patrick.net

HARM/Digger,

What makes matters worse is that even had you, or I bought in say SoCal in I dunno 2003 or 2002 we still would have our time stolen (just on the other end).

I've been on that hellbound train thank you. There is NO room for error! No daydreaming about career changes. Not even a thought of quitting or your mortgage will eat you ALIVE! Don't get any notions about mom staying home either. God forbid you took any equity out to actually do real improvements, now your new cost basis is 2004/2005 when as Surfer X is fond to remind us "you basically re-purchased" your home. It's a total and unforgiving tight rope.

We've brought high stakes venture capital values into our home. We invited them. And now they don't want to leave.

While I'm up, can I get you guys a beer?

@Robert Cote,

I will send email you the directions & contact info --really hope you can make it. Per the X-man, spouses & children are also welcome.

Surfer-X,

Looks like athena & others may want to come as well, but it's your place. Would you object to opening the invite to other regulars?

But, Randy, isn't creative destruction a necessary part of free market capitalism?

Once the bubble bursts, will be nothing left to do? Will there be no more goods/services that people would want?

Isn't it the responsibility of those who lose their jobs to search and find a suitable job for themselves in the modified market conditions?

SFWoman,

Thanks for the tip. Apples are quite difficult to grow compared to pears and persimmons (from a survivalist perspective, persimmons are particularly useful because it can be dried and kept as a delicious high calorie snack). I tried to make apple pie from home grown apples once and ended up throwing away most of the apples because of bugs.

Sonoma will definitely be the northern edge of avocado growth. I believe CA's primary avocado belt lies near San Diego.

Speaking of native American fruits...can you grow pawpaws in Sonoma? They're supposed to be easy to grow and highly nutritious. I've just found a wild patch on my walk yesterday, and now I'm psyched for the fall harvest.

anon,

You are such a wellspring of heartfelt compassion! Really, you should stop before someone accuses you of being a bleeding heart. :lol:

SFWoman,

Please to direct your "buccaneer matey" and his yacht to www.escapeartist.com for all the latest in keeping a low profile in such places as Panama, Bolivia or the Maldive Islands.

(This guy started out by giving dead beat dads and drug dealers advice on how to slip out of the country).

Seems now he's gone legit. The "inside stuff" he still advertises could be had for 1/4 the price by any drunken sailor. Apparently he has an audience though.

We WILL benefit from the crash. There will be a very real and tangible benefit for each and every one of us.

The bubble will cause an overcorrection. Prices will drop BELOW the "real" level. This means that we'll all be able to buy a normal house for much cheaper than we would have but for the bubble, or a much nicer house than we otherwise would have.

I FULLY expect to be in a position to move out of my rented 1BR slum apartment and into a purchased SFH in Beverly Hills. I am quite serious. Even at post-bubble prices the place in BH will still be a stretch and I therefore doubt I'll buy it, but still -- it'll be an option. A real option.

Most of us aren't rich, but in a few years, we'll look damn good to the banks. There will literally be MILLIONS of Californians with foreclosures, trashed credits, and zero savings in a few years. Entire communities in the IE and the Sacramento area will expereince waves of foreclosures that take as many as 60-80% of the homeowners with them. It'll be almost as bad in SF and LA proper as speculators and HELOCed-to-the-hilt Boomers are dragged under. There will be tens of thousands of upon tens of thousands reasonably priced homes in lovely neighborhoods for us to choose from.

People like us, with modest savings, good credit, and no debt, will look GOLDEN in the post-crash environment. We'll be competing for a much smaller pool of mortgage money with all kinds of FB's speculators, and overleveraged spenders. We'll win that competition.

Personally, while I am quite sure that there will be unbelievable bargains in the future, I would not trade the last few years of my life for a nicer house. I wish there had never been a bubble. It has been horrible. My family and I have suffered greviously. I would love to rewind the clock.

But I will certianly enjoy the ocean view from my house in Malibu when it is over!

RE Avocados - make sure you have a male and a female tree, otherwise ...nice trees but no avocados.

Personally, I'm going to try my hand with almonds, once I buy a place with some land.

@Joe Schmoe,

While I would love to see what you described come to pass, I have my doubts. Firstly, homedebtors far outnumber renters and --even more importantly-- tend to vote more often. What's more, people who have feel entitled to spend/live way beyond thier means are not likely to stay silent while the free market teaches them a nasty lesson. They are going to get mighty angry and shrill and start presenting their demands to Washington in a big way. The only question for me is, how far will Wa$hington bend over?

