patrick.net

i think there are a lot of well funded housing speculators in san francisco but they still borrowed the spec money and they are not going to be able to flip in the spring 08. everyone says that RE will be sticky on the way down....well just give it awhile. we are going to see a massive collapse when we start falling in this country. we are going to have a massive depression as people lose their 'service' jobs in the next several years. we dont have anything to fall back on now. 40% of the jobs got shipped overseas. 90% of the manufacturing is gone. we have no savings. our 401k's are invested in mbs, cdo, cds, and siv's so they are gone!

all the illegals in the more hostile states the ones passing laws to fine landlords and employers for hiring illehalss) are moving to socialist california where they can get social benefits. california will see massive tax hikes and stealth taxes to pay for all the illegals and unemployed people associated with the RE industry...i.e. all those laid off tech bubble workers. rents will fall like in 2003 and then plunge 50% farther.

california infrastructure is worn out. raise taxes. stricter auto emission standards will prevent lower income people from keeping their older dirty cars. insane gas prices because of the stupid special calif blends. you will lose your last refinery. calif refuses to build new power plants so you are going to get higher and higher utility bills.

can you say pissed off lower classes. higher crime. i checked my old cow hollow apartment rent and it is now 150% higher in 3 years. cool place to live but i am paying 90% less rent for a 500% larger space in the midwest. i miss the ocean but i dont miss paying a tax for a frwaking plastic bag at the grocery store or paying $100 for my auto emission inspection.

does california have rent tax yet? i cant remember seeing a story about it but i am sure it is coming. californians are going to get eaten by taxes. all my friends in the financial area downtown are scared to death they are next in the layoffs. all my friends that are left in the tech companies just manage visa workers that will be dumped (again like in 1999) at a moments notice. they all live 15 to a 2 bedroom apartment inpalo alto!

california is rolling over and it wont be a slow slide ...it is going to be a parabolic fall whe it gets going.

skibum Says:

> However, last weekend was the same. Downtown Palo
> Alto’s faux-trendy restaurants were half-full as a rule.
> We had a nice dinner at a half-full Zbibbo on Friday
> night, walked by a nearly-empty Mantra, nearly empty
> Junnoon, and only Miyake was near full. Tables were
> even available at Evvia, something I haven’t seen in a
> few years. But that’s a bunch of young, single renter-types
> most likely!

I was one of the renters that just walked in to Evvia last Saturday and couldn’t believe it when they had a table available. I was at Zbibbo last month on a weekend night and the place was barely half full (I walked in through the back door and the place looked like it was closed)…

> Other casual observations about local consumer sentiment:
> Stanford shopping center is still as crowded as usual
> Costco lately has looked like a ghost town, even on Saturday
> Ikea was likewise near-empty on a weekend

The reason I ended up down in Palo Alto last Saturday was to see some of my Formula Ford friends who were showing cars at the Palo Alto British Field Day (across the street from the Stanford Shopping Center). I bet that at least 250 of the shoppers in the mall on Saturday were wives, girlfriends and daughters of guys at the car show…

Randy H,

I don't want to imply that your entire basis for this thread is faulty, but we may be glossing over some major issues? Recently there's been quite a stink from the SAC area where it seems more often than not the abandoned repo with weeds and a mosquito farm can be traced back to a BA address. Sure, it's easy enough for specuflippers (TM) to ditch their failed investment like an ugly girl at a dance but then in turn re-re-refinancing your BA home to avert your impending reset may not be so easy? In fact w/ a foreclosure (or 9 delinquent payments) it may be damn near impossible!

With as many as 8 in 10 NOD's having ties to the BA you've just gotta' believe it will equate to more forced selling? Or perhaps this will be like so much water off a duck's back.

GC spoke an ugly truth about race and the welfare state, and therefore must be silenced, lest protected groups are offended.

No asik, GC has a long history of intentionally saying anything offensive, regardless of who it offends, simply to ruin the thread. That will not happen on my threads.

