shiller is a crook and a scam artist. Just listen to his aggression and nonsense. I'd like to see him put down Scientology in front of Tom Cruise and then see them both duke it out. Cruise should be at clear stage 12 by now and that means he can levitate at will. What a fight it would be. The superior Cruise against the seemingly calm and collected Shiller. I'd pay for ring side seats! Ding ding ding....
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Nomograph says
I'd rather stay here and irritate the living fucking shit out of people like you.
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Nomograph says
I doubt your a Californian... cant be anyone more greedy pnet like you.
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rootvg,
Nomo's right. You haven't retracted your bigoted and hateful remarks about your fellow Californians.
You think Danville is an island of such bigotry in The Bay Area? Think again. Put some placards on your front yard telling your gay neighbors what you think of them, like you told us here on patrick.net.
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Nationally, prices have come back to something like long term historical averages:
http://www.multpl.com/case-shiller-home-price-index-inflation-adjusted/
Of course that's just the national average. It's possible that part of China's massive RE bubble has been "exported" to the Bay Area.
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B.A.C.A.H. says
I think the words he used were "subhuman".
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thomas.wong1986 says
Do you lapse into Chinese when you get angry?
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rootvg says
The Creation Museum's website could really use some jazzing up. I think we may have helped rootvg finally figure out what color his parachute is.
http://creationmuseum.org/
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rootvg says
This has got to be the lamest reason I've heard yet for someone who's not from around here to choose to live in and buy a home in the Bay Area.
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Corning, NY
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I don't think rootvg ever tried to argue for Young Earth Creationism on Patrick.net. At least not since I've been active here.
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Nomograph says
Your gonna have to try a little harder than that...it doesnt take much to see your a permbull on RE. I say your neck deep in it, and the idea of additional declines would certainly wipe you out. But further decline will occur.
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Whittier, CA
Ugg, now children, if we are not going to play nice, then at least stay on topic...
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One reason why housing prices are going up in the Bay Area has to do with rent prices. I had a nice upscale apartment in San Jose for four years. My rent was between 1900 and 2100 in those years. Now that I'm moving out the next tenant will be looking at a monthly rate of 2500+ for the same unit. With rent prices this high people can just buy a 500k-600k starter home with a similar payment.
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Way to cite a year old article!
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San Jose, CA
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fewy says
Housing prices are not going up in the Bay Area. Housing prices are falling in the Bay Area.
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dunnross says
Exactly. If one is biased then he won't see that decline or one is defending from behind the armor of CS index,and is truely ignoring the current on the ground numbers. :)
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Fremont, CA
fewy says
I think it is not the rent. Rent was never the factor in house prices here. I wish it was. The interest rates going down for last 9 months with low inventory caused a little spike. Once foreclosures hit the market and rates go up(They already have started going up!), you will the downtrend in housing to resume
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Danville, CA
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Helloeeze says
Here again, it depends upon what, how, where and when.
In The Arena was (I believe) Richard Nixon's next to last book. He grew up in rural southern California and related a story from high school where he and a few others were assigned to debate buying versus renting. What analogy did they use? Cost to buy versus cost to rent. Period, paragraph.
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Nomograph says
That was damn funny. :p
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San Francisco, CA
dunnross says
Housing prices are falling here, but rents are not.
Seems to me that rents and housing would fall simultaneously, over time. If not, then any rent vs. buy calculator would only be accurate for that particular moment in time, but not for any future calculations.
I guess could keep rising as home prices fall if the 1% has their way and starts buying up foreclosures in bulk and renting to the 99%. Actually, I believe that is the plan - the last step in class warfare: the 1% has most of the money, now they want the land.
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San Francisco, CA
1sfrenter says
Meant to write:
I guess RENTS could keep rising as home prices fall if...
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Pleasanton, CA
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fewy says
Wow. Go into debt 500-600K to the bank so you can avoid a $2500 monthly payment. Incredible logic. No one sees how this accumulating debt is crippling our country? Hello out there...
Here is a marvel idea. Pay the 2500/mth to sit and wait. If you think you can afford a debt load of 500-600K then 2.5k is nothing to you. You got that in change in the sofa. ;)
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Corning, NY
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If rents are going up, that means fundamental demand is going up and will tend to keep housing prices up. However, house prices could still be overvalued.
In the end, do what's cheaper: renting the house or renting the money to "buy" the house. Also consider the costs of buying/selling if you're in a non-secure job.
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Corning, NY
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$2500/month on 500k is an annual rental yield of 6%. That's a little closer to sanity. Of course there's still maintenence, property taxes, and insurance, so the real yield will be less than 6%.
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Danville, CA
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RentingForHalfTheCost says
It's not crippling the country at all. There are only a few places in the United States where buying is THIS expensive.
This is the Bay Area. It's an economic, cultural and political bubble. There are simply too many people here with large sums of money they never earned or earned too easily or were simply handed because of the family they were born into.
And guess what else? You're not gonna change it.
Many people will not be able to continue to afford living here and other places like it. Michael Bloomberg, Judd Gregg, Peter Schiff and others have discussed this at considerable length.
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wthrfrk80 says
Are rents really rising? I read in NY times recently that rents went up 2.4% in the last 12 months, but that was not inflation adjusted. With 2.9% increase in the cpi there was actually a decrease in rents. I'm sure rents in certain area's are rising. Also I haven't been able to find a breakout of rents just for houses alone, so who know what the real story is.
