patrick.net

maxweber1 says

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.

Well, Cisco is spending its cash somewhere else.

Whenever one of our homeowner friends see us their first question is always: "Did you buy yet?" When we respond no, they're amazed and tell us "The bottom was last summer! You're going to be priced out! Prices are going to double again if you don't hurry! Run, Luke, Run!" (OK, I stole that last one!)

This is the dead cat bounce of "hope." A lot of people became seriously attached to the notion that housing was like owning a winning lottery ticket. Literally. That they would all be instant millionaires and earn more just living in a place that actually going to work. After the headlines over the summer, they didn't need a lot of help to get reattached to that notion. There are serious ego forces at work here.

So now all the sellers are back to demanding 2007 prices and threatening to just sit and wait for their lotto ticket to cash in. One thing HAS changed though: They don't have the cash reserves they had in 2007. So to steal another quote from Bill Murray: It's going to be a long, cold winter...

camping says

Wait until it’s $15k for investors too…where’s housing gonna go then.

If that happens, even I may buy a new investment property. Unless, of course, every swinging dick gets the same idea and runs up prices.

But if investment loans are hard to get, the tax credit alone will not generate enough new buyers to re-inflate house prices. In that case, the tax credit will be a boon to cash buyers picking up investment property. Example: As a cash buyer, I could bargain down a $165k home to $150k. Then I would get that $15k credit to boot.

However, that runs counter to gov policy of encouraging debt to inflate house prices. Look for any tax credits to be bundled with some easy loan scheme, such as allowing one to apply that $15k to the down payment, etc.

Tude says

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.

East bay and penninsula are entirely different worlds price-wise from what I have seen. East bay is not an attractive option for me, but I do understand it is much cheaper now. It may have bottomed there but no matter to me. I have also lived and worked in downtown San Jose and it has really dropped there. South bay is definitely cheaper than it was, but for me that commute still sucks. Bottom line in my opinion: Penninsula is still over-priced. Do you disagree? $1 mil for a townhouse is 'the bottom'?

That 8k incentive is a joke. People sure get suckered on the cheap. And then the tax man gets that back and then some. It's in the form of higher property taxes on buying a house now that is WAY overpriced. That's the other big downside I think about especially if prices fall significantly further and the upside-down buyers continue to walk away.
I don't hear much consideration of the property tax implications of buying now in the discussion.
Add out of control government spending to the mix and where might taxes go from here?

pkowen, it was not directed at you, but at people who don't live here and seen to thing the "Bay Area" is some crazy place where one has to make 200-500k a year to buy a starter home. It's simply not true and it's a real pet peeve.

It's like saying to like in Orange County you have to pay 1-2 million for a house. Well yeah, if you want to live in Newport Beach or Laguna (at least right now). I was born and raised in Orange County and have loads of friends and family there (owners and renters alike) that are working class people.

It's weird, maybe it's just this BB, but it seems so many people on here feel like if you aren't living in 2500-6000sf in the most "desirable" of neighborhoods somewhere...well life just ain't worth living!

This tells me a lot about why this housing bubble (and economic crisis) has totally fucked us all.

I guess I made a few assumption.
1. People who take $8K or $15K will walk away. I assume some/many will. Gambler's Problem/Addict's Problem.
2. Lower dollar is not a good thing for working Americans. It means things will go up in price to Americans (imports). Net Americans will do worse. So, housing purchases will diminish as Americans struggle to service their trumped up health bills, taxes, and other bills. I don't actually know a single person who works in manufacturing or sells goods ex-USA (well, I do know one, he works for a hugeco going around and shutting down plants and moving the work to China. And then there's my cousin's husband who used to work for a supplier to the auto industry.) Why don't the recent dollar drops mean pay raises? Answer that and you'll have your answer to why dollar collapse is bad for Americans (well, all but those controlling the puppets).
3. $8K is 4% of $200K - about the average home price I think. So, housing prices should pop 4%. Actually up 3.5% April-July this says (http://www.businessinsider.com/henry-blodget-americans-still-delusional-about-house-prices-2009-10). So, toss out $15K and it ought to be a downright (wink) solid recovery (wink) (another 7-8% one would expect).

