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Is David Lereah going to Hell?


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2005 Aug 28, 7:42am   27,740 views  170 comments

by HARM   ➕follow (0)   💰tip   ignore  

Ok, I know I said I was going into temporary retirement for a few months --and I will... soon... I promise ;-).

But every time I think I'm done with new threads, I read statements like the ones below from industry leaders --on whose words many people base their buying decisions and the MSM dutifully reports, often without question. And I get little hot under the collar. Every time I think these lying SOBs can't sink any lower and become even more craven and irresponsible, they go and prove me wrong again.

So while it's not all that surprising to me that David Lereah (rhymes with "diarrhea") and other industry scumbags have the gall and utter irresponsibility to make public statements like this --not to mention his latest magnum opus, "Are You Missing the Real Estate Boom?" (check out the cover art for it btw, a real eye-popper), I'd like to know what your impressions are. Should he go to Hell or will Purgatory suffice? A related question might be, why hasn't his own tongue dislodged itself from his mouth and strangled him by now?

Source: L.A. Times
"Equity Is Altering Spending Habits and View of Debt"
(August 28, 2005)

"If you paid your mortgage off, it means you probably did not manage your funds efficiently over the years," said David Lereah, chief economist of the National Association of Realtors and author of "Are You Missing the Real Estate Boom?" "It's as if you had 500,000 dollar bills stuffed in your mattress."

He called it "very unsophisticated."

Anthony Hsieh, chief executive of LendingTree Loans, an Internet-based mortgage company, used a more disparaging term. "If you own your own home free and clear, people will often refer to you as a fool. All that money sitting there, doing nothing."

HARM

#housing

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124   Peter P   2005 Aug 30, 6:04am  

My story Asking was 330K my realtor tell me with 7 other bids out there, counter with 1.5% per every counter offer.

I am glad he did not say 1% per "eyeball". ;)

125   quesera   2005 Aug 30, 6:29am  

@Surfer-X: Albuquerque is beautiful. Definitely more laid back than any part of CA I've been to lately... It's not as hot as you might expect (high altitude desert), but UV exposure is high.

Actually, minus the coastline, Albuquerque is more Californian than most of California is, nowadays. imho.

Not a bad choice at all. Has water resource problems, but not like Oaxaca...

126   KurtS   2005 Aug 30, 7:10am  

with their suitcases of money heading here in droves. Escalades as far as the eyes can see. Basically I see it happening as follows, boomers tend to run in herds

Surfer-X, lmao your rant. If it's any consolation, investors will soon litter the coast like driftwood, providing sustenance for shore life.

127   HARM   2005 Aug 30, 7:15am  

Why 30-somethings are leaving county: Home prices spur exodus of "young families"
tinyurl.com/8nagy
THE PRESS DEMOCRAT

"For the price of a condominium in Sonoma County, Joyce and Joel Turner are living in the house of their dreams - a six-bedroom, three-bath home on an acre of property with plenty of room for the couple's five children.

Like many other Sonoma County residents who are in their 30s, struggling to make enough to afford a house and a family, the Turners had to leave the area to make that dream come true.

They're not alone. The county's thirty-something, middle-income residents are leaving in droves. During the past four years, the number of 30 to 39-year-olds dropped by nearly 13 percent.

There is a very real exodus, driven by two converging factors: escalating home prices and the loss of thousands of well-paying manufacturing jobs, especially in the high-tech industry. 'I would say the biggest factor is home prices,' said Steve Cuellar, an economist at Sonoma State University. 'We're becoming more of a Marin-type model, where the smallest houses, which were once farmworker homes, are now going for a million dollars.'

"'You'll tend to see a greater gap between rich and poor in the county, less of a middle class and more poor,' he said, adding that there are still plenty of 'really dirt-poor areas in the county' where low-wage earners can find places to rent."

128   Jamie   2005 Aug 30, 7:22am  

Will Katrina be the economic tipping point? Interesting article:

http://tinyurl.com/7zfoq

129   Jamie   2005 Aug 30, 7:31am  

RE the BA losing families, I think that's a frightening trend. Aren't middle and working class families kinda sorta one of the stabilizing factors in any economic region's economy?

