patrick.net

bmwman91 says

we are steaming straight into bubble 2.0 here

If the Bay Area is steaming anywhere, it's back to the Stone Age, or at least the 3rd world country status. And, it's steaming there a lot faster than the rest of the country. Here are just some of my recent observations of the BA regression into the abyss:

1. Street lighting has
been getting worse and worse. I've recently visited the Taiga region of Russia, which had better street lighting than the Bay Area.
2. Road conditions are horiffic. There are huge pot holes on all the highways, and even the toll bridges are not exempt. Higher toll fees do not mean better road conditions, around the Bay Area.
3. The entire South Bay Area region is infested with Rats and Roaches, because, San Jose is saving money on sewer treatment. These critters act as if they own the place, burying themselves deep inside the crevices of your house.
4. Termites has always been a common issue in the Bay Area, but even that has been getting worse.

So, people who say that the Bay Area deserves a special place under the sun, are only saying that, because they are desperately trying to justify their purchase of an overpriced real estate.

ZoabKhan says

This is the house i was talking about in the above post

http://www.redfin.com/CA/Santa-Clara/2309-Gianera-St-95054/home/990589

That's a lot of money for that property, especially considering what it went for in 2003.

Bigsby says

That's a lot of money for that property, especially considering what it went for in 2003.

Yes, the bubble is alive and still kicking, even in the raunchy parts of the Bay Area.

Bigsby, houses ALWAYS double in value every 10 years.

dunnross says

people who say that the Bay Area deserves a special place under the sun, are only saying that, because they are desperately trying to justify their purchase of an overpriced real estate.

Yep. But what you get, for what you pay, is Bargain Prices compared to what you get, for what you pay, in Shanghai. Or Hong Kong. Or Singapore. Or Taipei. Or Mumbai. Or Bangalore.

dunnross says

I can tell you that the Bay Area is not a bargain compared to Bangalore

Friend, no price in Bangalore can buy you into Cupertino Union School District.

Bargain Prices.

B.A.C.A.H. says

Friend, no price in Bangalore can buy you into Cupertino Union School District.

The schools are better in Bangalore. This is why Bay Area has more engineers from Bangalore than from the Cupertino school district.

You can get into the top luxury in Bangalore for about $100/sq ft, today. Same thing in San Jose costs over $500/sq ft:

http://www.99acres.com/Residential-Apartment-Flat-in-KR-Road-Bangalore%20South-2-Bedroom-bhk-for-Sale-spid-V8044715&pos=SEARCH

In NYC, top luxury means almost $10000/sqft.

Yes, so, as you can see, the whole myth about housing in places like Mumbai and Bangalore being more expensive than the Bay Area is a complete bogus, perpetrated by people who want to keep house prices high, over here. Now, Hong Kong and Tokyo is a different story, but you cannot compare a city like Hong Kong or Tokyo to 99% of the Bay Area, because these are cities, and the Bay Area is just a notch above rural.

Bigsby says

ZoabKhan says

This is the house i was talking about in the above post

http://www.redfin.com/CA/Santa-Clara/2309-Gianera-St-95054/home/990589

That's a lot of money for that property, especially considering what it went for in 2003.

Not in that part of the bay area. Back when I still lived in the BA and only had two kids I would have been willing to bid on that house at that price, no doubt.

That house would cost under $2000 a month if you put 20% down. My rent on a tiny town house in sunnyvale was over $2500.

Just because numbers are big doesn't make them unreasonable. The Chinese family that bought that house most likely has an income north of $150k/year, and probably a large amount of cash contributed by the husband's parents (who will live with the family at least part time). That house is a very reasonable for that couple.

Kevin says

The Chinese family that bought that house most likely has an income north of $150k/year, and probably a large amount of cash contributed by the husband's parents (who will live with the family at least part time). That house is a very reasonable for that couple.

But the average household income for that area is only $70K, and this is just a townhouse, so not even a median priced house. Since I know that a majority of people who live there are house owners, what you're telling me is that most people who live in the area cannot afford to buy a house over there. Doesn't that make for much more foreclosures down the road?

dunnross says

Yes, so, as you can see, the whole myth about housing in places like Mumbai and Bangalore being more expensive than the Bay Area is a complete bogus, perpetrated by people who want to keep house prices high, over here. Now, Hong Kong and Tokyo is a different story, but you cannot compare a city like Hong Kong or Tokyo to 99% of the Bay Area, because these are cities, and the Bay Area is just a notch above rural.