Will there be a F@cked Borrower Omnibus Rescue Act of 2008 that forgives all defaulted mortgage debt, while letting them keep the house? Will there be a Special Savers/Renter's Tax that rewards FBs at the expense of us "unpatriotic, America-hating" housing bears? We obviously hate Amerika, right? Otherwise we would have spent ourselves into oblivion along with the rest of the country.

I really want to see the market dole out karmic/economic justice, reward the prudent and punish the greedy/stupid, but somehow I don't think a group as large and politically powerful as FBs will stand idly by and let that happen. We shall see...

I FULLY expect to be in a position to move out of my rented 1BR slum apartment and into a purchased SFH in Beverly Hills. I am quite serious. Even at post-bubble prices the place in BH will still be a stretch and I therefore doubt I’ll buy it, but still — it’ll be an option. A real option.

I'm not so sure about that. 50% off $3 million is still $1.5 million. Maybe if you had $200 or $300K in cash you could swing it. But I don't think lenders will be giving out any more NAAVLPs--even if you are foolish enough to ask for one. Lenders will want you to have some real skin in the game. And LT interest rates could be a lot higher by then, to compensate for the inflationary Fed, so it may not be so easy to finance the balance.

Although the bursting bubble will clean up lending, it will do nothing to address a lot of the longer term structural defects which have caused the bubble to inflate in CA, such as Prop 13 and NIMBYism. Many of the Malibu and BH owners will sit out the bursting bubble while paying their $3K/year taxes on their $3M homes so inventories will probably never swell the way they have in places where building is less restricted, like the inland empire.

Given today's housing figures, are people revising how long it will take for it to REALLY crash and house prices to drop significantly - or are we still on a three year time scale?

SFWoman,

For your climate, kiwi or banana passionfruit may be better bets than the native maypop. Figs are nice too.

It's nice to know that avocados can survive so far north, though I still think Sonoma might be too cold. You may want to check with your local agriculture extension office before growing them.

Purdue has a comprehensive guide on growing tropical fruits at this location:

http://www.hort.purdue.edu/newcrop/morton/index.html

By the way, I am in Mountain View, CA, from the house listings I have been monitoring they are going for 10% below asking or being reduced by 10% before selling - although some are still selling for way over asking.

SFWoman,

Yes!

And I am thinking that this overcorrection will be BIGGER than before. Historically, stock markets overcorrect. Commodities markets overcorrect. But most people do not participate in the equities or commodities markets, or do so to only a limited degree. I don't own any stock at the moment, so I won't lose anything if the stock market crashes. And even if I did, I'd limit my investment so that only a modest percentage of my capital was at risk. I'd keep the rest of it in safer options. I do plan to buy stock once the market crahses, an event I believe should have happened back in 2000. There are lots of people like me out there. When the market tanks, we swoop in and buy. We act as a floor on the market.

But 70-odd percent of Americans are in the housing market! And most of their net worth is invested there! This means that when the housing market crashes, there will be hardly anyone avaialble to swoop in and buy. Just bubble sitters and young FTB's entering the market for the first time. That's why I think this overcorrection will be even more severe than overcorrections past. I could be wrong, though.

Well, it might be time to open an upscale survivalist shop. Only the best escape yachts, the best semi-automatic hand weapons and security fences, the best photo-electric cells, the best open pollinated seed bundles and antique livestocks, and the best home stills for our paranoid multi-millionaire.

There's a lucrative consulting service somewhere in here.

Glen-

The chepaer SFH's in BH are $1.5mm. Today, at the peak of the bubble. A 66% correction makes them $500k. A stretch -- not one I'm really willing to make -- but possibly do-able. There are SFH's in Malibu for $1,000,000. 2BR Condos on the beach for $800-900k. Again, after a 66% correction -- do-able.

Do I think there will be a 66% correction? Oh, yeah. And believe me, there are plenty of overleveraged people with HELOC's in the toniest parts of LA. And there are not enough truly wealthy people to pick up the pieces.

HARM,

It is too late for that. Despite what the modern-day sophists known as "economists" tell you, the government really can't control the economy. This problem is way too big for the Fed Reserve and a future RTC to solve. Will people be mad? Yeah. Can government save them? Nope. In the end, the politicians will pass legisialation giving everyone a $50 tax credit, call it the "American Dream Homeowner Protection Act of 2009," and hold a big self-congratulatory signing ceremony in the Rose Garden. Meanwhile, HELOC'ed Boomers and Inland Empire FB's will waiting in the hallway outside of bankruptcy court waiting for their cases to be called.

