patrick.net

May not crash, but it can sure flatline for very long periods of time. If interest rates bump, it could certainly drop prices.

Rishwicks, I am old enough to have talked to people who were born before 1900 and others born in early 1920’s.

For the readers, the stock market in 1929 had loose rules, so did banking.

Margin rates were very high so you could borrow more against your stocks to get more stocks.
This was credit fueled assets therefore.
Banks were allowed to gamble the deposits in stocks also, using margin also.
Today both aren’t allowed, and deposits are insured.

But the depression was the aftermath of the stock market bubble popping; so many banks were wiped out, our economy was slowed down for years.

My grandmother was an entrepreneur and rented land and grew crops, started buying nice things from broke former rich, sold these and when I knew her these were antiques, she had an antique store. She gave work to unemployed men who had been professional and were now just seeking jobs doing anything to get by.

She had the cash to lend my parents when they bought the ocean view lot on Martha’s Vineyard in 1962 for a summer house.

My father was in a more prosperous family than my mother. She picked strawberries in the summer, and was a chambermaid in Nantucket in the summer. I think she had more fun than he anyway.

Both didn’t like to spend money frivolously, restaurants were for special occasions.

My grandmother left all of us grandchildren cash, which was a chunk of change. She was a renter.
I think she just thought a mortgage was a ball and chain.

BayArea says

There’s too much money on the sidelines, off the sidelines, everywhere. For 20yrs I’ve heard from the perma-bears about how housing is going to crash,

Sure the broken clock has been right once in 20yrs, but housing is not crashing. I’ve seen it do exactly the opposite over and over and over.

For 20 years?

Housing did crash...horribly so...and lots of people lost out big time if they couldn’t hang on through recovery

WineHorror1 says

I do a bit of work for a broker. He seems like a very sharp guy. He said he made his first million with REOs during the last downturn. He is 100% sure we will have another downturn soon that will be worse than the last one.

Banks won't let it happen. Too much data on how that went down last time for them to just foreclose because people are missing payments. There will be much more forbearance, loan mods and they now know how to handle short sales better. Remember too that most the lost jobs were either secondary income to help support the bread winner and even if it wasn't they were still getting UE benefits that likely earned them more than working. In most places they're back to work as well.

The biggest concern is going to be the municipal cash crunch. Cities and towns are going to have to cut back staff, projects and borrow more at higher interest rates because they're insolvent. Depending on the fiscal year, most budgets were already done before they could see the fallout from Covid. So this downside won't be full felt until next year in most places.

Think of Chicago. 5 Major sports teams, 2 of them being baseball with 0 attendance for an entire season. Amusement tax (for tickets) is something like 9.5%. Concerts over 1k people 9.5%. Then no sales tax from those events. Bars closed and now limited occupancy reopening. Sales taxes are demolished in Chicago and many other cities. Already dealing with a shitty credit rating and basically insolvent pension system for CPS, cops, fire, etc. Losing probably a 1/3 of your tax revenue when you were already fighting an uphill battle ain't gonna end well.

I think we're going to see some major cities need either bailouts or BK like Detroit and completely restructure the mess. Once the numbers come out, I don't see anyone that would want to invest in Chicago debt and they'll need a fuckload of it to keep the sinking ship going a little longer.

WookieMan says

I think we're going to see some major cities need either bailouts or BK like Detroit and completely restructure the mess.

What happens when a city declares bankruptcy? Obviously it means cuts to services and increased taxes. Which causes people to leave. Which causes property values to go down.

I guess banks could just hold the notes all the way down until the houses are worth $500 like Detroit.

PS, I'm not in favor of waiting. If you live in a place where it makes sense to buy and you can afford it then do it. Do a big down payment and pay the thing off. Maybe the value goes down, maybe it goes up. If you like where you live it shouldn't matter.

Anecdotally people are leaving the city in droves.
Prices in the suburbs are hot. Between COVID and the protests and / or riots, those who have the means to move are starting to. I dont have any hard data unfortunately, it's just an observation.

NewGuy says

What happens when a city declares bankruptcy? Obviously it means cuts to services and increased taxes. Which causes people to leave. Which causes property values to go down.

Depends on the situation. I know other cities do it, but if you're a cop, teacher or fire fighter you have to live in the city limits for Chicago. They start laying off those people that make solid money, then yes, it will get ugly and they'll move out to suburbs where it's cheaper to live.