DinOR

So what are you implying the effect of that would be? Faster price correction in the BA? It seems we're seeing a polarization of folks who think the correction will take until some time around 2167, and folks who think it will happen much sooner. I do think you're talking about a small percentage of BA'ers who own SAC investment property. Probably well under 1%.

I wrote:

> In America anyone can buy land (you can buy a decent
> home in Ohio or Michigan for less than $100 a month).

Then Different Sean Says:

> The only thing missing from this is an outline of other
> variables in Michigan or Ohio such as:
> what is the typical income? what is the job market like?...

Why does that matter, since if you make the minimum wage (or even less) you can afford to buy a home in America (You won’t be able to live in South Marin, Emerald Hills or Woodside where vacant lost cost over $4mm but no one has to be a renter in America).

P.S. I wish making a profit in real estate was as easy as hiring a manager and paying 7%...

Is Emerald Hills western Redwood City bordering 280? I think it is a very up-and-coming area. If I were to bet anywhere in San Mateo county that will have a great appreciation potential, I’d say that is the place.

I worked for this guy in 1997 who built a home in Emerald Hills for 900K, he was happy when he finally could use Emerald Hills instead of Redwood City on his address, I think it's still un-incorporated.

SFWoman Says:

> I think Peter P. may feel that the welfare recipients are
> parasites because he feels he doesn’t have a choice in
> paying tax dollars that he believes go to them. I do feel
> that way sometimes, when I see an idle young able bodied
> man in the projects in particular, but I feel much more
> strongly that way about the Halliburtons, KBRs and
> Blackwaters than I do some single mother trying to feed
> her kid on WIC.

I sometimes feel like I’m the only one in America that does not like to see $100mm programs that allow pregnant Welfare Moms to sit around smoking pot in the Housing Projects “AND” $100mm no bid contracts for contractors in Iraq. Most “Conservatives” only get mad about the waste of money on “Social Programs” while most “Liberals” only get mad about the waste of money by “Big Government Contractors”…

P.S. I dream of a day when the politicians pay for the “poor single mother problem” by forcing the “irresponsible baby daddies” to pay for their kids rather than just letting them hang out on corners doing nothing all day while the rest of us work paying for all their kids…

DinOR,

That is a very interesting point. If BA residents are getting foreclosed on their Sacramento speculation objects, for certain they will have trouble refinancing their local BA digs.

I can see it now, trying to explain it to the bank. "Well, yeah, I foreclosed on that Sac Shack, but don't worry, I won't happen again".

Perhaps real estate is not quite as "local" as certain professions would like us to believe?

FAB,

>“irresponsible baby daddies” to pay for their kids

Do you think that in this day and age, a woman gets pregnant unless she wants to? I'm not so sure about that. I have a hunch that quite a lot of accidental pregnancies are quite well-planned, if you catch my drift. So then who is being irresponsible?

We almost ended up in Emerald Hills in 2002. I like the area a lot. It was unincorporated then which had a lot to do with school districts, if I recall correctly. There was also some ruckus about garbage collection and water & sewage. But RWC was always full of politics; reminded me a bit of a little Chicago in the way it was run, only without Daley.

P.S. I dream of a day when the politicians pay for the “poor single mother problem” by forcing the “irresponsible baby daddies” to pay for their kids rather than just letting them hang out on corners doing nothing all day while the rest of us work paying for all their kids…

FAB,
Here's a solution to both of your problems: if you have a kid and the kid and the mom go on welfare, you get shipped off to Iraq.

That is a very interesting point. If BA residents are getting foreclosed on their Sacramento speculation objects, for certain they will have trouble refinancing their local BA digs.

