patrick.net

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.

disgusted.again says

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.

Wow! That's a quite a large area you are looking for. Some of the Inland Empire area were hit badly already and most likely hit the bottom. I won't be surprised price is going up little bit. However, I don't expect price going up rapidly soon. Unemployment is too high. Therefore it would be pointless to argue about "price going up" for those area.
I checkout Diamond Bar area on redfin. Inventory dropped and number of sale went up in last summer. How do you know price going up? Do you track price with comps? In addition, I am still curious to know the area YOU THINK price going up.

I just posted the areas we are looking in above.

I am a woman, and I support my husband (lucky him!). We are both retired and we do not need to live in some "trendy" zipcode. We travel, play tennis and golf, and try to enjoy life to it's fullest. We don't need to live in Rancho Palos Verdes so that we can look down our nose at people. We just want a small simple house so that we can continue to do the things we love. We have no need to "keep up with the Joneses". We prefer the simple retired life. It is fantastic getting up in the morning and not having to be someone else's slave until I am 65. That to me is worth more than some 4000 sq ft home in some tony neighborhood. I have allocated a certain amount of money that I am willing to pay for a home. The rest is invested and is what keeps us living the life we live. It simply is no longer economical to throw thousands away each month in rent on a property that we don't own.

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.

Disgusted,
Did you catch Patrick's post on 10-13: 'Why Higher Asking Prices are a Bad Sign'
I've been noticing this in my area (Puget Sound) with a lot of properties on the market for months and months re-listing with a price increase. This perplexed me to no end, but I think that article explains at least one of the motivations for this bizarre behavior. Amusing, sellers think buyers won't notice their pricing history. HELLO, can anybody say Redfin?

As a buyer, who wants to be be the last in on a crap box for a stupid price? That is what keeps us from taking the plunge. One property in my 'hood was a real dump that sold for an obscene amount as recently as this summer and now I pity the fools as I see much nicer homes recently being listed for same or less money within blocks of that place: same style, bigger lots, move in condition.
Who wants to be that couple?
I'm with you on not engaging in panic bidding- if we are in a bidding war, we're out. That means we're still pushing on a string. And foreclosures? What a scam---sheeple are in frenzy when a marginally attractive one comes on and sometimes sells in a bidding war for well more than the foreclosed sellers last sale price! Go figure.

Patience. Think of it as a challenge, a game. They who can hold out the longest will likely be the ones who get the prize.
But to be fair, no one knows for sure what will happen with The Manipulators at work.
I gather from your post, you've seen behind the curtain already. Now, follow your instinct.
Good luck to you!

p2d2 - most of the listings in Rancho, etc are short sale. Very few standard sales or foreclosures even come on the market. Everything is so overpriced.

disgusted.again says

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.

Rent or house payment is just the cost of living. You are only 'throwing your money away' by renting IF you can buy the same thing and pay something close per month factoring in tax benefits, appreciation (or depreciation!) etc. I rent for 1/2 what it would cost to buy the same place, and I pay over $2,000. The place sold for nearly $1 mil in 2006. Similar places still selling for $800-900+. Yup, as of 10/16/2009 it still would cost much, much more to buy than rent. I am living where I want to be for 1/2 what my neighbors pay. Except those neighbors who bought 15+ years ago, or those who bought more recently but who are sitting on a ticking time bomb with their 1.5% ARMs and such. (I have checked county records).

I don't know SoCal real estate that well, I am in the SF penninsula. A cursory look tells me you are talking much lower prices than here. $350-400k is not possible for a livable house here. I am not bidding but I watch it very closely. We still have sales happening at very high prices and I am glad I am not one of the buyers.

pkowen - I have never understood why anyone would pay the prices that they pay in the Bay area. That is just not for me. I have lived in So Cal all of my life and have no desire to move up North and buy some overpriced house. If you have to live there because of work, I feel for you.

disgusted.again says

pkowen - I have never understood why anyone would pay the prices that they pay in the Bay area. That is just not for me. I have lived in So Cal all of my life and have no desire to move up North and buy some overpriced house. If you have to live there because of work, I feel for you.

The "Bay Area" is a big place. I live 5-10 minutes from Berkeley, and 20 minutes from downtown San Francisco. Homes in my area are selling for 200-300k (a decent working class area with lovely people and wonderful neighbors). I am a 4th generation Californian from Southern California. I know this state intimately and have lived in many areas affordably.

disgusted.again says

pkowen - I have never understood why anyone would pay the prices that they pay in the Bay area. That is just not for me. I have lived in So Cal all of my life and have no desire to move up North and buy some overpriced house. If you have to live there because of work, I feel for you.