The easy (not quick) fix here in IL is to pass a constitutional amendment to allow changes to the pension systems. It's been known for at least 2 decades now that government was over promising and not going to be able to deliver on their pension promise. Specifically Chicago. You lose a 1/3rd of your tax revenue on a pension system already in deep shit due to Covid, and the already sinking ship just got its death shot. Not a chance Chicago comes out on the other side of this intact without 10-15% tax increases across the board or they BK. If unions were smart they'd support pension reform now before their members end up with $0.50 on the dollar.

BayArea says

Over the past couple of months, housing has been on fire.

Literally, in much of California.

clambo says

our economy was slowed down for years.

The stock market wouldn't return to equivalent 1929 levels until 1954. So if you had been 40 in 1929 and lost everything, you'd be 65 if you survived the Depression at all. Of course, at 51 the build-up for World War II would have helped you. My parents were born in 1898 and 1902, but were never unemployed during the Depression, my mother being a teacher. They would talk about it from the perspective of a gallon of milk cost five cents in the 30's, which seemed unbelievable in the 50's, and then add but nobody had that nickel. The jazz and short skirts were fun while they lasted, but they really paid for all the fun.

BayArea says

There’s too much money on the sidelines, off the sidelines, everywhere.

I randomly clicked on a zillow in the trivalley you spoke of, a modest 3 BD SFH in Pleasanton. Asking price $1.169 M. Based on the zillow "facts" looks like the junk fee taxes added about $1800/yr on top of the 1% property tax of pre-sale assessment.

So, I suppose the Rich Fat Cat with all the sideline money who will over-bid for this over-priced gem will sign up for about $1100 per month of Property Taxes. God Bless'em, our civil servant unions need those payments to keep feeding the pension and retirement medical beast.

You are so right about all the rich folks with all their extra money on the sidelines, year after year, to "service" our civil service. Over time though it may feel like they're "being serviced", the way a stallion is rented out to service a mare.

Governments are incentivized to do anything they can to boost home prices.

NDrLoR says

My parents were born in 1898 and 1902, but were never unemployed during the Depression, my mother being a teacher. They would talk about it from the perspective of a gallon of milk cost five cents in the 30's

My grandmother used to talk about that, but never seemed to get my point when I talked about how salaries were also proportionately low.

The only question is how many minutes the you have to work for that gallon of milk at the median wage.

GlocknLoad says

Governments are incentivized to do anything they can to boost home prices.

Yes, for two reasons:

1. Bank equity! If the banks don't have that money, then they are in the red and will need to be bailed out or they won't pay back their depositors

2. Politics! People vote against parties that preside over beneficial deflation in housing prices.

Both of those things have the same underlying motive: trapping obedient servants and making them work for you with the threat of armed men kicking them out of "their" house if they don't.

Money is just control over labor, nothing else.

clambo says

I think she just thought a mortgage was a ball and chain.

That's because it is. But theoretically at least, it can be paid off.

Property taxes are a ball and chain that you can never cut free from. And it gets heavier every year.

I just can't wrap my head around someone committing to a large mortgage payment and a huge tax bill at the same time.

Shit I'm drunk as fuck. I'd say I had 5 highballs but they were more like Lowballs, 2/3 Seltzer and 1/3 Bushmills County Antrim.

Any case, Indecisive Slog. Trump had some openings but kept throwing jabs instead of the bolo/hook. Should have been 1619 vs. 1776, CHYNA Trade/Covid Lies, and Hunter.

Trump tried to attack across the whole front but didn't get a decisive breakthrough in any single place.

I thought the "law and order" thing was a pretty solid.

He lied about the vaccine too. We don't need no stinking vaccine. I think he basically had to.

True part was the companies saying, "Yeah we're ready", False part was bureaucratic approval.

Or maybe I misheard.

B.A.C.A.H. says

I just can't wrap my head around someone committing to a large mortgage payment and a huge tax bill at the same time.

Me either. Me. Either.

NDrLoR says

My parents were born in 1898 and 1902, but were never unemployed during the Depression, my mother being a teacher. They would talk about it from the perspective of a gallon of milk cost five cents in the 30's

My paternal grandmother was born in 08, lived until 101 and was sharper than most up until 100.

Lost her job at a bank in San Antonio when the great depression hit. Moved to the Texas gulf coast, met my grandpa, made babies, said, "Nobody really noticed the great depression down there."

Shrimp boats, agriculture. Everyone ate.