Is this trend already established in San Francisco, I wonder? When I walk around that city with my husband and two small kids, I sometimes feel like we're a little pack of aliens--a never-before-seen family unit.

130   sfbayqt   2005 Aug 30, 7:37am  

Harm,

That article was absolutely mind-numbing. And although the general media is not reporting this kind of information, I wouldn't be surprised if this scenario is repeated all over the Bay Area....especially in areas where big business is moving out, reducing head-count (i.e., out-sourcing), and our young people cannot afford to buy in their hometowns. Those who are in a position to wait will probably rent until the market cycles back around.

BayQT~

131   HARM   2005 Aug 30, 7:48am  

...our young people cannot afford to buy in their hometowns. Those who are in a position to wait will probably rent until the market cycles back around.

My wife and I have been waiting for 2 years now, and I know many who've been waiting much longer than that. And I know many more who got sick of waiting, packed up and left when the opportunity presented itself, including both of my brothers and nearly all of my CA-born cousins. When I get my opportunity (or make it myself), I'm joining them.

This is one of the reasons why I don't buy the "people will pay any price to live here/intangibles" argument (sorry, Jack). When I leave, I promise to turn the lights out and take the flag with me ;-).

132   SQT15   2005 Aug 30, 8:19am  

I would leave Ca in a heartbeat if the oportunity presented itself. I am sick to death of reassuring my husband that yes a 6 figure income is very good and it should in a rational world be able to buy a very nice home. But in Ca we'd have to take out a NAAVLP at least 5x's my husbands income to even think about buying some tiny shitbox that would be smaller than our rental. We've been looking at rental homes lately, but that's a crapshoot since the market is so squirrelly right now. I'm afraid that we'd move in, and they'd kick us out in a year to sell. My husband's job right now would be tough to transfer, but if it gets easier, we're outta here.

133   Peter P   2005 Aug 30, 8:24am  

I am sick to death of reassuring my husband that yes a 6 figure income is very good and it should in a rational world be able to buy a very nice home.

A six-figure income is of course very good... did he read too many posts from MarinaPrime? ;)

134   SQT15   2005 Aug 30, 8:27am  

A six-figure income is of course very good… did he read too many posts from MarinaPrime?

Not if I could help it. Talk about making my job twice as hard.

135   HARM   2005 Aug 30, 9:03am  

I remember a while back when FaceReality & Fake P were still posting on a regular basis. One of them (or both) basically said they expected things to devolve here into a sort-of "Running Man" type future, where you have exclusive ultra-rich gated communities on the beaches, surrounded by a wasteland of vast squalid urban ghettos where 10-20 illegals are packed to a room. My response at the time was MIRAGE and CHUMPS (new people --see "Housing Bubble Glossary" thread).

I certainly hope this vision of CA's future turns out to be wrong, current credit/asset Bubble notwithstanding. This is not a future I wish to inhabit, not even as one of the elite landlords. "Gotta go to the store for some milk, honey, can I take one of the bodyguards with me?"

It's kind of a moot point for me, though. At this point in our lives, my wife and I want a better quality of life, and we don't care to wait another 5+ years for it. Prices will no doubt correct in the coming years, but by then we'll be happily settled someplace else. Multiply that by X thousands, and I think you can see where things are headed for Hotel California.

136   HARM   2005 Aug 30, 9:28am  

You are right. People ARE leaving in droves. But to my mind, “intangibles” was never an “either/or” argument. Both can be true. People are definitely leaving, AND the reason so many people are leaving is BECAUSE there are still others who will “pay any price” to live there. The bottom line is: Does the exodus out weigh the numbers of people who are buying? Again, the only reason that people ARE leaving, is because someone is paying “any price” (higher price) to live there. I know you will say its also a lot of speculators, and you will be right on that point also. All three can be true also.

