patrick.net

ptiemann,

The counselor is in Sunnyvale, and Project Sentinel has an office there. Absent an indication to the contrary, I would say it is reasonable to assume that the she is talking about Sunnyvale.

The article also contains concrete examples with homeowners from San Jose. I don't think that fact negates any statement from the counselor from Sunnyvale.

$950800 Midtown Palo Alto House, Room for Rent (palo alto) (map)

Kinda interesting stuff.

http://sfbay.craigslist.org/pen/roo/1596443570.html

Parts of Sunnyvale e.g. 94089, 94086 are gang infested ratholes. The entire block just north of the CalTrain station looks like a war zone. But the area south of El Camino bordering Cupertino/Mt. View are super nice. What was true 10 years ago of the various Sunnyvale regions are true even today - perhaps a bit more truer as the expensive parts are much more expensive today and the poor parts poorer. Little has changed in 94087 in terms of the prices of the homes (from 2 years ago) or the general characteristics of folks who live in them. In general I don't see much increase in hardship of the dual income crowd reflected in the depreciation of home prices in the nicer parts of Sunnyvale or the Bay Area in general. Lots of $250K pa + W2 households with cash cushions at least double that. SV will perhaps go down marginally and stay flat until we have widespread Engineering layoffs at tech companies (because Engineers are 50%-60% of HQ staff). What is the probability of Ebay, Google, Cisco, Oracle letting go 20K - 30K engineers in 2010 ? That would mean $100,000 X 25,000 = $2.5B out of the local economy. Then assume that they wont be able to find a job in the next 5 years i.e. they drain their $500K cash cushions before they start putting their $1M+ homes on the market. This is already fantasy staff. Ain't happening here.

justme says

ptiemann,
The counselor is in Sunnyvale, and Project Sentinel has an office there. Absent an indication to the contrary, I would say it is reasonable to assume that the she is talking about Sunnyvale.
The article also contains concrete examples with homeowners from San Jose. I don’t think that fact negates any statement from the counselor from Sunnyvale.

abcd says

Little has changed in 94087 in terms of the prices of the homes (from 2 years ago) or the general characteristics of folks who live in them.

Provided you consider price per sqft dropping from $585 to $518 is little.
And 33 properties in market and nearly half of them with 100+ DOM with price reductions.

abcd says

In general I don’t see much increase in hardship of the dual income crowd reflected in the depreciation of home prices in the nicer parts of Sunnyvale or the Bay Area in general.

What constitutes "hardship"? Is the seller of this property in hardship?
http://www.redfin.com/CA/Sunnyvale/893-Ithaca-Ave-94087/home/1447574
2006 purchase price $965K. Listed now $1056K.
Listing description: "VERY MOTIVATED SELLERS! PURCHASED NEW HOME! WILL CONSIDER ALL OFFERS!"

abcd says

Lots of $250K pa + W2 households with cash cushions at least double that. SV will perhaps go down marginally and stay flat until we have widespread Engineering layoffs at tech companies (because Engineers are 50%-60% of HQ staff). What is the probability of Ebay, Google, Cisco, Oracle letting go 20K - 30K engineers in 2010 ?

Actually, if you been here for say 20-30 years, you would have seen this already happen.
We certainly have seen 25% and more headcount reduced rapidly. Others get chipped away
over a decade. And no, R&D is usually 25% of worldwide headcount, which is mainly outside of
the region. R&D is not critical in running a private/public company on a monthly/quarterly basis. Engineers work on long term projects which may or may not yield a product sometime in the future.

Many of your critical operations centered around Accounting, Legal, and Sales Admin have a larger
impact on managements critial issues, reviewing contracts, financials, and other G&A functions. You may find VPs of Engineering but that is a very small number.

Symantec, in Cupertino has some 1,000 employees locally, yet their global headcount is 17,000+.
As the heads of bigger companies attain leadership in small start ups, they start shipping R&D jobs elsewhere. This has been a long secular trend. The booming golden years are far behind us.

abcd says

Little has changed in 94087 in terms of the prices of the homes (from 2 years ago) or the general characteristics of folks who live in them. In general I don’t see much increase in hardship of the dual income crowd reflected in the depreciation of home prices in the nicer parts of Sunnyvale

Dual incomes in Tech industry and other highly paid careers have been around for a very very very long time. LOL! How can you tell.... Ever read the marriage announcement section of the SJMN back in the early 1980s. And those were the real boom years... Nothing new!!!

abcd says

Parts of Sunnyvale e.g. 94089, 94086 are gang infested ratholes.