So, I vote "no bottom". The only way this could be a bottom is if the inflation increases drastically. Even then, middle America gets slaughtered. I think what they are doing now is rev.ing inflation just enough to keep the thing floating.

Well, it is October and should be near the seasonal lows; so, maybe its a bottom. I can't tell any more. I actually talked to my wife about buying but she, my dad, and her dad advise against it. I'm finally old enough to heed advice. I hope.

Like disgusted.again, I can only tell from my personal experience that I'm losing faith for a further drop in the Bay Area (even in nicer areas). We've made an offer on a place in the South Bay and didn't bother on one on the Peninsula since it already had 10 offers. For the one in the South Bay, we were lowest (even though we offered list price) of 14 offers. And we're talking pretty good neighborhoods, one place was around $600k and the other was around $700k. For those, tinfoil hat types, we don't have proof there were 13 other offers and 10 offers, respectively, but we do know they did not sell the house to us at list price and the Peninsula one is sale pending. So, it's not likely they are making stuff up unless they really just don't want to sell to us for some unknown reason. People somehow have money and/or are getting loans. And since only 1 buyer will buy each of the houses, you have at least 12 others watching and waiting. With the banks trickling foreclosures out, I just don't see prices getting good in the near future.

I have been following some zip codes and what i have noticed is that houses at the lower end are moving fast NOT at the upper end. One of my colleagues bought a 2nd home and has started to rent his first one. He is loosing money every month renting his first one. He is just waiting for the market to recover but if it doesn't then he would run out of patience. My guess is there would be more people like him who are waiting. Once these people run out of patience there would be a further pressure on the market to bring down the prices. Of course everyone gets anxious and there are some people who are jumping into the well again but how long can you maintain a frenzy ? Soon the truth would prevail. So keep chilling and keep waiting.

disgusted.again: I am shopping in some of your same areas, Cucamonga, Upland, Alta Loma, San Berbardino, etc. though my price range is much lower. Things are wierd. I don't think its any one thing out of place but lots of little things that are creating an artificially robust sellers market. I think the RE agents are liars, cheats, and crooks. I think the banks are holding onto houses and trickling them onto the market to keep the supply of houses low. I think folks like you and I are getting frustrated, tired of waiting, and saying the hell with it and taking what they can get.

I myself am happy renting for now and will continue till I get the house that I want. Its very close and I have put several offers down, only to get the ol bidding game, offer rejected, or just don't hear from the seller. If I miss out, its not a big deal. I am 32 and single and would rather live the lifestyle I have now verses spensing all of my income on a house.

I doubt that we are at a bottom of this cycle because usually in a bubble/major correction there is some sort capitulation but the majority. This only happens when the majority(homeowners/investors) believe that prices are going through the floor. Most owners right now still believe that this drop is only temporary and prices will bounce back once the dust settles. Only a few in the know have the inkling that the bottom is dropping out but can't get past the idea of losing money if they sell now. This is typical investor behavior in the markets and in any speculative investment gamble. Always consider this, that in the investment world the majority cannot be right(winners) because the minority cannot make the majority rich.

Right now the investors are holding on waiting for the turnaround and grasping for any good news in hopes that things will go their way(sliding down the slope of hope). But as happens when people over leverage themselves there comes the devestating margin calls(foreclosues). You see investing is all the same. In real estate though, time passes much more slowly than in most markets like stocks. It has been almost 80 years since the last major correction and it will probably be years before we see the Market hits the bottom. It will probably be many years before we see significant appreciation.
All this said, if you are buying a house as a speculative investment in my opinion you will probably be sorely disappointed in your return(or loss). If you just want a place to live as long as you can pay the mortgagego for it. When I owned previously in the 80s I didn't care at all about the 90s downturn. I had my home to live in. In general this is the best reason to own real estate.