Jack, I don't deny that CA has (or had) lots of positive intangibles --great weather, good beaches, lots of fun stuff to do/see here, etc. However, I also see plenty of PIBs (just couldn't resist using that again ;-)) in other places as well that don't require an NAAVLP(tm) and selling your soul to the devil. I wouldn't say high housing prices are the "only" reason middle class people are leaving in droves. Rising population (esp. due to illegal immigration), pollution, flat or falling wages, longer commutes, environmental degradation (see rising population), etc. all play a big role.

This is why I'm so bearish on California --I see the PIBs slowly evaporating right before my eyes every day, right along with affordability. Without a middle class to support them, I believe prices will fall hard over a long period, and may not recover for a long time.

137   Peter P   2005 Aug 30, 9:32am  

I remember a while back when FaceReality & Fake P were still posting on a regular basis.

Where are they? Are they in hibernation until November 1?

138   Jamie   2005 Aug 30, 10:11am  

HARM, I agree with you that CA's intangibles are degrading, esp. thanks to increasing population and cost of living. We moved here over 12 years ago--to the desert between LA and Vegas--and stayed for 2 yrs, then were stationed elsewhere. When we were stationed here again 2 years ago, I was astonished at the population increase in those years we'd been away. When a craphole high desert town like Victorville is experiencing a population and real estate boom, you know things are getting bad. It also astonishes me to see the hoards of people crowding the highway each weekend on their way from LA to Vegas. If it's so fabulous to live there, then why must so many people sit in unbelievable traffic trying to escape so they can get drunk/laid/lose all their money gambling?

139   Peter P   2005 Aug 30, 10:27am  

Is it just me? I am seeing a sudden increase of inventory in 400K - 600K condos and townhomes. Looks like the "pre-crash condo-slide" is coming very soon.

140   Peter P   2005 Aug 30, 10:57am  

Where (which zip code) did you see these inventory? I thought the inventory should be low during the labor day long weekend…

The inventory in 700k~900k single family home in cupertino/sunnyvale/w.sj are still very limited.

Basically the entire Silly Valley, from Millbrae down to San Jose up to Fremont. But I am focusing on 400K - 600K condos.

SFH prices will fall only after condo crashes.

141   Peter P   2005 Aug 30, 11:09am  

Odyssey, what is your theory about the market relying on the 700K-900K segment?

142   Jimbo   2005 Aug 30, 11:49am  

Seriously, you should consider renaming this the Sour Grapes Housing blog.

I think California is great, the quality of life in San Francisco has been improving, not going down and I don't intend to ever leave. If I had a long commute from the suburbs, I might think differently, I don't know.

The City as a whole does not have lots of children, but some neighborhoods are chock full of them. I live in Noe Valley and I see half a dozen women with strollers walk by in front of my house in the hour I drink my coffee and read my email every morning. The Sunset also has lots of children.

I had to really stretch to get my place 3 years ago, but I convinced my fiancee that the numbers made sense and that if we didn't buy then we might get priced out forever. Unless there is a serious crash, that prediction was proven right. We are making 30% now than we were making then, but we would not be able to afford our duplex.

It takes two incomes to afford a house now in California, especially near the coast. The stay at home was never an option, except for the wealthy anyway, except for a brief period in the sixties. I know you all think that there is something wrong with that, but that is the hard cold economic truth and complaining about it doesn't change anything.

143   Jimbo   2005 Aug 30, 11:51am  

That next to last sentence should start with "The stay at home Mom..."

Sorry.

144   Peter P   2005 Aug 30, 11:55am  

Huh?

145   Jimbo   2005 Aug 30, 12:03pm  

I don't expect 20% y.o.y. appreciation to continue forever. I am surprised it continued at this rate for as long as it did.

I think home prices in California will tend to increase at a bit above income over the long run.

My kids will probably have to buy a shitty, tiny house in the suburbs (on two incomes) and build equity for a decade and then trade up to a house that they can raise a family in.

Just like anyone can do today.