94089 and 94085 are the bad areas of sunnyvale. 94086 is fine for the most part.

abcd says

SV will perhaps go down marginally and stay flat until we have widespread Engineering layoffs at tech companies (because Engineers are 50%-60% of HQ staff). What is the probability of Ebay, Google, Cisco, Oracle letting go 20K - 30K engineers in 2010 ?

Layoff is not necessary. You cannot hold the current home price without some degree of job and income growth.

Silicon Valley enters 'new phase of uncertainty,' groups warn:

Employment is back to 2005 levels, with 90,000 jobs lost in less than two years; the influx of foreign science and engineering talent has slowed; venture capital funding has declined; and there are fewer middle-income wage earners in a "hollowing out of the middle." Per capita income is down 5 percent from 2007, and the number of people working as contractors rather than full-time employees is rising.

This is the document the above article is referring.
Page 8: Foreign immigration drop between 2008 and 2009: 34%. It seems mythical foreigners are not coming to here to buy up Silicon Valley real estate.

Page 20: Information tech job growth between 2008 and 2009: -7.7%

abcd says

Parts of Sunnyvale e.g. 94089, 94086 are gang infested ratholes. The entire block just north of the CalTrain station looks like a war zone. But the area south of El Camino bordering Cupertino/Mt. View are super nice. What was true 10 years ago of the various Sunnyvale regions are true even today - perhaps a bit more truer as the expensive parts are much more expensive today and the poor parts poorer. Little has changed in 94087 in terms of the prices of the homes (from 2 years ago) or the general characteristics of folks who live in them. In general I don’t see much increase in hardship of the dual income crowd reflected in the depreciation of home prices in the nicer parts of Sunnyvale or the Bay Area in general. Lots of $250K pa + W2 households with cash cushions at least double that. SV will perhaps go down marginally and stay flat until we have widespread Engineering layoffs at tech companies (because Engineers are 50%-60% of HQ staff). What is the probability of Ebay, Google, Cisco, Oracle letting go 20K - 30K engineers in 2010 ? That would mean $100,000 X 25,000 = $2.5B out of the local economy. Then assume that they wont be able to find a job in the next 5 years i.e. they drain their $500K cash cushions before they start putting their $1M+ homes on the market. This is already fantasy staff. Ain’t happening here.

holy exaggeration batman. I happened to live just in the area 3+ year and counting.. sure there are lots of marginally maintained rentals and has a high Hispanic population, but its safer then any big city I know. I've left my car (convertible) unlocked by accident parked on the street with GPS sitting out in plain view, $20 worth of change in the ashtray and I've yet to have anything stolen. There is a mint condition Miata that always leave its top down just down the street. Again nothing stolen. By contrast, I've had my ipod taken from my car and other cars vandalized at the patrolled parking lot at work.

abcd says

In general I don’t see much increase in hardship of the dual income crowd reflected in the depreciation of home prices in the nicer parts of Sunnyvale or the Bay Area in general. Lots of $250K pa + W2 households with cash cushions at least double that. SV will perhaps go down marginally and stay flat until we have widespread Engineering layoffs at tech companies (because Engineers are 50%-60% of HQ staff). What is the probability of Ebay, Google, Cisco, Oracle letting go 20K - 30K engineers in 2010 ? That would mean $100,000 X 25,000 = $2.5B out of the local economy. Then assume that they wont be able to find a job in the next 5 years i.e. they drain their $500K cash cushions before they start putting their $1M+ homes on the market. This is already fantasy staff. Ain’t happening here.

Uh yeah, I see that you're new here. The "there are tons of rich people here" argument has been done over and over again. The problem w/ your argument is that the math doesn't back it up. Check the census data on household income and you'll see that there aren't nearly enough $250k+ households to support bubble prices. They also don't have $500k in the bank. If they did they wouldn't have been using Alt-A and neg-am loans to buy houses.

The bottom line is that these people are living MUCH closer to the edge than you portray.

camping says

abcd says
Parts of Sunnyvale e.g. 94089, 94086 are gang infested ratholes.
94089 and 94085 are the bad areas of sunnyvale. 94086 is fine for the most part.

Which begs the question, why put up a Cinema/shopping center there or build hi-rise business complex on the East Side of 101?

grywlfbg says

Check the census data on household income and you’ll see that there aren’t nearly enough $250k+ households to support bubble prices.

I agree. According to census data of 94087 zipcode, only 9.3% households (1,810 out of 19,480) have $200K+ income. The median household income of 94087 is only $84,856. I wonder where abcd got the idea of "lots of $250K pa + W2 households with cash cushions".

that census data is from 1999.

Even there were 1810 families in the 200k income bracket. Compare that to not only the number of houses in that zip code
but how many of those houses are available for sale.

