patrick.net

I think it's premature to call a bottom because we don't know the direction of the economy--our retail economy?
No doubt realtors and Wall St. cheerleaders would lead you to believe the worst is passed--so buy, buy, buy! Damn.
I don't buy it for a second. We haven't quantified the downside on the biggest bubble of all: the credit bubble.
Has the credit contraction backwashed over corporate salaries and relevant to SFBA--venture capital? Not yet?
I'll buy we're at bottom when the BS fog clears and we finally see the total sum of damages--not before then.
But that's just me.

What Tude said. The incentives the goverment is giving are completely distorting the market. Barney Frank just sayed it was *policy* to write bad FHA loans to keep prices from falling too fast. And just like cash-for-clunkers the policies are pulling forward demand. Once that pull is gone, the market will be weak again.

Still, I think some markets are indeed close to the scraping bottom phase, and won't fall much more. That's assuming we don't go into a double dip recession, which is a big if.

High end markets like the city of San Francisco? We're just getting started. My friend who's been in the market for 2 years told me a few days ago that 10% down has evaporated (Used to be 80% first, 10% second, 10% down for many first time buyers on standard loans), and now the only deals getting done are 80/20. The bottom just dropped out of the market, and the foreclosures on options ARM borrowers isn't even underway yet.

Gosh, I better rush out and buy right now! If the bottom is in it will only be a matter of weeks before the market is back to it's bubble valuations!

With all the unemployed suddenly employed again there's sure to be a mad scramble for all this oversold housing.

Can someone recommend a good realtor to help me?

lmao ....... welcome to the club BrotherBrian

BrotherBrian says

Gosh, I better rush out and buy right now! If the bottom is in it will only be a matter of weeks before the market is back to it’s bubble valuations!
With all the unemployed suddenly employed again there’s sure to be a mad scramble for all this oversold housing.
Can someone recommend a good realtor to help me?

I know a RE guy, but I think he is buried in mortgage troubles and is busy trying to rent out his garage to someone.

To look at it another way, what are the pros and cons of buying now vs later.

If you buy now and prices go up, they will likely go up at a more normal rate, probably in the 4-7% range that we have seen over the 20 years or so (minus the bubble times) If you buy now and prices go down, the bottom is unknown, and losses could be fairly large.

Your losses likely out weigh buying now, vs locking in a years worth of gains. Don't try and catch the bottom, catch on the way up, when you are sure things are stable and going to return to a stable uptick. You'll lose the absolute bottom, but hopefully won't take a large loss. On the flip side you add a year to your mortgage and you retire it one year later in life.

The complaint about housing prices jumping in the bay area, different people moving in and people moving here en mass is just a city growing up. Instead of a single neighbourhood changing, it's an entire city. If people don't like what the majority have "done' to the bay area they can obviously leave and go somewhere else and find a city with demographics that they enjoy. But it's the masses who decide the values on homes and what they're willing to pay or give up.

So far only about 3 percent of mortgage modifications have been made permanent so it it does not look like
the flood of foreclosures is going to stop any time soon.
This does not even include the Alt-A and Option Arm loan problems coming in the next year.
Also 20 percent of California workers will be unable to get loans due to unemployment and
wage cuts that will make them "bad credit risks" for several years.

Others had said it, but it's useful to remember that all real estate markets are local. A "bottom" in Akron, OH will occur at a different time than in Stockon, CA. It seems that this board is dominated by northern CA people, which isn't unusual because that's one of the places where the bubble hit hard. The best way, IMO, to know if a bottom is near in the area you are looking at is to look at the historical ave. price or historical price/rent ratio. Those charts have been posted on here several times on different forums... Keeping in mind that after a bubble and recession, you usually end up below the mean.

HISTORY HAS SHOWN A LONG CYCLE GOING FROM INFLATION TO DEFLATION CLEAR BACK TO THE REVOLUTIONARY WAR. IN TERMS OF ECONOMIC THEORY, JAPAN ADOPTED MONETARISM FIRST, & WAS CITED IN FRIEDMANS BOOK ABOUT HOW TO CURE INFLATION: "FREE TO CHOOSE", WRITTEN BACK IN THE 1980'S. WHAT FRIEDMAN'S THEORIES OF MONETARISM NEVER FORSAW WERE THE LONGER TERM CONSEQUENCES OF MONETARISM: DEFLATION IN JAPAN. AT THE FED, WE USE THE SAME BASIC MONETARISTIC MODEL AS JAPAN. THUS, ITS HARD TO SEE HOW WE ARE GOING TO GET DIFFERENT RESULTS USING THE SAME APPROACH. MAYBE HISTORY, JAPAN, & HUMAN NATURE HAVE ALL CHANGED--SO "THIS TIME ITS DIFFERENT", BUT AGAIN, THAT IS HARD TO SEE OR BELIEVE....GIVEN THE CONTINUING CONSEQUENCES WE SEE ON A DAILY BASIS TO OUR ECONOMY SINCE THE BUBBLE HAS POPPED................ERIC WALTON