146   Peter P   2005 Aug 30, 12:05pm  

It takes two incomes to afford a house now in California, especially near the coast. The stay at home was never an option, except for the wealthy anyway, except for a brief period in the sixties.

Wrong, genius. ;) (sorry... can't resist)

Our fellow member, Fake P, is a proud recent homeowner with single income. It takes two incomes to "afford" a home of one's "want".

147   Jimbo   2005 Aug 30, 12:07pm  

Oh, regarding New Mexico. Yes, it a beautiful and still relatively inexpensive place to live.

My boss just quit to move to New Mexico, which is how I got a raise. Actually, he will still tele-commute, but he couldn't manage the group from 1000 miles away. He is from there and really misses it. He is really excited about the prospect of not having to rent a tiny two bedroom in foggy El Cerrito and insted having a large home with room for an art studio.

I know another guy who is super smart, has a PhD in physics and left the Bay Area to go work in the Naval Weapons Lab there. He also bought a large home on 1/2 acre.

So I can definitely see the advantages. I just like California too much to ever want to leave.

148   Jimbo   2005 Aug 30, 12:11pm  

Wow, these homes are even cheaper than I imagined.

Not to my style, but a new big house for $219k:

http://www.nmhomes.com/4800ch.html

149   Peter P   2005 Aug 30, 12:12pm  

I heard that speculators from California are spreading from AZ to NM now. Greed has no bound.

150   Peter P   2005 Aug 30, 12:13pm  

The numbers may have added up to you personally 3 years ago, but with every passing month, not only have the numbers increasingly not added up, but divergences and aberrations like this are now the NORM. Scary stuff I say.

Divergences tend to converge. There is no new paradigm. Large divergence only means large eventual correction.

151   quesera   2005 Aug 30, 12:17pm  

@Jimbo:

That works for 20-30-somethings with no school-age kids. Great time to live in SF.
Most people will eventually want better schools, more space, a yard, off street parking, neighborhood kids, time to spend with kids, etc.

Quality of life is defined differently by everyone. And it changes over time. SF was exactly where I wanted to be for ten years, but not any more. You might change your mind too, but if you do, at least you'll be in a great position to move. SF real estate will always be 3-4x just about everywhere else.

152   Jimbo   2005 Aug 30, 12:25pm  

Yeah, sorry if I sound snarky.

I am happy to be here now, maybe, probably even, considering how my fiancee feels, I will have to move to the suburbs somewhere. I will fight a holding action as long as I can, but unless we decide to put the kids in private school for at least K-6 we will have to at least change neighborhoods. I would like to retire here, too, I see lots of elderly here and it seems like a great place to be retired.

As for the whole divergence from the mean thing, yes I agree. There has to be a correction somehow. I have been promoting the "rust not bust" theory since I first started posting here, but I am starting to think it will be more like mini-pop then rust for a decade. Everyone is right that the current economic trends cannot continue.

153   Peter P   2005 Aug 30, 12:28pm  

Found the CAR article about Bay Area income slightly declining. Look carefully at the chart on the bottom!

When confronted about this fact, I am sure realtors will say that income is irrelevant. It is MIRAGE that matters.

Honestly the MIRAGE argument is more plausible (still shaky) in places like Vancouver, which is more desirable (IMO) yet has a much lower costs of living.

154   Peter P   2005 Aug 30, 12:30pm  

Yeah, sorry if I sound snarky.

Don't worry. Your opinion is very appreciated. :)

Honestly, I think SF will fare a lot better than the rest of the Bay Area. It is just a great place to be in.

As I have said many times, it is fine to own a home so long as one is not stretching. You will do just fine in the long run.

155   Peter P   2005 Aug 30, 12:54pm  

New thread: When will you buy? What will you buy?

156   Peter P   2005 Aug 30, 12:57pm  

Back on topic, is David Lereah going to California?

LOL :lol:

There are some "nice people" pockets in California... Davis used to be nice. Is it still nice?

157   KurtS   2005 Aug 30, 1:42pm  

There are some “nice people” pockets in California

Yes, there are--I think Jack would agree. (another "intangible"?)