I read the guys post who was on the fence about buying or not because his lease on his apt/house was coming up for renewal. Just go month to month- why would you want to lock in the high rate. Maybe you can find a better deal elsewhere. And maybe there are better deal to be had. Or maybe you could negotiate a lower rate from your current. We are in a deflationary environment right now and your landlord is probably keenly aware of it.

Good luck whatever you decide.

Today's investors are tomorrow's defaulters. I am sitting back and enjoying the ride. As a matter of fact if I buy now I'll get off the ride that I am enjoying. Buy at your own risk. You have been warned.

P2D2 says

Well, Cisco is spending its cash somewhere else.

Unfortunately the US based managers making the shift to India and rest of Asia
are not US born folks. Yes I know these people. To me its akin to dismantling
our US economy by foreign interest parties and no one is stepping back to really
ask the important question.

Yes I do sound fascist here but no one is asking questions like 'why are you really
doing this?'. No the Soviet communist didn't win, but this is what it would feel like
had they won. East Germany and the rest of Soviet block was drained of resources.

Well, today I was driving around a townhome development I was interested in. Come to find out, it had speed bumps, those worthless things aren't good for cars!! Anyway, I called an agent and he asked what price range I was looking in. Well, little did I know, he just wanted to attack me (found this out after I told him). He said, "Well these places won't go for less than that." I thought, Buddy, you need to get your head out of your a**. Then this crackhead who is selling his place on his own for $179,000, $50,000 above asking price for most of these places, thinks he can get that much for a townhome!! I can't wait until things collapse. Time to knock some sense into these idiots!!

wish i was lucky says

We can’t even begin to compete. If they come over here - they can still work for less than we can and send the money home

Naturally, any country with higher professional costs "can't compete" merely on that labor level with developing countries who have a surplus of recent graduates. So what's the solution here...outsourcing your workforce to stay fiscally "competitive", which will further sag the economy--or raise your product to a higher level? I think of the "cheap way out" as the lazy solution because it puts the emphasis on labor vs. product, and is ultimately a dead end when developing nations compete directly against you.

I'm not a protectionist per se, but we need to think of our citizens and our larger strategy. If roles were reversed, and Americans were displacing jobs somewhere, would those citizens would just write it off as globalism? Dunno.

When Americans stop buying cheap crap made by outsourced labor, then I might begin to believe those same Americans give a damn about something besides saving a few bucks on garbage and about keeping jobs in this country.

You have to be certifiably out of your mind to want to live anywhere in the filthy, smoggy gang-infested rat's nest known as the Inland Empire. What possesses people to want to live under a constant smog blanket is beyond me. But then again, there is a lot of STUPIDITY out there. God help you.

chrisborden says

When Americans stop buying cheap crap made by outsourced labor

Yeah, there's quite a bit of useless crap out there. I've really cut back on buying useless junk, like the latest gadget. When I do buy something I look for where it was made. If I can buy a US-made product of comparable quality, I will. I'm sure I'm not the only one.

Dear wish, I cannot disagree with anything you say. Did you read the recent article about the hapless homeloaners in Florida who can't live in their homes because the crappy Chinese sheetrock gives off toxic fumes and corrodes plumbing? Seems the builders couldn't (wouldn't?) find quality American products and so went the cheap way during the building boom of the early 2000s. (By the way, your observation about the former farming paradise that was the Inland Empire is correct. Why do human beings insist on paving over productive farmland with parking lots, strip malls and crappy houses and then proceed to import the produce we used to grow there? That land can never be recovered for food again. We are starving ourselves in the wanton pursuit of greed and materialism.)

Our country is moving closer and closer to protectionism...Which of my policies do you agree with?

Yes, we need to bring jobs back to America
Yes, America is for sale..name your price
Yes, the home prices will be reset to pre-2000
Yes, we need to regulate corporations, healthcare

No, we cannot fund GDP with our home equity
No, we cannot continue the trend of offshoring
No, you should not buy now
No, home prices will not skyrocket again....ever

We are moving closer and closer to protectionism?