Raginggg:

How long would you suspect this current cycle of downturn will last? My estimates are 4-6 years

Lorenzo

I have been reading many of the comments on this stie for years now. In times of frustration, they give me hope that equilibrium will one day be restored, and reassure me that renting isn't all that bad.

As a non-homeowner, it's in my own best interest to want prices to fall as much as possible, particularity if interest rates stay low due to government pressure on the underlying market forces that drive the interest rates. The reality is, I could buy now. It would be very tight, but I could. If this is as good as it gets, if the market starts its slow recovery, then I may buy sooner (within the next six months to a year) rather than later (a few years from now). Let me be clear, I am not trying to catch the bottom, but I am trying to time the market.

With many so bearish on housing here (not that I would expect anything different) I can't hep but wonder if there is an almost amusing parallel between our "it has to come down more" to the bubble mentality that "real estate only goes up"

the market needs a reset....thats what a recession is all about.

MAYBE HISTORY, JAPAN, & HUMAN NATURE HAVE ALL CHANGED–SO “THIS TIME ITS DIFFERENT”, BUT AGAIN, THAT IS HARD TO SEE OR BELIEVE….

Japan didn't enter it's economic hinterland with as many monkeys on it's back as Uncle Sam did - especially the loss of our industrial base - and this makes quite a difference.

I seriously question daily, whether or not the US will be able to recover from this HUGE MESS, that was created and popped in a couple years time....

I'd like to hear some input from those who know a little more about real estate...

"wish i was lucky" had some excellent points... how does it make ANY SENSE at all-that "starter houses" in the bay area, are 350,000-500,000. IF, (and I don't know why anyone would)...you DO buy a starter home, IN THIS ECONOMY-what are the chances that you will be a move-up buyer in a couple year, when say your family expands in the next few years and you cannot live in your 3 bed, 1 bath house... HOW will you have enough equity to make your money back??? esp, if we are talking about in the next 5 years....

my mom bought her house when she was like 20 years old, I believe it was around 50,000$ (I'm not exactly sure--)... she put 20% down (like a normal person should) and still has it today as a rental... By purchasing that house, she was able to make enough equity and finance our "move-up" house, and then so on and so forth...

Prices for a house like her first one, are in the range of 300,000$ (6 TIMES AS MUCH) however, my salary today--is VERY comprable to hers back then... so please tell me how on earth would I buy a house 6 times as much, making the same salary....

NOT TO MENTION--- IF (and thats a big if) people stick to buying a house within their limits (aka-3x annual income)..how many "first time home buyers" are making 100,000$ to buy that 300,000$ starter home??? I'm 24, and NONE-literally none of my friends make 100,000$ a year... so please tell me who these first time buyers are, and why they are still purchasing homes at 400,000$....makes no sense....

I can't speak for everywhere but I've been literally swamped with contract programmer job offers here in the Charlotte area. Maybe its bailout money. Maybe the Great Recession was only for places with housing bubbles. Who knows. The housing here is overpriced for what you get but probably underpriced for any other large city. (CLT is 19th largest in the USA.)

Some houses in my neighborhood sold. E.g. one was $214K. Sold. The one next to it: $265K. Did not sell. So, when all the houses look basically the same, the yards are the same, and the community center the same: price alone sells houses.

I suspect the market for houses/pay/prices is fairly priced. Its a much lower price than 2-3 years ago; but, as someone points out "jobs gone", "pay dropping", and "benefits canceled". So, US government and State of CA must float credit to keep floating themselves above reality. Who would loan to them? I guess those who benefit from the bubble. FWIU, the Basel equity requirement to cover AAA rated government loans is 0.