Well yes, I work here, at a 'gummit' job, and plan to take my pension (if I can stand it that long) and live well in retirement back east. CA/Bay area government positions pay much more than their equivalents elsewhere. I have worked in software private sector for many years and made a decision to work on the other side for a while. No need to feel for me, I am glad not to own an overpriced house or condo or twnhse here. Rent is also too high, but not as high as house payments.

tatupu70 says

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.

yeah no kidding!!! i wish i could, sadly my boyfriend has a job that is here in the bay area... and he's the one making the money-so we stay...

EastCoastBubbleBoy says

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.

what's crazy is that in order to live in the bay area, you need to make way more than that...

I have a 4-year college degree, and an impeccable employment history-- I graduated probably right as the economy started going into a recession so that leaves me with "crap" for options.... people were literally offering me $10, ---I made more than that working at In-N-Out Burger when I was 17!!!! I was shocked, but I got over it.. found a somewhat normal job, but realize I would never be able to buy a house on my salary alone now...

...my boyfriend makes over $100,000 ALONE, and just lost his house-- short sale... about $200,000 underwater + $37,000 assessment to each until, insane... he could have probably afforded it, but we'd be living in that condo, with no way out until we were like 90 years old.... not reasonable.

We could probably afford a "starter home" but now I ask this--what is the point of buying a starter home, if say in 5-7 years when we need a "move-up" home, we'd have negative (probably) equity.... or break even...

so now I'm stuck... I really really really want to buy a house, and make it my home, but can't even imagine doing that... at these prices,

so now I wait... and watch my friends all buy houses, probably foreclose or short sell them (like we already did) or be stuck in their homes forever... it's like watching a train wreck...except with everyone in America being involved.

It makes me sad that this is what the world has come to, greed, greed, greed... and now the government is HELPING keep home prices "unaffordable" (aka-to them affordable) to everyone. :(

Hmmm lilsuperstar16 seems you (or your boyfriend) were also part of the problem. And here you are, in your mid 20s I expect if you just recently graduated, already whining about not being able to own a house. What ever happened to working, living simply and saving? Oh what an entitled generation we have.

Tude says

Hmmm lilsuperstar16 seems you (or your boyfriend) were also part of the problem. And here you are, in your mid 20s I expect if you just recently graduated, already whining about not being able to own a house. What ever happened to working, living simply and saving? Oh what an entitled generation we have.

my boyfriend bought his condo at the peak of the market, when they told people that housing would never go down, and if he didnt buy then, he'd be priced out forever, .... obviously he was one who got sucked in.. option ARM, 0 down, etc...

I didn't know him at the time, otherwise I'd obv. had put in my opinion then!

everyone who bought at that time is part of the problem, but after being in the situation and realizing theres no way out, (other than short sell, foreclose), even though I don't really agree with walking away, most people have no choice....

I am working, simply living, and have a hell of a lot of cash saved (for someone my age) ... I don't NEED a house now, obv, which is why I'll rent for a very long time probably....

I just wanna know how things are ever going to turn around, if the FHA is still letting people in on 3.5% down, 4x annual salary houses... I see no end..

It will all end, it has to. I fear for how bad it will get before and during the blow up. I never in million years thought this country (and world) would get to this place. I fear we truly might end up in another world war.

They are inflating the problems away or at least attempting to. The end is either high inflation, or they fail and things crash again.

Dude, i can't believe the dorks. Dollar collapse means pay collapse means RE prices will drop until that trend stops. When will that trend stop? gov.s are locked into a debt-financed existence now. It will not stop. UN has won. Middle class is being deflated. Change - back to servitude with you Americans!

Short term, of course, more freebie programs. C'mon, steal a cookie with me. Its basic human nature. Govs and banks want someone else to suffer the coming punishment. That's all this stimulus stuff is. Everyone knows its all a house of lies and we have people here posting trying to blame the bubble on one particular person. Its not one person: its a pandemic. One not being cured but only covered over.

The more appropriate question is to ask yourself in what dreamworld the government pays for the first 1-1.5 years of mortgage for its citizens? How is this anywhere consistent with the thought there is no housing bubble?

More exactly: do you think salaries will recover? Go up this year? Next year? That's just not what I'm seeing at all. People I know are being asked to all but cut off their own arms just to make six figures. In an over-priced metro - that's like 50K in a rural city.

Another way of asking is to think of Cisco or Intel. Are they investing in your community? America? I heard companies like these are sitting on $20B or $40B or so. They sure don't think its a bottom!