We will benefit from this.

anon,

Sorry, I usually don't take critique from an "anon", especially one who haven't followed more than 1 thread (because if you did, you'd realize every thread here quickly goes off topic, including the off topic threads).

As for the gun toting thing. Well, just because guns are insanely available and easy to get doesn't mean there's no other way to market them. Many people in major metropolitan areas are intimidated by guns and gun-ownership, so they may be more comfortable buying guns from an upscale survivalist outfit (I'm amazed Costco hasn't gotten into this business) than a normal gun shop where they'd feel like amateurs.

"giving everyone a $50 tax credit"

You know Joe, that's about the size of it. Someone (I hope in jest) suggested at the tail end of the last thread that the gub'ment convert property taxes to a "direct dollar for dollar credit"! I couldn't believe it!

I said we don't subsidize housing enough?

Joe,

A topping off of 60-70% in prime, established areas like Beverly Hills would only occur if the rest of LA county fell 80-90% from their highs and the houses in the high desert are sold for $10-20K each.

Personally, I don't see it happening. And I'd be really really scared if it did. There wouldn't be much of a consumer economy left if prices declined that much.

Anon's posts are currently being put into moderation. If (s)he contributes anything that's not direct baiting, I'll release it. Any other admins are also free to release any moderated comments (as always).

The first time was a buy. We don't need another flamebaiter.

Astrid,

I understand that BH prices dropped by 50% last time, in the early 90's. 66% this time seems possible to me.

Second, I think people overstimate the effect that the false wealth of the housing bubble will have on the larger market. was a consumer economy back in 200/2001, when you could find an entry-level house in BH for $500-600k, and a McMansion in Malibu (without an ocean view) for $350k. 2000/01 was not the stone age.

Yes, the housing crash will hurt the larger economy. Yes, it will be very painful. But a 66% drop in housing prices is not the end of the world. It will not lead to Armageddon.

Given today’s housing figures, are people revising how long it will take for it to REALLY crash and house prices to drop significantly - or are we still on a three year time scale?

Anyone?

My own sentiment is moving more towards a hard-fast landing than a soft-long landing. I gave it about even odds a few months ago, maybe even a bit more likely to be soft.

As I see this developing I'm coming around to maybe a 70% chance of a hard-fast landing. The real question for me is whether it causes an "economic" hard landing. It is possible there could be a hard landing in housing but still a soft landing in the overall economy.

In this case I'd expect most of the declines in about a 12-18 months, then a protracted period of 3-5 years of flat to slowly declining real prices, with some false spikes up and down in between.

But if I made that an official prediction I'd be sure to be wrong. So let's just say it's a hunch.

I'd suggest querying those who really make their livings on real-estate values & rent yields, like Zephyr or Former Apartment Broker. They probably have the best instincts about this.

(I'll leave this thread open until Monday morning, to give any weekend readers time to comment)

@Athena, come on down!

Joe,

I'll defer to your experience, since I don't know much about West LA RE. I admit that I'm making some fairly broad assumptions

I just thought $1.5 Million in BH doesn't sound like a significant price increase from 1995 or 2000 prices. Thus, for those places to drop by 66% means retrenching back to maybe mid 80s prices. That to me seems like a very significant drop for about the most rock solid pieces of the RE market, since they're desireable and upper middle class without being fashionable. If even those neighborhoods dip even momentarily into mid 80s price levels, that probably means everything else is practically worthless.

But if those neighborhoods have experienced 150-200% gains in the last ten years, then my analysis is completely wrong and I'm just talking out of my ass. (though I've already admitted as much, even if I was right).

This is one of the most successful threads recently. Congrats, Randy.

SFWoman Says:

> If prices dropped 50% from what things sold at last
> November my apartment would still sell for almost
> twice what I paid for it in 1994. That’s how out of
> whack this market is.

If most of the homes in my area (Presidio Heights) sold for 50% of their 11/05 peak they would still be 400% above the average 1994 prices...

SQT Says:

Sorry if I put the thread up too early Randy. I just figured we were getting close to the 300 mark, and might as well put a new one up.

I have noticed a recent resurgence in number and rapidity of posts. Interesting.