So, governments can continue to borrow infinite amounts of money as there is 0 cost to the bank to loan it to them. So, they can borrow up and until they cannot service the loans. Hmmm, does that not sound like the LIAR loans of yesteryear?

lil--

Any chance you could move somewhere outside of the bay area? That is one of the most expensive places in the country to live. I can assure you that it doesn't take $300K for a starter home in most of the US... I think most of the people there have to have 2 incomes to afford their house.

lil - I travel throughout the northeast, and most "stater homes" within commuting distance to the major urban centers are priced such that the HH income would need to be at our near $100k if one were to apply the 3x income rule, so I know what you mean.

I was having this conversation with a friend of mine, and the conclusion we came to is that perhaps there are more $100k+ households than we though there were. For a young couple who is college educated in an "employable" field, working a professional job, they would only have to make $50k each, and a salary of $50k is not unreasonable for urban areas. The same can be said for tradespeople and skilled laborers. Granted, the guy or gal who serves your your coffee at the local coffee shop dosen't earn anywhere near $50k, but that's probably their second (or third) job.

So, as much as I hear what your saying... if you need to earn $100k to buy a starter house, then things are out of whack, there may be more $100k+ households (not individuals, but households) than we realize.

That median household income chart always set me off. We are in the top 35% (60-70K) yet feel like we are in the bottom 35%. Are there that many people living off of such few $'s!?!?! Man, compare this to our home buying frenzy over the past 7 years and it is just unbelievable!

I strongly believe that people are NOT contributing to 401K's etc but instead are trying to support their lifestyle. Are folks that hopeless? Or that optimistic?

While I do agree that people are neglecting factors such as retirement in order to support their lifestyles, there are other things to consider.

As income declines, eligibility for government services does increase, and that makes it possible to live on an income at the lower end of the spectrum. Which probably does not make it fun. But various levels of government do provide housing assistance, preschool tuition, school lunches, reduced price community college tuition, health insurance, and food stamps. And of course taxes are lower in the lower brackets. Also, there are a number of lower-income second jobs which can happen under the table--child care and yard care come to mind, and while they do not pay much, they do pay cash. Additionally, a number of lower income people come from cultures that allow for closer living situations, making group purchases of homes--and of course all of the things you might need to furnish a home--possible and reasonable. I used to work with a Russian sysadmin who bought a home with a bunch of roommates as soon as he landed his first job. They sold the place, as agreed, after a few years, then split the profits and kept moving up. There are lots of ways to make the most of a little.

There is also established or inherited wealth, which may not show as income but certainly matters when you consider security and purchasing power. That could mean anything from an inheritance from dear Great-Uncle Stan to a good severance to years of prudent saving. I know another guy who works as an engineer for about two years at a time, then takes a year off to travel and make art. On the off years, his income is close to zero, but he is never broke. Just prudent. Similarly, at any given time, some percentage of two-income households become one-income households so that someone can stay home with the babies. Some people are even wise enough to save for that possibility.

Finally, I doubt that median income includes standard roommate situations, or unmarried couples living together and sharing expenses while filing separate tax returns. Again, ways to make a lot from a little.

So while I can't quite see the possibility of surviving on 15K per year or even quite a bit more than that in the Bay Area, I also think that median income is not necessarily representative of purchasing power. Poorer people get perks. Some people save a lot during the good years, or throw in with others to make the most of what they have.

I guess I don't see these numbers as having absolute meaning.

Eliza says

Finally, I doubt that median income includes standard roommate situations, or unmarried couples living together and sharing expenses while filing separate tax returns. Again, ways to make a lot from a little.

The US Census factors the above.

Cool. That is useful to know.

"the market needs a reset….thats what a recession is all about."

Market corrections already began prior to recession some 2 years back.

http://www.housingbubblebust.com/OFHEO/Major/NorCal.html

You need to compare the local income distribution to your local price distribution, not the national one. In the suburbs of DC, the median household income ranges from ~90-110k, thus at today's interest rates ... if everyone holds onto the collective delusion that the housing ladder is a good idea, and buys $300k THs, then house prices might be supported.

Problem of course being that if there's no one left to buy the $400-500k starter-sized SFHs... eventually they will come down in price and pull demand away from the THs.

I can only tell of my family's experience as of late in the real estate market. We are looking to buy a small home in So Cal. Prices have consistently gone up over the last 3-4 months. It is as if we have actually missed bottom! We have placed bids on at least 9 houses, and the number of bids we have placed is extremely small compared to the many others out there looking for a home right now.