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Corning, NY
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bob2356 says
Well I just assumed "fewy" was telling the truth vis a vis rents in San Jose. It's just one data-point though.
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Los Angeles, CA
Ok, so Shiller said what exactly? They "could" be falling for 20 years. They also could not. If a house falls every year 1%, shiller would be correct, right? Useless information. It's like saying...the stockmarket COULD be going down for 20 years...or up...or stay flat. It MAY....It also MAY not. All these guys make ridiculous claims to get on the news. When the stockmarket is at 6000 the analysts come out and say that we may go to 1000. When the stockmarket is at 13k, the same guys are saying that we are going to 20k. Useless info. You have to make radical claims these days to get on the news.
So what, you have to live somewhere and if you are coughing up 2500/month in rent, you might as well pay off a house with that.
2500/m over 30 years = 900k in rent spent. That is, if you don't have a rent increase EVER. Highly unlikely to go 30 years without rent increase. After 30 years you practically spend a million bucks. Remember, you still have to live somewhere when you retire...meaning...keep paying rent.
Why not use that money and pay off a 500k home? Or a 600k home? Remember, you will spend 1million to rent. And after 30 years you have NOTHING to show for from the 2500 you spent every month.
I don't know. No brainer for me, regardless what shiller says.
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RentingForHalfTheCost says
Debt is not the bondage that you make it out to be! Debt at a variable interest rate can overwhelm you... But low fixed rate debt is not something to be afraid of! Its like being afraid of death... You are eventually going to die, there is nothing you can do about it... If you die with manageable fixesd rate debt or flush with cash, neither is following you to the grave. If you are worried about your heirs well-being... Take out a juicy life insurance plan.
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Corning, NY
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SubOink says
Yes, rent is "money down the drain." It really sucks doesn't it? And yes, inflation tends to favor buying rather than renting, since rents rise with inflation whereas your debt does not.
But interest on debt is also "money down the drain." So are maintenance, property taxes, and insurance.
Choose the option that results in less money down the drain. To see, use the rent vs. buy calculator under "real estate tools."
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RentingForHalfTheCost,
A dual income family with only one person employed in the tech sector should be able to afford a 500k to 600k home. Even with 5 years of experience this family should be making 150k a year, if they have ten years of experience I would say that would be around 200k. With those incomes and maybe some sort of down payment this house falls into the historic 3x annual salary range.
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Tarzana, CA
So many good points relating as to why housing is not a bottom, I didn't choose one. Right, just look anywhere, around you, your neighborhood, the city you live in, information from the media is debatable, combined with what you see and common sense about interest rates, foreclosures, shadow inventory, etc. it looks to me like a set up agonizing slow drop in house prices. (Didn't someone say the banks are bankrupt? ;-) yeah, that would make sense no liquidation, they can't afford it.)
This leaves unsexy choices regarding housing, just rent or choose an option that 'results in less money down the drain'.
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Los Angeles, CA
wthrfrk80 says
Interest is also deductible and the portion of the payment is significantly lower than renting.
example: Mortage of 2400/m , in the first year interest portion is about 1800/month and it keeps going lower and lower of the course of the loan. Once you have passed 15 years your interest portion is less than what goes towards your principal. It's like rent that gets reduced every month!
Maintenance costs are not what some people make it to be. In rentals, most landlords hate their maintenance costs and because they don't live in their $hitbox you end up with the cheapest, cheesiest quality of everything. In a home, you can upgrade your bathroom to your liking, yes, it costs, but you are also the one enjoying it.
Insurance? My homeowners insurance = what my renters insurance used to be. Same shit. ($1000/year)
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Los Angeles, CA
wthrfrk80 says
When we sat down and calculated what we spent in rent, I almost fainted.
It served as a big motivator to get our shit together and buy.
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RentingForHalfTheCost says
Don't forget Philadelphia, Houston, San Jose, or San Antonio. You know, 4 of top 10 cities (by population) in the U.S.
As Paul Krugman famously concluded (and somehow played Captain Obvious and won a Nobel Prize for it), people move towards big cities for jobs. Guess what? Some of these people will desire houses as well. Why these cities aren't included in the Mr. Shiller's Housing "Index" is beyond me.
It would be very helpful to add the aforementioned cities. This would help track housing trends correlating data based on the 50 largest cities in the U.S. It should be updated every 10 years via the latest U.S. Census Bureau data. This information would be more relevant to more people.
Take a look at either the Top 10-City or Top 20-City Composite Housing Index. It's just a chart run by idiots and consumed by popular media outlets as the unquestionable de facto standard for housing information.
Shiller and crew are a bunch of idiots. This is why I visit patrick.net instead.
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K Dub says
Paul who ? You better read up on Shillers books.. Shiller was way ahead of many back during the dot.com and housing bubble. Even as late as 1999 Shiller spoke about SF and Boston area showing a disconnect between RE prices and Incomes/Inflation.
All Kruman came to be was the left wing media's darling boy in economics but didnt make any analysis or conclusion as Shiller did that prices would fall.
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fewy says
We have had dual income families for decades.. still even during the best decade of growth 1980s.. Prices did not skyrocket as they have post 2000.
WHY ?