Even though we've all seen the news stories about Bay Area "investors" using MEW off their primary residences to buy "investment" properties in Sac, LV, AZ, Central Valley, etc., I think it's not a large enough portion of FBs in the Bay Area for this cascade phenomenon to have much of an impact. On the other hand, I DO think there are more than enough 2 earner families with $1M+ mortgages living on a razor thin edge around here that their financial distress WILL have an impact. Of course, if you predict a "Black Swan" moment, it's not really by definition a Black Swan, but I think that moment will be severe economic downturn from the credit crunch leading to recession that hits the tech industry harder than most predict.

FAB,

Believe it or not, I agree with you completely. I do admire the permanent welfare mother niche. These women have more spending money, free time and security than a good chunk of the middle class. And they can actually afford to have kids...I don't think I can afford to have kids.

"correction will take until some time around 2167" LOL!

I've heard those arguments too! Still I wouldn't be so quick to dismiss it as a factor. It's hardly just SAC. Elk Grove, Modesto, Tahoe etc. From an anecdotal standpoint, and I can't say as I don't live there, how many times have you overheard people boasting about their "investment properties"? A few may have been talking about Aruba but look at what an impact it's become for L.A where PHX and LV are concerned?

All that excess Cali equity had to go somewhere and everyone I know considers themselves a RE investor. I just wanted to point out that the 40% of sales in 2005 that were "2nd homes" will have to have implications for major metro areas. I imagine most folks SFWoman knows own RE elsewhere in CA or beyond. Some will be able to weather it better than others.

skibum,

I would agree with you, except it wouldn't be fair for the Iraqis, whom we're still nominally there to help.

Okay, so Oil hits a record price today on low inventory. Add to that Gold has been hovering above $700/oz, and the dollar is at near-record lows against the Euro and Yen. Who else thinks a Fed rate cut, although likely a given, will look silly. In my book, it would erase any remaining credibility they have on the inflation fighting front.

DinOR

Still, you're talking about a small percentage of BA denizens. I'd be really surprised if even 5% of the total home-owning BA population has a second investment property. Especially if you exclude legacy properties -- extra homes people have picked up through inheritance.

FAB,

I woulda thought you'd be in Frankfurt checking out the autoshow there!

Randy H,

Oh agreed and in ways I was being a little snide. With ALL of the focus on SAC, PHX, LV (or Bend for that matter) I just thought it might be an appropriate point to give the 'Primary MEW Generators' equal time.

If you were forced to sell your BA home b/c of a failed specuvestment you couldn't afford to live here to begin with!

"Who else thinks a Fed rate cut, although likely a given, will look silly."

On that topic;

(and I know I should know this by now)

I'm I correct in assuming that a fed rate cut will devalue the dollar against other currencies?

And additionally add fuel to the inflation fire that's eating up my paycheck?

AND...not help FBs at all?

If these of those assumptions are correct, why again is Cramer (and his buddies) screaming for a rate cut ?

(and I know I should know this by now)

# skibum Says:
if you have a kid and the kid and the mom go on welfare, you get shipped off to Iraq.

Aren't we having enough trouble there already, even without giving guns to a bunch of shiftless, irresponsible deadbeats? I would vote for a local gulag instead, where they can coat children's toys with lead paint, so we can compete with China more effectively.

SP

FAB and Astrid:

I see that the "welfare queen" myth is alive and well.

FAB says: I sometimes feel like I’m the only one in America that does not like to see $100mm programs that allow pregnant Welfare Moms to sit around smoking pot in the Housing Projects “AND” $100mm no bid contracts for contractors in Iraq.

First of all, the bipartisan welfare reform bill eliminated welfare as a lifestyle choice. What remains is a strict program with a 5 year cap, which rewards work. It would be nice if the same sort of consensus could be reached on military contractors, but so far it hasn't happened.

Would you really want to eliminate ALL welfare? A pure free market capitalist system with no social insurance has other costs which you may not be considering.