We are cash buyers, and we are consistently being asked to bid way over asking price. We walk away as soon as they ask for our "best and highest". I refuse to get into a bidding war on an already overpriced crap shack.

We are now getting priced out of the market yet again because each new listing that comes on the market is priced higher than the last. We are looking for a foreclosure, and the condition of these homes is going way down as the prices are going up.

I just cannot understand this at all! It is the most insane thing I have ever seen in my life! The multiple offer scenarios are not just games the realtards are playing - it is true - we have lost out on 9 homes to people who were willing to offer much more over list price.

We have pretty much decided that we will never be able to buy a home in So Cal with these rising prices. We refuse to take out a mortgage because we are not going to rent from the bank (plus we are already past middle age and do not want to be paying on a mortgage into our late 80's!).

Where are all these foreclosures? They sure as heck are not listed! It is such a scam!

If you are out shopping and bidding you are part of the problem.

disgusted.again says

I can only tell of my family’s experience as of late in the real estate market. We are looking to buy a small home in So Cal. Prices have consistently gone up over the last 3-4 months. It is as if we have actually missed bottom! We have placed bids on at least 9 houses, and the number of bids we have placed is extremely small compared to the many others out there looking for a home right now.
We are cash buyers, and we are consistently being asked to bid way over asking price. We walk away as soon as they ask for our “best and highest”. I refuse to get into a bidding war on an already overpriced crap shack.
We are now getting priced out of the market yet again because each new listing that comes on the market is priced higher than the last. We are looking for a foreclosure, and the condition of these homes is going way down as the prices are going up.
I just cannot understand this at all! It is the most insane thing I have ever seen in my life! The multiple offer scenarios are not just games the realtards are playing - it is true - we have lost out on 9 homes to people who were willing to offer much more over list price.
We have pretty much decided that we will never be able to buy a home in So Cal with these rising prices. We refuse to take out a mortgage because we are not going to rent from the bank (plus we are already past middle age and do not want to be paying on a mortgage into our late 80’s!).
Where are all these foreclosures? They sure as heck are not listed! It is such a scam!

I truly understand your frustration but ask yourself a question will these bidding wars last forever? There were bidding wars at height of the bubble. Now there are bidding wars on REO/foreclosure. Once these bidding wars are over that is the time to buy. Unfortunately nobody can tell when will be the end to the bidding wars.

I have waited 7 years, and it is no longer an option for us to continue renting. The attitude that everyone must wait is ridiculous. Everyone has different situations and needs at any given time.

If you are not out shopping in this market, how can you comment on it? You have no clue what is going on if you are not experiencing it first hand. You are just guessing and assuming.

I have been reading Patrick.net daily for many years. I was not dumb to buy into the bubble. At some point though, some people just really need to find a home. I am sorry you are so stubborn that you think we all should fit into your cookie cutter view of life.

Edit - this comment was directed at tude, not the previous poster

People with young kids seem to be a big part of the problem, too. Maybe they had enough sense to sit in the sidelines and save, but now, with a kid or two, they really really want to have a house of their own. Right now. Yesterday. Sigh. The real estate bubble has really impacted the expected flow of young people's lives. They wanted to find a partner, get a house or condo, have a couple of kids. Having been made to wait, and wait, and wait, on the house part, they went on with their lives, but once there are a couple of kids in the picture, they get frustrated. They want to provide their kids with the stability of one set home, the stability of being in the same neighborhood elementary school without the constant risk of having to move (both home and school) at a landlord's whim. At least, that's what I see around here--both among my friends and whenever there is a house for sale on my street. It is very reasonable and also very sad. I really hate to see people stretching their finances so much just to get the sort of basic stability that families took for granted when I was growing up.

I saw that coming for Tude. I have waited for 5 years now and I am happy that I did not buy it then although most of co-workers did. All I can say is, if you are really in need of a house you have to bid way over asking and get price gauged. I don't see any way out it. Good luck.

The idea that "not buying is no longer an option" is ridiculous. Many people (rich and poor, young and old) rent homes their whole lives.

We ARE in the market (so to speak) for a place, but the realtors, mortgage brokers, and buyers are retarded and still living like theres some sort of bubble still, or are trying to time the bottom totally convinced that any day now homes will skyrocket by 100%. You still have millions of people thinking housing is a get rich quick scheme. I chose to not participate and not feed the monster.