So you can see why median price doesn't have to correlate with median income.

toothfairy says

that census data is from 1999.

What's your point? Is there a dramatic change since 1999?

toothfairy says

Even there were 1810 families in the 200k income bracket. Compare that to not only the number of houses in that zip code
but how many of those houses are available for sale.

What kind of logic is that? Do you think all 1810 families are buying home? Very likely most of those 200+K income households already own their homes. Then who would buy those homes which are currently in market? People with less income looking for $8K credit?

Bottomline, someone here was saying "lots of $250K pa + W2 households with cash cushions". That's NOT true. Only 9.3% of this zipcode has 200K+ income.

After seeing the data P2D2 provided, it looks like more than 60% of family earns less than 100K/year, and their mean family income looks like somewhere arround $100K range. With this level of income, 1M+ home means 10X thieir yearly income thus buying 1M+ house is not feasible unless they took nonsense loan or inherited something. Sure there's 30% of over 100K earners and they can take care of the house though, even maintaining it is a challenge for 60% of people there. Some rental properties, lots of arround 300 to 500K homes, and few 1M+ homes sounds about right for that income level area. It ain't, isn't it?

Sunnyvale housing data is more interesting. This is not specific to 94087 (there is no 2006-2008 estimate in zipcode level).

71.3% houses have mortgage.
34.3% houses have monthly housing expense (mortgage + other expenses) more than 35% of household income (does not sound like a lots of $250K+ earners with $500K cushion).

seaside says

After seeing the data P2D2 provided, it looks like more than 60% of family earns less than 100K/year, and their mean family income looks like somewhere arround $100K range. With this level of income, 1M+ home means 10X thieir yearly income thus buying 1M+ house is not feasible unless they took nonsense loan or inherited something. Sure there’s 30% of over 100K earners and they can take care of the house though, even maintaining it is a challenge for 60% of people there. Some rental properties, lots of arround 300 to 500K homes, and few 1M+ homes sounds about right for that income level area. It ain’t, isn’t it?

I agree that houses seem expensive compared to the median income, but keep in mind that not everyone bought their house in the last 2 years. If they bought 10-15 years ago, their income might be be fine for what they paid for the house...

tatupu70 says

If they bought 10-15 years ago, their income might be be fine for what they paid for the house…

People who bought 10-15 years ago should not have problem of keeping their homes. But some of them need to sell for various reasons. For example, here someone is trying to get out:
http://www.redfin.com/CA/Sunnyvale/973-Harney-Way-94087/home/1764385
Purchased in 1999 for $550K. In market since June 2009 with two symbolic price reductions. 240 days in market and counting. If the owner is serious about selling it, he needs to lower price. Because there aren't enough households with $250K+ income, as someone is trying to portray here, to prop up $1M home price.

I see $800k houses go pending in less than a week. even today
Which makes it hard to believe there's not enough demand for $1m houses.

>> 500k cash cushion....

haha, very funny!

toothfairy says

I see $800k houses go pending in less than a week. even today
Which makes it hard to believe there’s not enough demand for $1m houses.

I am sure if that 973 Harney is lowered to $800K today, it will sell quickly. In that case it will be the new comp of that neighborhood. The future sellers in that neighborhood have to compete each other and possibly have to go lower than $800K. This is how price slides in down market (remember how price used go up five years back? This is now on reverse gear). It does not happen in one day or one month. It takes time.

It is no way an indication that there is lots of demand for $1M+ homes. In 94087, total number of $1M homes in market: 14. Only five of them less than 100 DOM.

You can buy an 800k house w/ a conforming jumbo loan and less than 20% down using FHA. This is going to open up opportunities to buy an 800k house to a lot more people than a 1MM home which requires a 200k down payment, does not qualify for the 729k loan or FHA. Its a totally different customer. 750-800k is a sweet spot for housing right now. You see short sales listed at this price point because more people will qualify to buy an 800k house due to FHA vs. 1MM. Theoretically a house listed at 1M should really cost 700-800k or less anyway. I think psychologically everyone thinks their dumpy 1700 sqft rancher should be worth 1M.

samsmom says

You can buy an 800k house w/ a conforming jumbo loan and less than 20% down using FHA. This is going to open up opportunities to buy an 800k house to a lot more people than a 1MM home which requires a 200k down payment, does not qualify for the 729k loan or FHA. Its a totally different customer

Is this the same pre-bubble $250-300K home now being pimped for 700K-800K down form $1M?

Seesh Mom,

Do you really wish us kiddies to assume a 600K+ obligation? Would you wish that on Sam or your other kids?