How do you get, that? Perhaps if we poll public sentiment, but it is not the reality.

We hit bottom a long long time ago. What's amazing to this former native Californian is how many idiots refuse to see it. The U.S. is indeed for sale to the highest bidder.

wish i was lucky says

The farmland is laying fallow for one big reason WATER. Have you not been reading? When there is a drought - the water goes to the homes and not to the farmers. Or the farmers sell their water allotments. Our water supply cannot support the amount of homes we now have AND the farmers.

Well, there is the case with California orchards during recent droughts, where water was rationed but not cut off completely. I seem to recall that Sac valley residents were rationed first to help protect the almond farmers. Orchards are an exception, because they need so much water to be viable next season. And, fallow land can be a normal cycle w/ seasonal crops to replenish the soil. They'll grow a high-yield crop, then plant alfalfa and till that under to replenish nitrogen. Those are just some details I'm aware of.

I think we'll have better luck balancing water needs between ag and cities when residential/business are not so water-dependent for landscaping, such those as heavily watered lawns around business parks and homes in otherwise arid areas. Golf courses in deserts is another idea which deserves close scrutiny.

One of the main reasons I quit CA is that it (along with some other highly urbanized war zones) exceeded its carrying capacity years ago. I do believe California's problems are unsolvable as long as the state remains a reservoir for society's garbage and its residents refuse to pay their bills. California is bankrupt in every way. Why do people want to live there?

A lot of suckers are showing the same desperation and paranoid characteristics that led sheeple to believe that you had to buy now or be priced out forever. Any realtor scum you deal with will tell you ALWAYS that this is the best time to buy, that prices have dropped and people are sensing on opportunity and that homes are flying off the shelves.
I believe that there is only one reason for buying now and that is if the dollar will be destroyed with another few rounds of bailouts that helicopter Ben and Obama are already planning to flood the economy with. So if the realtor says that the markets are hot but the Fed and the govt. are of the opinion that more liquidity ( read printing ) is needed to ease the crunch, who would you believe ? Are'nt they supposed to be in cahoots ?
I do not blame realtors or the banks or even the govt, only the greedy buyers who are the main reason for loans going bad. We need to bring back debtors prisons and exclude mortgage debt from being written off just like student loans. Stupid buyers are the only reason we continue to witness this madness.

Wish I Was Lucky:

I am adding your manifest to my list:

Here are my immigration laws:
1. If you migrate to this county, you must speak the native language
2. You have to be a professional or an investor. No unskilled workers
allowed.
3. There will be no special bilingual programs in the schools, no
special ballots for elections, all government business will be
conducted
in our language.
4. Foreigners will NOT have the right to vote no matter how long they
are here.
5 Foreigners will NEVER be able to hold political office.
6. Foreigners will not be a burden to the taxpayers. No welfare, no
food
stamps, no health care, or other government assistance programs.
7. Foreigners can invest in this country, but it must be an amount
equal to 40,000 times the daily minimum wage.
8. If foreigners do come and want to buy land that will be okay, BUT
options will be restricted. You are not allowed waterfront property.
That is reserved for citizens naturally born into this country.
9. Foreigners may not protest; no demonstrations, no waving a foreign
flag, no political organizing, no badmouthing our president or his
policies, if you do you will be sent home.
10. If you do come to this country illegally, you will be hunted down
and sent straight to jail.
Harsh, you say? The above laws belong to the immigration laws of
MEXICO!