FAB says:

I dream of a day when the politicians pay for the “poor single mother problem” by forcing the “irresponsible baby daddies” to pay for their kids rather than just letting them hang out on corners doing nothing all day while the rest of us work paying for all their kids…

That day is here. The "baby-daddies" are required by law to pay child support. If they are earning a paycheck and don't pay, their wages are garnished. Child support obligations are nondischargeable in bankruptcy. However, if the "baby daddy" is unemployed, or in jail, or participating in the "underground economy" it is hard to collect from them.

Your family has apparently done quite well for themselves. The military industrial complex and the "prison industrial complex" (2 million in jail and counting) are there (at great expense) to protect you and your property rights from kidnappers, vandals and invading armies. The welfare system is in place (at a much lesser cost) as part of the cost of keeping the peace.

Don't begrudge the few crumbs that are thrown in the direction of the needy. Remember what happened to Marie Antoinette.

FYI... a couple of threads back Glen did a "Buffet stress test" of WaMu's loan portfolio versus earnings. A couple days ago WaMu announced an increase of $500 million for their loan loss reserves, bringing the total to around $2+ billion, which was the number used by Glen in his calcs. To review if 10% default and the defaults result in a 30% loss, then the net is a loss of around $7.9B ($263B x .10 x .30). Subtracting annual earnings of around $3.2B and loan loss provisions of $2B, they are still left with a loss of $2.7B, not covered by loan loss reserves.

I did a similar calculation for Wells Fargo. According to their second quarter report they hold $342.8B of loans and $34.6B of loans for sale, or around $387B total. If 10% default and the defaults result in a 30% loss, then the net is a loss of around $11.6B ($387B x .10 x .30). Subtracting annual earnings of around $8.7B and loan loss provisions of $4B, they come out about even.... hmmmm....

Glen,

The problem is that throwing the crumbs leads to more crumb eaters. I also know of people who work two full time jobs to support their families, they certainly seem more deserving of more free time/more spending money than people who live largely off of taxpayer largess.

Then again, I also think poor people shouldn't procreate (and neither should stupid rich people), so I'm probably just a fringe wacko.

I LOVE lead paint! LOL!

Yes, we would be much more competitive! I also visualize "Meth Camps" in the desert where abandoned aircraft hangars provide "shelter". Weekly air drops of meth and twinkies are provided along with just enough water to make sure tweakers can't pack it out.

No more identity theft and car break-ins! :)

Most “Conservatives” only get mad about the waste of money on “Social Programs” while most “Liberals” only get mad about the waste of money by “Big Government Contractors”…

I am not a fan of corporate welfare either. We should let the market sort things out.

However, social welfare is a bit worse than corporate welfare. One can at least choose to become a shareholder of Haliburton. :)

Without Ron Paul, there is no hope.

There is no hope.

I love Ron Paul. :(

mickrussom,

Your statement, in addition to being incredibly speculative and unargued, also overlooks a most important information point -- I'm completely in favor of speaking Mandarin. In fact, once you grasp tonality, spoken Mandarin is very easy, much easier than a crazy language like English.

HARM stated "You might get lucky and find that rare, equity-rich long-time owner who hasn’t HELOC’d the place to death and doesn’t mind selling 30-50% below comps, but… I wouldn’t bet on it."

If you take the peak as Summer of '06, use the historic rate of appreciation for the Bay Area (5% as opposed to the national average of 2.3%) and perform regression to the mean using the last year prices made any sense (housing costs as 30% of gross income) of 1998 you get:
Summer 2007 = 35% down from peak
Summer 2008 = 32% down from peak
Summer 2009 = 29% down from peak
Summer 2010 = 25%
Summer 2011 =21%
Summer 2012 = 17%

Frankly, over time it just gets easier to accept the off-peak price as the underlying real appreciation knocks down the percentage decrease.

I agree that 2011 and 2012 are far more likely the time at which the market will be fully regressed to the mean given no new external factors.

A recession, large job-loss, a currency debacle (China unloads its dollars) would accelerate the regression-to-mean and would even likely lead to an overcorrection.

I think the idea of a 50% shave must represent the rare property that was even more disconneted from fundamentals.