South Mumbai is over $500/sqft. Other parts are cheaper, but still run over $200/sqft. Considering the per capita income is about $3000 in Mumbai...

dunnross says

But the average household income for that area is only $70K,

Average household income is not the same thing as average buyer income.

dunnross says

this is just a townhouse, so not even a median priced house.

I'm not so sure about that. A *lot* of the housing stock in Santa Clara is town houses. They don't let anybody build apartments so it's the highest density option there is. If you're on a 3000 sf lot anyway, a townhouse is a better use of space than a SFH with some bizarre little alley in between houses. The median home in SC being a townhouse would not surprise me one bit.

Zillow (data isn't great, but it's the best I can find) says that median for that zip is $767,000. So this is a relatively cheap house in that zip.

dunnross says

Since I know that a majority of people who live there are house owners, what you're telling me is that most people who live in the area cannot afford to buy a house over there.

city-data (only source I can find) says that santa clara as a whole is about evenly split between renters and owner-occupied (55/45).

If we assume that the upper half of incomes are the ones buying and the lower half are renting, the median household income is probably over $100k amongst buyers.

Furthermore, someone making $70k absolutely could afford this home, if they put 20% down. We're talking 33% of income (~$1950/mo mortgage) -- a high, but not ridiculous ratio. $1950 is much less than rent in SC. A 1 bedroom apartment in that city costs over $1500; a 3 bedroom will go for north of $2000. A home equivalent to this one will be $2500-3000 easily.

Yes, this home is unaffordable to a first-time buyer trying to use FHA. Those people would need to look elsewhere if they want to buy; either keep renting, or buy a condo instead.

dunnross says

Doesn't that make for much more foreclosures down the road?

As long as people can comfortably afford their mortgage payments there won't be foreclosures.

The people who simply borrowed way more than they could afford have already been swept out of the system.

Barring a major amount of job loss in that area, there's no reason why existing buyers should have any trouble making payments.

Bigsby says

outh Mumbai is over $500/sqft. Other parts are cheaper, but still run over $200/sqft. Considering the per capita income is about $3000 in Mumbai...

The average home size is also a 250sf apartment. And that's among the relatively small portion of the population that buys homes. Most well-to-do people rent. About a third of the residents pay little to nothing for housing, because they live in slums. $5/mo or less (i.e. free) is common. This is for what amounts to a dry spot in the corner of a room.

The average legitimate rent in mumbai is around $300/mo. The average household income is around $8000/year (per capita income is a bullshit figure, never use it), so this is expensive but within reason.

The average person living in Mumbai is poor, unemployed, and possibly illiterate. Like most third-world cities, there's a small nugget of the place where the wealthy people who are disproportionately compensated live and they're surrounded by hordes of the poor. That kind of wealth inequality doesn't last for long, fortunately.

Bigsby says

Considering the per capita income is about $3000 in Mumbai...

If these people are so poor, why are they buying houses in the Bay Area?

dunnross says

Bigsby says

Considering the per capita income is about $3000 in Mumbai...

If these people are so poor, why are they buying houses in the Bay Area?

I didn't say they were ALL poor.

Bigsby says

South Mumbai is over $500/sqft. Other parts are cheaper, but still run over $200/sqft. Considering the per capita income is about $3000 in Mumbai...

I don't know where you're getting those numbers from? Here is one for $80/sq ft:

http://www.99acres.com/Residential-Apartment-Flat-in-new-panvel-Mumbai%20Navi-1-Bedroom-bhk-for-Sale-spid-H6772561&pos=SEARCH

dunnross says

Bigsby says

South Mumbai is over $500/sqft. Other parts are cheaper, but still run over $200/sqft. Considering the per capita income is about $3000 in Mumbai...

I don't know where you're getting those numbers from? Here is one for $80/sq ft:

http://www.99acres.com/Residential-Apartment-Flat-in-new-panvel-Mumbai%20Navi-1-Bedroom-bhk-for-Sale-spid-H6772561&pos=SEARCH

Google the figures rather than a specific example.

Bigsby says

dunnross says

Bigsby says

South Mumbai is over $500/sqft. Other parts are cheaper, but still run over $200/sqft. Considering the per capita income is about $3000 in Mumbai...

I don't know where you're getting those numbers from? Here is one for $80/sq ft:

http://www.99acres.com/Residential-Apartment-Flat-in-new-panvel-Mumbai%20Navi-1-Bedroom-bhk-for-Sale-spid-H6772561&pos=SEARCH

Google the figures rather than a specific example.