158   Jamie   2005 Aug 30, 1:44pm  

Jimbo, I agree with you about the many strollers in Noe Valley. I look at them though and wonder if they'll still be living there in a few years when their kids want to ride bikes and stuff and they have to haul them to the park to do it. We stay in the Sunset every time we visit, and while there may be lots of kids there, the only time I see them is when they're walking to and from school. It's just kind of depressing to me to see neighborhoods where kids never play outside, but I guess that's the norm in most places now.

But with regard to SF being a kid-friendly place or not, I actually think it does have a great deal to offer kids, more than many other places--the ocean, Golden Gate park, the Academy of Sciences, the kid-friendly museums, the playgrounds, the public transportation... In my 5-yr-old son's view, the city is one gigantic amusement park.

For me though, I need lots of sunshine and lots of greenery, and I love being able to let my kids ride their bikes and their hundred other ride-on toys right outside my house (we live in a suburban neighborhood), and go looking for leaves and bugs and rocks right out in the front yard, etc.

I think both suburban and urban places have pros and cons for raising a family, but with my kids at their current ages, I personally think the burbs are the easiest place to raise them (not that I have a choice though, since the army decides where we live at the moment). Still, if it were up to my husband and son, there would be no better place to live than SF. If it were up to me and money were no object, I'd head straight to Marin.

I don't mean to make this sound like it's contradicting my earlier post--my point then was that when we're in the city, I don't see many other families walking around together. Maybe I'm looking in the wrong places. :-)

159   Jimbo   2005 Aug 30, 2:15pm  

Come down to 24th Street next time you visit then. You will see teenagers hanging out in front of the Starbucks, trying to look bored, families walking together back from dinner with their children and young (and not so young) couples with their baby strollers. Along with the occasional 20 something hipster spilling out of a local bar and an even rarer panhandler. It is quite a mix.

I live on a relatively quiet street and the kids from across the way play in the street. It is still too buy for me to believe that it is safe, but they do it. They watch out for cars, but still...

Every playground is full of playing kids on the weekends. Check out Douglass playground (26th and Diamond) next time you are here.

Noe is kind of looked down on by much of the rest of The City as being boring and unsophisticated, full of "breeders" but it suits me just fine. I have to admit it is the most "suburban" in character, but that is just because the children are the focus of the community here, something that is extremely rare in urban America.

I often wonder why I don't see more children outside in The Sunset as well. I think it has something to do with the mostly immigrant community there not wanting to let their kids run wild, but I am not really sure.

160   Peter P   2005 Aug 30, 3:21pm  

Generally, love this blog, and I love eavesdropping on the chatter. But while Vancouver may seem cheap to you, please take a gander at van-housing.blogspot.com. The median house price here has hit half a million. Median income around 60K. Median house price in Toronto, a fair city for comparison: 350K.

I agree that housing prices in Vancouver are very expensive. Cost of living (other than housing) is still a lot cheaper though. This may explain why retirees like to live there. (I hope to retire there too.)

Don't get me wrong. There is definitely a housing bubble in Vancouver. IMHO prices will correct significantly.

161   Peter P   2005 Aug 30, 3:29pm  

blue, do you think the Olympics in 2010 has anything to do with the bubble?

162   SQT15   2005 Aug 31, 1:02am  

Jack

I think you've nailed why my husband and I are still in Ca even though we get so frustrated with the housing market. Right now the area I live in is becoming increasingly pretentious and annoying as everyone is tooling around in their new Escalades patting themselves on the back. But the area was really fantastic not too long ago. Fortunately this particular area has not been overwhelmed with all the building that has gone on everywhere else around here. So I think we keep hanging on in hopes that the level of pretention will go down with the price of the homes. We'll see.

163   Jamie   2005 Aug 31, 1:28am  

Jimbo, Noe Valley sounds great. I'll definitely give it a closer look. My husband lived in that neighborhood when he was very young, but we haven't spent much time there since I've known him. Just have had brunch at a couple of good restaurants there, names of which I can't remember.

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