Here is my new laws:
1. If 1 gangbanger commits a crime, then they all commit a crime. Charge them all with murder for the one individuals crime
2. Cancel all welfare, healthcare for illegal immigrants
3. Place the military at the CA and TX borders, gun down anyone attempting to cross illegally…especially Native Americans like myself trying to re-enter my very own land.
4. Legalize any illegal immigrants willing to pursure a Masters Degree in college and learn extremely fluent ENGLISH
5. Cut off welfare benefits for anyone after 18 mos, if you havent found a job after 3 years then you just aint trying
6. Setup a tent city in Mexico for the lowlifes who refuse to work or pursue higher education in our country. Force them to rebuild the infrastructure of Mexico at minimum wage
7. Demilitarize Russia, China and any other country that is a immediate threat to the security of the United States.
8. I would bomb these countries back into the middle ages because they represent the #1 challenge to our national security.
9. Round up all Crips, Bloods, KKK, Mexican Mafia and send them to live in the tent cities of Mexico to work at minimum wage.
10. Shutdown all drug trafficking by bombing Columbia, Mexico and France as necessary, then legalize Marijuana for the tax and license profits.

Nomograph says

Did you know that CA has the ninth largest GDP in the entire world? It’s kind of hard to make the argument that CA is circling the bowl when in fact we are a global economic powerhouse.
California holds plenty of opportunity, but it is also highly competitive and requires hard work and smarts to make it here. While you were sitting around wishing you were lucky, others were earning their fortune in this world

While the prices of farm products over the years have gone up with rate of inflation, with spike and declines indicating volitity,
tech has seen declining Avg selling prices due to competition. An Apple from central valley has gone up, while the Apple from Cupertino has gone down.. and while everyone still want to buy an apple from Central valley and there is competition from other apple makers prices still goes up. The other Apple in Cupertino which has demand and has competition prices keep falling and weaker on supporting costs.

As some recall the Apple from Cupertino almost went belly up and didnt make it back in the early 90s while the Apple in Central Valley was still doing well.

Is anybody aware that CA is perpetually bankrupt? What opportunity is there?

I'm just starting to see capitulation in my area. But, when a house goes up 100% between 2001 and 2007, is a decline of even 30% really a "bargain"? A $100,000 house increasing at 4% per year would be worth just over $136,850 in 9 years. If the same house doubles over 7 years (to $200,000) then falls a total 30% over the next two (to $140,000) the difference between the two is small (just over 2%). But I still can't wrap my brain around how the first time home buyers (which make up a majority of the sales in my area right now) are doing it... even with the tax credit and the low FHA down payment requirement. Or rather, I know how they are doing it, but I can't fathom how they can sustain it long-term, given the monthly payment that would be incurred as compared to the incomes of the area.

I'm just starting to see capitulation in my area. But, when a house goes up 100% between 2001 and 2007, is a decline of even 30% really a "bargain"? A $100,000 house increasing at 4% per year would be worth just over $136,850 in 9 years. If the same house doubles over 7 years (to $200,000) then falls a total 30% over the next two (to $140,000) the difference between the two is small (just over 2%). But I still can't wrap my brain around how the first time home buyers (which make up a majority of the sales in my area right now) are doing it... even with the tax credit and the low FHA down payment requirement. Or rather, I know how they are doing it, but I can't fathom how they can sustain it long-term, given the monthly payment that would be incurred as compared to the incomes of the area.

My bottom line is that all of the government intervention means that we are probably closer to bottom than I want to believe, but I can't help but think that a second downward leg is coming... all the data that I have seen certainly supports that theory, but I can't help but recognize I have a strong bias towards that data which supports my hypothesis.

Tude says

I don’t think we will hit bottom until the incentives are gone. Too much government involvement in the way of tax credits and FHA BS loans for us to find a true bottom. They want you to think this is bottom and buy, but I refuse to until the monkey business with housing stops.

I agree with Tude on this one. Prices in the zips I'm watching have gone up only since the extension of the $8k tax credit/gift/loan or whatever the h*ll they call it.

My understanding is that they want to increase the amount to $15k or even $30k. Not sure, however I am viewing this as catering to the homeowner vote.

Too much manipulation for me.

~Misstrial

The more i read these threads the more i believe that our leaders are a bunch of idiots. Someone said in a earlier thread we have a 2 party system:

The Government vs The People

...and they were right.

The People have forgotten that they are (were) The Government. Now the governors have enslaved the governed in the name of "sell the country to the highest bidder" with the latter's willing consent. It's as simple as that.

