patrick.net

ptiemann says

Still leaves 70% capable buyers, right?

I don't know if you can assume that. Some may not have the down payment, or the employment history to qualify yet for a loan. Some may be living in an underwater home already and are looking to get out. So I'm not sure you can assume anyone who isn't unemployed/underemployed is a "capable buyer". Too many factors to consider with that loaded term.

Yeah there is a rally going on right now spurred by low inventory. But can it be sustained? Can investors fuel the rally? who will?

ptiemann says

Even if only 20% of the population are willing and capable buyers, that's enough to cover the available supply. Also remember, that often 2 people buy property together. It's the conventional way of life, aka husband and wife.

Or do you see 20% of all units for sale? I don't think so.

20% of the population in CA is looking to buy RE? The real # isn't even half that. And many of those don't have the income to overbid -- lenders wont let them overpay even for amounts they are qualified for.

We may have reached the bottom and the investor/cash buyer is creating heat right now. I know a lot of guys who feel the market has peaked so RE seems like a good bet right now.

ptiemann says

Still leaves 70% capable buyers, right?

Are you saying that all 70% are 6 figure earners? A gardener making 30K for years is a part of that 70% and you expect him to buy a condo? How? only 1 way - return of LIAR loans. :)

How many people in this 70% have $100k+ income?

You really need that income to buy a $500k house.

xenogear3 says

How many people in this 70% have $100k+ income?

You really need that income to buy a $500k house.

A very good question. By some "rules of thumb" a $100k income only buys you a $300k house.

wthrfrk80 says

xenogear3 says

How many people in this 70% have $100k+ income?

You really need that income to buy a $500k house.

A very good question. By some "rules of thumb" a $100k income only buys you a $300k house.

Presumably that entirely depends on money down and day-to-day expenses.

Goran's right of course. The situation where I live is the houses are going down continually because they are unaffordable to 90%+ of the local population.
Lots of places are rented out to the 1. UCSC students 2. illegal aliens 3. sec. 8
The rentals are what is keeping the houses from completely dropping.
There are still some masochists who will drive over 17 to make money enough to buy something if they have a wife who also makes money.
So few people have actually got enough dough to get that down payment for houses that cost $500K+
When the houses fell and the stock market took a shit I jumped in with more shares of AAPL. Why? Because I have lived around, I am not your average provincial Californian.
I know that the thousands of illegals and poor will never hope to buy a house for $500,000 but what they ALL can afford is an iPad, iPhone and the rest.
Of course, since I got my second bunch of AAPL in Jan 2009 I'm only up about 500% while Santa Cruz house prices have been falling since 2006 or so.
I stocked up on more AAPL a while ago in addition to other mutual funds because the idea of overpaying for fun of going into debt simply is unappealing to me. But, I am also an extreme cheapskate.

rowemoore says

We may have reached the bottom and the investor/cash buyer is creating heat right now. I know a lot of guys who feel the market has peaked so RE seems like a good bet right now.

I was talking about this with my father the other day. He was saying that, as far as he can tell, his generation is desperately looking for worthwhile investments to cover for retirement. A lot of them are skeptical of the stock market's current good numbers, bonds and savings are not returning anything, and the only thing left as far as they are concerned is RE. The same exact thing fueled China's RE bubble (RE was the only "investment" available with seemingly reasonable returns). So, it may well be baby boomers buying up much of the inventory to supplement their 401k's and SS since they know that they will probably implode with the next stock market crash and be totally underfunded, respectively.

Add to that a lot of 0th- and 1st-gen Indian and Asian tech workers that have come here, to whom buying a house is the pinnacle of "successful adulthood" and the market is really going to have low inventory. There are a few open houses in my parents' neighborhood this weekend (Cambrian / Willow Glen). "The Enclave at Foxworthy" is one of the more shameful ones lol. Anyway, there were throngs of Asians & some Indians coming & going while I walked over to grab lunch at Zanotto's. A 0.5 acre lot with a beautiful ranch style house across the street had a mid-fifties white couple leaving in an expensive SUV. According to the realtor, there is a cash offer for the asking price of $1.2M from a developer that wants to put 3 more gawdy southwestern-themed McMansions on the lot. The sellers apparently prefer to have someone buy it that wants to keep it intact since they took really nice care of it. But there you go, a whopping paragraph of anecdotal evidence that all of the activity is coming from baby boomer investors, Chinese & Indians. LOL. Take it for what it is worth (a cynical grain of salt or thereabout).

There are a couple of houses for sale about a half a block from my parents' house. One was a foreclosure bought for $430k, and it was flipped by (guess who...BB investors) and is now listed for $680k LOL. The fixer a block over, which is not a foreclosure (yet) is listed for $460k. My folks are watching closely to see what happens. The 3/2 house (more or less move-in condition) right next to theirs was recently bought by a Chinese family with a new born for $730k (father is a chemical engineer, not sure about the wife). They are rarely there, mostly just to sleep it seems, and the yard hasn't been mowed in almost a month. The place is going to be one of "those" typical houses...too busy making money to care for the yard, too cheap to pay a gardener. It is a shame, because the former owners took great care of it (the wife was a horticulturist).

Your father and his pals can buy 1. high yield bond fund 2. payout fund from Vanguard 3. annuity
Of course they can all also reverse mortgage their houses for lots of extra income.

clambo says

Your father and his pals can buy 1. high yield bond fund 2. payout fund from Vanguard 3. annuity

Of course they can all also reverse mortgage their houses for lots of extra income.

I know that he is exploring 2 of those 3 options, but carefully. 401k's seemed pretty safe, but their savings took a hammering in 2008. He isn't into RE speculation because...well, he calls it speculation. May as well put $100k down on black.

bmwman91 says

(father is a chemical engineer,

Hah! Now there's a real "stable" income in what's become of nowadays' "Silicon" Valley.

Thanks for commenting everyone. I just wanted to make sure the stats for underemployment were really examined. I think underemployment is a huge drag on any housing recovery, sustained at least.

Goran_K says

Thanks for commenting everyone. I just wanted to make sure the stats for underemployment were really examined. I think underemployment is a huge drag on any housing recovery, sustained at least.

Maybe, but not so much when you can still borrow $726k on 3.5% down and lock in 3.8%APR on a 30 year note. On top of that, there still seems to be a lot of money in this area. I am not sure where it is coming from, but it seems to be there based on the cars I see all over and the fact that rents & RE are still so expensive. Love it or hate it, it seems like the BA is still functioning within its own reality.

Goran_K says

Underemployment at 20.8% in California, big drag on housing market?

No kidding. Imagine how much it will heat up if employment gets more normal track.