If you NEED to buy so bad, and have all cash to do so, then quit your bitching and pay the market price for the house you want. Personally if I had 350k in cash right now I would own the little ranch in the foothills that I want and not give a shit if I possibly could buy it for 100k less in a year or two or three (nor would I care if the "value" went up).

It's really that simple.

Well Tude, if you are in the market right now, then YOU are part of the problem.

Pot, Kettle, Black

If everyone saw this coming from Tude, I guess it is safe to say the he/she/it is a troll.

Remember disgusted.again you are priced out due to an epic bubble. House is a greatest investment of life time is fed into ordinary masses brain for a while now. Again if you have enough cash go ahead and lock in your cash in loosing value home. Have you thought of renting the very home you can't get by bidding? You will be happy that your cash will bring more(if wisely invested) than your newly bought home in this market.

I just recently purchased a home in 91748 area. This area is a highly desirable area with a good school district.
I purchased my home at 2004 price. 435K

Now to my point, article http://housing-kaboom.blogspot.com/2009/10/shadow-inventory.html?ref=patrick.net posted on Patrick.net definitely shows a large shadow inventory. However, the large volume of shadow inventory in this article is for homes that require a horrible 2 hour commute to the inner cities where all of the jobs are.

Also - In general, San Bernardino is basically a vast land of homes with poor school districts and high crime rates. I'm not saying that all the people living in San Bernardino are under performing citizens, but merely stating that the ratings from this county is not a place where you want to raise your kids.

So yes, the bottom is definitely still months or years away in this county. BUT do you really want to buy a home there?

Most of the buyers, that I know are well educated and have high income.
Those shadow inventories are worthless to these groups of people.
The homes they want are in desirable zip codes with less shadow inventory.
I don't have the numbers to back up the desirable zip codes, but the media seems to high light shadow inventories of counties I would not want to buy a home in the first place.

In California they keep saying home prices have stabalized. Well, with the $8,000.00 tax credit expiring in Novemeber and no one saying they will definitely extend it would that not mean a slow down in lower income housing. Which would then mean a more equal distribution with high income sales in turn showing an artificial leveling off of home prices.
Am I starting to understand economic theory or am I crazy?

disgusted.again says

Well Tude, if you are in the market right now, then YOU are part of the problem.
Pot, Kettle, Black
If everyone saw this coming from Tude, I guess it is safe to say the he/she/it is a troll.

No I am not "in the market" because I refuse to look or bid or feed the beast. I will buy a place when this all ends, or maybe never.

dabad - the whole point of this thread was "what if we have hit bottom". My whole point was that it appears from everything that we are seeing in our local market that prices are rising again. Prices are higher than they were several months ago here in So Cal. That is just a fact. Will they go down again? Not anytime soon if the banks keep trickling the foreclosures onto the market and wait for a feeding frenzy. Can we hold out and rent for several more years? Not in our situation. We are spending over 2k a month on rent, and we will never see that money again. I retired 10 years ago at the age of 36. We have lived very comfortably all this time, but we are just burning through money renting. I would like that money to be for a home - not an investment - a place where we will grow old. I could care less if it loses value a week after we buy it because I am not planning on selling.

disgusted.again says

My whole point was that it appears from everything that we are seeing in our local market that prices are rising again. Prices are higher than they were several months ago here in So Cal. That is just a fact.

Would you mind if I ask for the zipcode where price started going up? Being an ex-SoCal guy I am very curious.

P2D2 - We have looked everywhere from Diamond Bar to Rancho Cucamonga. We even briefly looked in Lake Elsinore, Murrietta, and Canyon Lake, but those homes keep going up and up in price, and the areas are rotten and the taxes are high.

We do not look at short sales, so I never include those in home pricing because I think they are a total joke. Getting the bank to actually agree to the list price on a short sale just doesn't happen.

P2D2 says

disgusted.again says

My whole point was that it appears from everything that we are seeing in our local market that prices are rising again. Prices are higher than they were several months ago here in So Cal. That is just a fact.

Would you mind if I ask for the zipcode where price started going up? Being an ex-SoCal guy I am very curious.

Yeah I am curious too. I am in Socal.

P2D2 - We have looked everywhere from Diamond Bar to Rancho Cucamonga. We even briefly looked in Lake Elsinore, Murrietta, and Canyon Lake, but those homes keep going up and up in price, and the areas are rotten and the taxes are high.

We do not look at short sales, so I never include those in home pricing because I think they are a total joke. Getting the bank to actually agree to the list price on a short sale just doesn't happen.