Boats are all gone these days. Out competed by Asian farms. Looks pretty desolate in particular after hurricanes over the past 40 years.

It's always a good time to lock in your Prop 13 tax basis.

There was a someone who identified as a resident of SJ with handle "E-man".

He shared a lot on Partick.net about his prowess as a Bay Area real estate investor and landlord. Seems like recently he fell off the face of the earth, or at least got erased or self erased from this blog.

That's too bad.

It'd be interesting to read what he would chime in on this topic.

He's still around. Commented Aug 14: https://patrick.net/post/1334449?offset=0#comment-1694010

Hey, @EMan you here?

Case/Shiller Ess Eff Bay Area Home Price Index hit an all time high and reversed direction after two months of decline. Inconceivable! (Seriously, this is unprecedented). Bear in mind this is a five county index that includes east and north bay (but not southern bay area).

EBGuy says

Bay Area Home Price Index hit an all time high

God Bless them all for funding Local Government pensions and retirement medical benefits. The higher taxes they will pay because of the higher assessments because they bid up the prices they paid will take some fiscal pressure from the rest of us Tax Donkeys.

Gotta love those rich fat cats with their money sitting on the sidelines bidding up their tax assessments and tax bills.

I also recall for years Logan M said early to mid 2020s would have very strong real estate demand, from a demographic perspective.

B.A.C.A.H. -- are you swimming in the Bay much these days? For some reason the open water seems to be beckoning me. Not sure how polluted this side of the bay is, though.

Rents appear to be in free fall over here (or at least until the students come back...)
The dismal market has forced property managers to get creative. Sorokin convinced one landlord in a new building downtown to slash rents from $4,000 to $2,000, expecting a flood of prospective tenants at the gates. That hasn’t exactly happened. “We’re literally getting two or three groups each week even at those prices,” he says. “It’s a bizarro world – there’s just literally a lack of any interest whatsoever in apartments right now.”

Patrick says

He's still around. Commented Aug 14: https://patrick.net/post/1334449?offset=0#comment-1694010

Hey, @EMan you here?

Yup, I’m still around and doing well. Onto another flip to MOGA! Make Oakland Great Again that is.

B.A.C.A.H. says

There was a someone who identified as a resident of SJ with handle "E-man".

He shared a lot on Partick.net about his prowess as a Bay Area real estate investor and landlord. Seems like recently he fell off the face of the earth, or at least got erased or self erased from this blog.

That's too bad.

It'd be interesting to read what he would chime in on this topic.

Truth be told, Patnet holds a special place in my heart. Seriously.

To answer your question, I’m always a buyer and a seller regardless of where we are in the cycle of the housing market. I’ll buy for the right price, and I’ll sell for the right price.

Check out the link to the flip in Oakland that Patrick shared above. I bought it for the right price, and I sold for the right price.

My partner and I recently closed on this deal. We’ll see how much we’ll sell it for when done. Should be a quick in and out rehab/flip.

https://www.redfin.com/CA/Oakland/1749-24th-Ave-94601/home/909190

EBGuy says

Rents appear to be in free fall over here (or at least until the students come back...)
The dismal market has forced property managers to get creative. Sorokin convinced one landlord in a new building downtown to slash rents from $4,000 to $2,000, expecting a flood of prospective tenants at the gates. That hasn’t exactly happened. “We’re literally getting two or three groups each week even at those prices,” he says. “It’s a bizarro world – there’s just literally a lack of any interest whatsoever in apartments right now.”

@EBguy, can you share a link to the article? We had the most turnovers during SIP. 22 turnovers within 4 months, March - June. However, we were able to re-rent them quickly at the same price or slightly higher during these months. Average turnover was 5-7 days between tenants for studios and 1-bed unit. 2-bed units were slower to rent, and we had to reduce the price a bit. Before, 3-4 girls would share a 2-bed unit, but Rona changed that.

The new tenants have been all young professionals. Most of our rentals are around SJSU. September was a little slow. Rent is just a tad softer (5% lower) now. We had 2 units to fill. One went within a week while the other took 3 weeks to rent. Have 2 more vacancies for Oct.

EBGuy says

B.A.C.A.H. -- are you swimming in the Bay much these days? For some reason the open water seems to be beckoning me. Not sure how polluted this side of the bay is, though.

Haven't done it yet, still need to get a wetsuit. Ceffer recommended a surf shop in S.Cruz. I was saving extra cash. Then came COVID. The gym closed so I stopped swimming laps in pools. I think this concept's on hold for a while till I can rebuild my swim stamina in the pools.