By the way - I can only assume the 5% historic appreciation for the Bay Area must represent the fact that wage growth is completely allocated to housing.

That day is here. The “baby-daddies” are required by law to pay child support. If they are earning a paycheck and don’t pay, their wages are garnished. Child support obligations are nondischargeable in bankruptcy. However, if the “baby daddy” is unemployed, or in jail, or participating in the “underground economy” it is hard to collect from them.

Glen,

I agree the "welfare mother" hand-wringing is somewhat overblown. However, having lived in an (shall we say) "ethnically diverse", region of east L.A. County for many years, the idea that Clinton's welfare reform completely eliminated abuse/free-ridership is naive at best.

At my old supermarket in Alhambra, I personally witnessed various well dressed asian customers driving up in a brand new Mercedes/Lexus/BMW, load up the cart with expensive meats, fish, etc., then pull out a wad of food stamps at the register. Ditto for obvious "undocumented" non-taxpaying Hispanic "guest workers". And yet when I was out of work during the early '90s recession and had run out of unemployment benefits, I was turned down for welfare on the basis of the remaining $50 I had in my checking account. Go figure...

astrid Says:
I’m completely in favor of speaking Mandarin. In fact, once you grasp tonality, spoken Mandarin is very easy, much easier than a crazy language like English.

Is this from the "if it is inevitable, lie back and enjoy it" school of thinking? I thought mick was complaining about being enslaved to overlords and such colorful concepts, not about those who enthusiastically learn a new language out of choice, to expand their own mind and such.

SP

This is another little information point re: PRC's USD policy. Individuals are only allowed to exchange $10,000 USD to RMB per day. There is no limit in the other direction.

The Chinese don't fight very well, as evidenced by countless invasions in the past. Making money seems to be their forte. Just go sharpen your knives. Everything is going to be alright.

SP said:
In other words, no Jumbos for the Dumbos.
I had been saving this for a thread on Jumbo loans, but now seems to be the appropriate time.

Another thing RE: child support is, in California these laws are all but unenforceable. Each of the counties here (and in many cases, the cities) has its own child support/'deadbeat dad' database, and none of them can communicate with one another, or track an offender beyond city/county borders. They've been trying to create a statewide database that can connect and/or replace the crazy-quilt patchwork of local systems, but so far it has been a dismal failure and bottomless taxpayer money-pit.

Read about it here: http://www.signonsandiego.com/uniontrib/20070328/news_1n28computer.html

Oh my. This is priceless. Simple, straight and spin-less. From a Realtor.

I couldn’t figure out which parts to make bold :-)

All real estate is over-priced. It's just that some are less overpriced than others; this is just another form of spin that realtors use.

If everyone decided to sell their car for $100K and I put mine up for $80k, my car would be less over-priced (or even considered a good deal relative to others), but it would still be over-priced. I could slash $30k off of it making it an even better deal (relative to what I was originally asking), but at $50k it would still be over-priced, but some sheep may still bite.

The sheep mentality is that if it's cheaper than others, it's a good deal and these are the type that realtors are targeting; knife-catchers!

SP,

I know. But I thought Mick's Ron Paul = Libertarian Messiah belief (because I don't really see a coherent argument behind that statement) deserved my out-of-the-left field response.

skibum said:
if you predict a “Black Swan” moment, it’s not really by definition a Black Swan

It could still be a Black Swan for those who missed, ignored or didn't understand the prediction. When those people constitute the majority, then it's effect is asymptotic to a real black-swan event, n'est ce pas?

For example, we 'predicted' the bubble would pop, and several folks (including myself) posted here that the inevitable end to Jumbos For Dumbos (tm) would precipitate a sharp deterioration in the bay area. However, the majority of Bay Areans were (and still are) unaware and unprepared. For them, the impact is just as if none of us predicted anything.

Another example is 9/11. There were predictions, warnings and clues. We didn't "get" it, and ended up with the swan.

SP