If people should suffer in proportion to their participation in the bubble economy, shouldn’t you be on the hook for some pain?

Huh?

By the way, I am in Mountain View, CA, from the house listings I have been monitoring they are going for 10% below asking or being reduced by 10% before selling - although some are still selling for way over asking.

Living in Sunnyvale, I've been keeping my eye on Mountain View (free wifi!) and Palo Alto - the prices have reduced a little, but still ... it's no san diego.

:(

This is one of the most successful threads recently. Congrats, Randy

Thanks Peter P. It's not hard to generate lots of comments when you put yourself out there for a public impalement.

SQT, no worries. This thread was full, and ran it's course pretty quickly.

Robert Cote'

It will still be sticky. I can say this with certainty, because it already is sticky, right now, at this very moment, and it has been for many months now. What takes six hours to happen in the stock market could take six months; or even 16 months to happen in even the hardest real estate landing. But sometimes I think you and I could argue about anything, even if we are in complete agreement.

Joe Schmoe - re:BH meltdown...

I'm in agreement. Looking on Zillow for some places in 90210, you only have to go back to the late '90's to see 'affordable' prices - ie 500 - 800K.

Same with Malibu - although you still get a$$clowns listing places at 2 or 3 times the Zillow 'Zestimate'. My favourite at the moment, and possibly the most expensive place on the West Coast, is a little beauty with beachfront with an LP of 65 million.
There are a surprising number of places for sale though, and some of the DOM figures are in three figures. Even very rich people must feel the strain of carrying a house that's too expensive, eventually.

I think that areas like these will slip, kicking and screaming, dying a death-of-a-thousand-papercuts, reducing 1% and 2% at at a time as the months tick past.
Nothing says "I'm rich! Now %uck off hoi polloi" more than a mansion in the hills. I expect more denial there than in the rest of LA.

SFWoman - thanks for the UC Davis tip!
Depending on how much land I end up buying, I'm sort of interested in starting a small farm/smallholding - lots of Farmers Markets around West LA.

My husband, of course, thinks I'm insane. But I keep on telling him that, come the recession, he'll be thanking his lucky stars that he lives in a place where we grow our own food. He'll be laughing on the other side of his face in a few years, you'll see ;-)

speedingpullet,

That sounds wonderful, especially if you go the sustainable agriculture/organic route, since that's less reliant on fossil fuel. What would you like to grow?

I really miss the Farmer's market from my college days. I can see a Farmer's market actually benefit from a recession, since most farmer's markets are a lot cheaper than Whole Foods and equivalent. Thus, a lot of health conscious yuppies would switch to local farmer's market when they can no longer to hand over their whole paycheck.

I've always been interested in Permaculture, so it would be fun to try growing most of our own food (as a start anyway) using Permaculture techniques. As for growing enough to sell, its probably just a pipedream.

I worked on a farm as a teenager, and have had allotments back in the UK, but always grew stuff ;just for fun'. Although on my list of 'things to do before you die' is have an orchard...

Anyway, unless this bubble bursts soon I'll end up in a condo, with pot plants on the windowsill..

The tones on CNBC have become bearish the last two weeks they know all bets are off... I agree with Harm alot of the goverment complicty is to blame. I heard them say this morning "cash is king". Ben is meeeting with the fed governors in Wyoming as the walk around the nature trails asking each other what the F" to do about this mess.

I myself will not have any sympathy for the participants of the HB. I had to hear what a loser I was because I left california last january. How if you don't pull down six figures or have a partner (I'm divorced) you can't afford to live here. I'm not frivilous my income went down 50 percent in 2000. Shortly after the five years escalation in home prices it was bad circumstance and timing not my fault.

My arrogant boss who lived in Laguna in his cliffside MacMansion said I was an idiot for not buying at historic low IR's. But yet he didn't give me a raise in six years. I had about 50k and that was my entire nestegg. I was not going to get suckered into a IO or ARM and risk losing all I had.

Those who thumbed thier noses up at me (ex included) can rot in helll! I'm living cheaply in the southeast for the time... If So Cal shakes out I have the money to retuen as I don't have debt, own my vechicle outright, and have some saving. I think it will be a year or two before things really correct. I have the advantage of time on my side. So no worries...

As for the FB's in cali? I hope thier karma comes to roost instead of flipping houses I hope they nd up flipping burgers at Micky D's

SP, come on down :)

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