Yup that is a suburb. Not Mumbai proper. Try getting an apt in Mumbai proper for less than 150k USD.

India is in the throes of a once in a multi generation lifetime property boom. If and when that collapses and the Chinese one too-the USA will look tame in comparision.

lostand confused says

Yup that is a suburb. Not Mumbai proper.

Then why are we comparing prices to Santa Clara? Is Santa Clara considered a Financial Capital of the country, now?

dunnross says

lostand confused says

Yup that is a suburb. Not Mumbai proper.

Then why are we comparing prices to Santa Clara? Is Santa Clara considered a Financial Capital of the country, now?

You were the one who mentioned Mumbai.

I guess San Francisco has been overpriced since the gold rush. I never understood what is so great about the area. Please bay people, don't get defensive, but instead tell me why you are willing to pay 3 plus times more to live there. I've visited pier 39, golden gate bridge, alcatraz, coit tower, dined at Earnies. Those places are nice and maybe with the weather and somewhat higher salaries a 20% price premium might be appropriate. When I think about people paying those prices, I just can't believe it.

Zakra,
You cannot beat the Yayyyyy area. Scenery, 4 seasons(none extreme), things to do, people, diversity, schools, universities, jobs......

Back to the townhome for sale. Who has all this money to buy these townhomes, Cash? Is the younger generation doomed to rent overpriced apartments in this area?

The house i listed is in the arm-pit of Santa Clara. It is next to the Amtrak rail line, "on the other side of town"

Zakrajshek says

I guess San Francisco has been overpriced since the gold rush. I never understood what is so great about the area. Please bay people, don't get defensive, but instead tell me why you are willing to pay 3 plus times more to live there. I've visited pier 39, golden gate bridge, alcatraz, coit tower, dined at Earnies. Those places are nice and maybe with the weather and somewhat higher salaries a 20% price premium might be appropriate. When I think about people paying those prices, I just can't believe it.

There is a bit more to it, in fact natives usually never hang out at Pier 39, it's fairly dirty and the food is sub-par. The climate is very stable and sunny but not hot, you can do everything form windsurfing/surfing to skiing/snowboarding fairly close by. It also has a really good diverse crowd of young(er) urban professionals and is suited to work hard and play harder without the hectic and stress of New York. And the food is diverse and superb. That being said, I agree that it is pretty overpriced and that's why I am renting close to the ocean but still in the city where you can small houses reasonable rents. I hardly participate in consumption (bike to work mostly) so I only pay too much for good food - and for my family ;) I would avoid buying a place in SF, there maybe OK deals though in other areas in the bay area which are less desirable.

It wasn't this overpriced. My colleague bought a house in 1999 in Fremont, CA -walking distance to BART and not a boxy McMansion, but a nice house with garden-for 330k+ . The economy was much better and so were the state finances.

Bigsby says

You were the one who mentioned Mumbai.

No I didn't. BACAH mentioned it, first. What I am saying is let's compare apples to apples here. If you compare Raunchy suburban Santa Clara to downtown Mumbai, then, it's not a fare comparison. Here is what I call a fare comparison:

Downtown Mumbai Luxury Appartment: $500/sq ft
Downtown San Francisco Luxury Appartment: $2000/sq ft

Raunchy Santa Clara: $500/sq ft
West Mumbai Suburbs: $75/sq ft

So, I still fail to see were foreigners from Mumbai find bargains in the Bay Area.

Bigsby says

Wouldn't that be more meaningful?

No, because, you were saying that these foreigners come here and think BA prices are a bargain. Affordability has nothing to do with it.

dunnross says

Bigsby says

Wouldn't that be more meaningful?

No, because, you were saying that these foreigners come here and think BA prices are a bargain. Affordability has nothing to do with it.

Er, no, I wasn't saying that.

Darrell In Phoenix says

Bigsby says

Why not compare affordability rather than actual sq ft prices? Wouldn't that be more meaningful?

Why would you want to avoid a price per unit measure my friend "Bigsby"?

Oh, I don't know. Maybe because when you're comparing prices in one city with those in another, and one of those cities has (apparently) a household income of $8000 and the other one has a household income more than 10 times that figure, then...

Darrell In Phoenix says

Why would you want to avoid a price per unit measure my friend "Bigsby"?

Because when you buy real estate you also buy freedom from landlords.