Stop re-electing thieves to Congress and clean house, get educated, follow your government's business, read real books about government and politics, stop watching controlled media and corporate television (PBS is brain food), get informed, exercise your right to redress grievances (it's in the Bill of Rights until they steal that one), get off the couch, yell and scream, write letters to the editor, write to your Congress members about how you feel on major issues and watch how they vote (make them accountable) and above all, BE A THINKER, NOT A PASSIVE SHEEP. Untie yourself from the bonds of corporate America. Buy green stuff, buy at the farmers market, walk whenever you can. Don't buy Chinese crap, buy American. You will pay more but get lasting quality. Question everything you believe, and ask yourself why you believe it. Pay attention, use your senses. THINK and ACT. Stop being a pacifist, stop listening to the pundits and the raving lunatics on both sides. Become a political agnostic. Don't think like the crowd. Is that enough?

thunderlips11 says

“Probably it has gotten to the point that it has because BIG Business would rather we paid for the Benefits.”
That’s right wish. The whole stuff about the fence is nonsense, just a handout to the M.I.C.. The way to stop illegals is to RICO act Agribusinesses, Meatpackers, Landscapers for conspiracy to violate employment laws. Also, discrimination lawsuits by native born Americans of all races for ethic preferences. Mix together a few executives of Tyson Chicken with a few local contractors here and there, make them do the perp walk, and watch the redistribution of jobs to the legally employable. Illegals will then remove themselves without deportation. Also, require naturalization papers or birth certificates to receive benefits.
Businesses that use unskilled labor love illegals because they’re easily intimidated, don’t stand up for themselves, will work for peanuts, and if they get hurt, the taxpayer pays the tab for the hospital or disability or welfare. It’s a great illustration of externalities.
And of course, it depresses wage scales for our own unskilled people, making it harder for them to support or improve themselves.

excellant post

1 year ago my wife & I almost bought a house here on the peninsula. We thought it was a good deal on a bank owned property. We had a 5.1% rate 30 year conventional loan, etc. etc. Good K-5 schools for our kids, etc. etc.

One of the first things that spooked me was when our realtor told us that he had a interest only loan on a $1M house in San Francisco that was about to re-set to a double digit interest rate, and he was barely getting by on the monthly payment as it was. When asked he was "not too worried about it" when I asked what he planned to do about it, I knew then I couldn't trust a frigging word that came out of his mouth when it came to representing our interests as buyers. a) he was an idiot b) he'll do or say anything to get the sales commission from me.

I am going to go out on a limb here and suggest that the tax credit for buying a house will become permanent. I do not see how they could believe they have any other choice to help keep housing prices artificially inflated. They have already told me as much and Mr. Frank already told the whole world that making home ownership acquirable was America’s policy. I am paraphrasing him as I disagree with is you use of the term affordable.

I have always heard that during its inception Social Security was suppose to a temporary solution and was never meant or originally designed to be a long-term or permanent solution. I have never verified this, but given how Social Security is working it clearly was never designed to be enduring. This is my basis for believing generations from now no one will even have a concept of the fact that the housing tax credit originally was a temporary solution. It will be taken for granted that it was always intended to be permanent and they will start complaining about is failure when the cracks are too wide to be ignored.

Why are we trying save Social Security if it was only ever meant to be temporary? It’s a rhetorical question. Accept it the housing tax credit and all its problems are permanent.

The artifical bottom is permanent policy.

it's a bit local. I was shopping for a rental house in Oakland this time last year and there was plenty to choose from in the 100k range.

Now it's slim pickings and anything halfway decent is in the 150-180k price range.

I'm thinking the best time to buy was back when prices were falling with "no bottom in sight"

toothfairy says

it’s a bit local. I was shopping for a rental house in Oakland this time last year and there was plenty to choose from in the 100k range.
Now it’s slim pickings and anything halfway decent is in the 150-180k price range.
I’m thinking the best time to buy was back when prices were falling with “no bottom in sight”

This time last year may have been the best time to buy in Oakland.