Eman says

Patnet holds a special place in my heart.

E-man, thank you for sharing.

CA is in a totally different position than much of the rest of the US, mainly because of its politics, prop 13 and the zoning laws (esp. bay area). There is no price discovery as there's neither healthy demand nor healthy inventory, so for the time being you will see a stable housing market, adjusting with inflation. Mainly SFH though, not so much Condos or apt bldgs which have not been as stable as SFHs. For housing prices to drop in the bay area you would need the forbearance to end and foreclosures to pile on, if that happens it's not going to be before mid-2021, perhaps not before 2022. If prop 13 falls all bets are off.

Eman says

B.A.C.A.H. says

There was a someone who identified as a resident of SJ with handle "E-man".

He shared a lot on Partick.net about his prowess as a Bay Area real estate investor and landlord. Seems like recently he fell off the face of the earth, or at least got erased or self erased from this blog.

That's too bad.

It'd be interesting to read what he would chime in on this topic.

Truth be told, Patnet holds a special place in my heart. Seriously.

To answer your question, I’m always a buyer and a seller regardless of where we are in the cycle of the housing market. I’ll buy for the right price, and I’ll sell for the right price.

Check out the link to the flip in Oakland that Patrick shared above. I bought it for the right price, and I sold for the right price.

My partner and I recently closed on this deal. We’ll see how much we’ll sell it for when done. ...

Hey @Eman,

I checked out the prior link. So somehow you got to purchase it for 100K below the initial asking (750k) for 640K and then sold it for a double? How much money did you put into renovations? I mean if people crave it and are willing to pay for it then there's no arguing that, but I have a hard time believing somebody would look at the history and then buy at a 100% premium unless you put 200-300K in renovations into it and make it top notch. Anyways I will be watching the next one.

mell says

Eman says

B.A.C.A.H. says

There was a someone who identified as a resident of SJ with handle "E-man".

He shared a lot on Partick.net about his prowess as a Bay Area real estate investor and landlord. Seems like recently he fell off the face of the earth, or at least got erased or self erased from this blog.

That's too bad.

It'd be interesting to read what he would chime in on this topic.

Truth be told, Patnet holds a special place in my heart. Seriously.

To answer your question, I’m always a buyer and a seller regardless of where we are in the cycle of the housing market. I’ll buy for the right price, and I’ll sell for the right price.

Check out the link to the flip in Oakland that Patrick shared above. I bought it for the right price, and I sold for the right price.

My partner and...

@mell, the house had foundation issue. Too big of a job for the average Joe or Jane to take on. The house had about 650sf of addition, which was not documented. We raised the house, installed new foundation, and installed a subdrain system around the foundation to collect hillside run-off water. We legalized the undocumented 650sf, etc....

The house was languishing on the market forever and kept dropping the price. I made an offer of $600k to start, but eventually settled for $640k as I felt an ARV of $1.2M was achievable.

Once it was done, I saw a sale price of $1.275-$1.3M was achievable. The offer came in on target so I took it immediately rather than playing games.

We spent $330k to rehab the house. It paid off. My little brother was the GC on the job. We gave him 20% bonus on the net profit for his efforts in addition to his salary. This is the only way to retain good help.

Eman says

mell says

Eman says

B.A.C.A.H. says

There was a someone who identified as a resident of SJ with handle "E-man".

He shared a lot on Partick.net about his prowess as a Bay Area real estate investor and landlord. Seems like recently he fell off the face of the earth, or at least got erased or self erased from this blog.

That's too bad.

It'd be interesting to read what he would chime in on this topic.

Truth be told, Patnet holds a special place in my heart. Seriously.

To answer your question, I’m always a buyer and a seller regardless of where we are in the cycle of the housing market. I’ll buy for the right price, and I’ll sell for the right price.

Check out the link to the flip in Oakland that Patrick shared above. I boug...

Thanks that makes sense! I will be watching the next flip - better than property brothers! Good luck!

All new high in August.

one society forgets, this happened 12 years ago!

Patrick says

Literally, in much of California.

When does it crash again Patrick ? And by how much ?

https://www.longtermtrends.net/home-price-median-annual-income-ratio/

,

theoakman says

one society forgets, this happened 12 years ago!

Work from Home (WFH) making people to increase the existing bubble. Anyone buying now at best will have home values below their purchase price for at least 5 years from now.