And that cost to win freedom for one's family depends on the local rent level, which has little to do with the sticks and bricks and everything to do with area incomes, vacancy factors, and supply of new & used home listings on the sales market.

Comparing price-to-rent ratios between different markets is a generally valid measure of how unaffordable housing is getting in a market, since interest rates and lending practices are generally uniform between markets.

(But comparing price-to-rent over time in a single market is deceptive, since falling interest rates reduce the actual cost of owning, and boy have interest rates been falling)

Darrell In Phoenix says

The bank is your landlord.

Funny thing is, banks never raise the rent. They actually lower it as the principal is paid down.

Plus Uncle Sam and the state kicks back a third or more of the bank's "rent".

Wish they did that for renters. Well actually I don't, since what would happen would be landlords would just take that too.

Meanwhile, on Planet Reality:

http://lansner.ocregister.com/2012/09/22/socal-rent-inflation-at-3-year-igh/166455/

Dunno about Denver or Chicago, nor do I care particularly

btw, your own damn link says:

A new TransUnion rental screening solutions
report found that the average rent for the
nation increased 4.4% from $829 in the first
quarter of 2011 to $865 in the first quarter
of 2012.

Learn to read, LOL

Bellingham Bill says

Because when you buy real estate you also buy freedom from landlords.

You go stDarrell In Phoenix says

The bank is your landlord.

And your boss is your landlord too.

But I never got my question answered as to why some people, here, think that Bay Area housing is a bargain for foreigners from places like Mumbai and Bangalore, where I just proved to you that prices in those areas are 5x cheaper than they are in the Bay Area.

Darrell In Phoenix says

Why pay an inflated price for a rapidly depreciating house when you can rent it for half the monthly amount?

Here's a non-shitty "Archstone"-quality complex in Sunnyvale:

http://www.windsorcommunities.com/apartments/san-francisco/missionpointe/floor-plans

The location is not so hot (wedged between two major freeways and among the worst quality of SFH housing in the entire south bay) but the quality of the development itself is decent enough.

going with $2500/mo for the two bed/bath place (the bare minimum for a family), we now need to find a $5000/mo house to see why we should buy and not rent.

Hmmm, twice that $2500/mo rent is $60,000 a year, and going with a 4% jumbo interest rate that would pay the interest costs on a $1.5M loan.

What can we buy for $1.5M?

Redfin reports ~50 homes in the $1.25M to $1.5M range in the entire south bay (!).

actually, they all sucked but I found this place:

http://www.redfin.com/CA/Santa-Clara/267-Saratoga-Ave-95050/home/1642740

listed for $840,000 that looks nice enough.

With 20% down, PITI less the P is $2400, about the cost of renting that semi non-shitty 2B apartment.

The average PITI less the P is ~$1900/mo over the 30 year life of the loan. I don't think that apartment will fall under $2000 again, but of course as a renter I'd be happy to be wrong about that.

And after the loan is paid off, the holding cost is $1000/mo.

What will the rent on that place be in 2042? If the past is any guide, $6000/mo (3% pa up).

dunnross says

where I just proved to you that prices in those areas are 5x cheaper than they are in the Bay Area

because the shittiest parts of the bay area are about as livable as the nicest parts of Mumbai and Bangalore?

*quality* supply is, I gather, constrained in India. I don't know anything but from talking about this with my Indian coworkers they were really gung-ho on buying here in the bay area, even in mid-2006.

dunnross says

But I never got my question answered as to why some people, here, think that Bay Area housing is a bargain for foreigners from places like Mumbai and Bangalore, where I just proved to you that prices in those areas are 5x cheaper than they are in the Bay Area.

And you also never retracted your comment that I was the one who said that.
I don't actually agree with the comment that people from India think BA housing is cheap, but there are plenty of people around the world who do think US housing as a whole is pretty damn affordable compared to what they are faced with at home.

dunnross says

But I never got my question answered as to why some people, here, think that Bay Area housing is a bargain for foreigners from places like Mumbai and Bangalore, where I just proved to you that prices in those areas are 5x cheaper than they are in the Bay Area.

I have a good number of friends from those cities in the BA, and none of them have ever told me that they thought it was a 'good deal'. Other than the guys with family estate homes outside of the city, though, they thought it was generally better than back home.

5x cheaper is misleading. An 'average' place in mumbai or bangalore is not an 'average' place in BA. You can live in the slums for a lot cheaper, sure, but living in the good parts of town will cost just as much as, if not more than, an acceptable place in BA.