patrick.net

Besides the fact that a neighbor on my block sold for 10% more than the ‘peak’ last yr, and another neighbor sold for a record $3.7 million for a row house last month (previous record was $2.7 million), you’re right.. 6.6% is understating the actual price appreciaiton in SF!

DAQU,

It seems I've underestimated just how stupid you really are. Not only do you not understand the concept of a median, but you also think that two examples of oversold means your fake 6.6% appreciation is understating it? Give me a break. You are too dumb to realize that the more outlandish the example you cite, the more it means that the true MEAN (not median) appreciation for the vast majority of homes is well below the published numbers.

Well, it's official - there is now more inventory on the market than at any time in the past year in both San Jose and SF:

http://www.housingtracker.net/

I can't say for sure but considering last year was a record year for inventory in recent memory, I'd assume this year is a new record.

Good point –forgot about Prop. 13, the Great Unequalizer. Even assuming RE capital gains had been exempt to $250/500K back then, and the remainder taxed at today’s rate, the 1970s tax basis alone is worth a serious chunk of change. (Note to self: (a) choose parents and birth generation more wisely next time, (b) keep working on that time machine.)

Maybe you could pay some senior citizens to adopt you. After all, they can transfer the home to kin without a reset in tax base.

Which is retarded.

The world is coming to an end, and we all have declining incomes, and are losing money in our retirement savings too

DAQU,
Nice Chewbacca argument. Did I ever say the "world is coming to an end, etc."??? Maybe YOURS is, as you haven't seen a Realtor commission in god knows how long, and you're struggling to make payments on your neg-am mortgage that's about to reset, but nice try.

Hi_there,

True, but nowadays don't RE "investors" claim every property they own as a "primary" residence? I mean, Congress even allows you to define ANY property you've lived in for 2 (non-consecutive) years of the last 5 as a "primary", and I seriously doubt the IRS bothers to verify. Plenty of fudge factor there. A certain Uzbekistani flopper who used to have 8 "primary" homes comes to mind...

FormerAptBroker,

Prior appreciation says nothing about whether homes are overpriced today. Gains from the 70's till today were tied to strong regional real income growth due to the boom in Silicon Valley. It's impossible that the real price of real estate in the Bay Area can appreciate at the same rate unless real income rises at the same pace which is inconceivable.

Another way to look at it is that investing in Intel in the 70s would have generated spectacular returns. Investing in Intel today is highly unlikely to yield comparable returns over the next 30 years. I think the Intel comparison is apt since the same forces that made Intel so valuable are the same forces that drove Bay Area real estate price appreciation.

As other people have objected, claims about past appreciation need to look at average data not a particular investor. If you father did better than average, he may be especially skillful or just lucky but that performance has no bearing on what an investor can expect to earn. I don't expect to earn Warren Buffet's historical returns (which crush real estate by the way).

It's also impossible for any asset class to indefinitely outperform other asset classes on a risk adjusted basis. If the expected returns for real estate are really better on a risk adjusted basis, capital would flee other asset classes and all move to real estate driving up the price till the expected return declined to other assets with the same risk. Analysis of many asset classes show that ones that have had superior performance tend have low future returns because the previous gains drive up prices in that asset classes beyond the point intrinsic value.

My claim that low expected future returns on rental real estate leads to rental stock in a sorry state is more solid that anecdotes about previous gains. It's not possible to buy any rental estate in Bay Area today using a full amortized fixed rate mortgage for 80% or greater of the purchase price and not have strong negative cash flow. Thus new landlords have to pay monthly for the privilege of owning property. The future gains would have to be spectacular to over overcome the opportunity cost this negative cash flow.

Perhaps you disagree me about future real income can growth. Or perhaps you believe housing will continue to appreciate without real income growth. Just looking at the past doesn't show us anything about future.

MiC

DAQU

Don't skirt the issue. C'mon. Don't skirt it. Don't skirt it. Don't skirt it.

We wouldn't want to have to declare you cathartic, would we? Are you just content with Trolling, or do you have any comment on what I wrote above?

To FAB, OO, etc:

Any of you old-timer RE investment pros ever sell an investment property that managed to qualify under the new guidelines as a "primary" residence (and $250/500k capital gains exemption)? It looks to me like a loophole large enough to fly a 747 through, but then again I have zero personal experience in the matter. Just wondering...

Monkey In Chief

One minor point:

It is not similarly unreasonable to strive to achieve equal or greater returns than Buffett. Buffett's success was not industry dependent, but methodology dependent. Someday another value investor with a slightly improved approach will outperform his results, although his record could stand for a while.

And let's not forget about the RE investor's other best friend: Mr. 1031 exchange.

Overrated

I decided to check out the historical data.

HUD has nice set of historical data:
http://www.huduser.org/intercept.asp?loc=/periodicals/ushmc/winter06/Q406_historical.pdf

The change in the nationwide median home price between 1973-2006 was 7.68x (see table 9). FormerAptBroker says his father did between 30x and 43x which is a startling difference and far far beyond average.

For comparison the Dow Jones Industrial Index was 12.86x over the same period. I would have preferred to use the S&P over the same period but couldn't numbers going back that far.

The other interesting nugget from the HUD report is that afford-ability is at its worst point since the mid-80s and this is with historically low interest rates (table 11)

On the topic of Buffet, even Buffet can not generate the same percentage returns he used to. The amount of capital he needs to invest makes it difficult. He's methodology is also difficult to apply since it requires accurate predictions of potential investments future cash flow. His methodology is well known and any of the parts easy to apply have probably already been so widely as to dissipate any premium from them.

OMG, I just stopped the DVR to read this. You know the cashcall commercials with Gary Coleman? Read the fine print. The APR for a typical loan of $2600 is 99.25% with 42 monthly payments of $216.55.

Basically every 12 months your total of payments is $2599. The total of payments to borrow $2600 is $9072.

That's just wrong.

@Malcolm,

No kidding. Casey could tell you all about that, I'm sure. I guess it's better than the old style hard-money lending, though. At least you don't get your legs broken by 'Knuckles' when you don't pay.

100% APR? Even Knuckles would just bruise em real bad and tell the guy to tell all his friends he actually broke em. That's ONE HUNDRED PERCENT A P R.

M - I - C:

Incomes of local residents don't have to keep going up to prop up and continue to push up median house prices.

Only the "nominal" incomes of BUYERS need to keep going up.

Like, the nominally rising wealth of Asians. About half the people on the planet are in a couple of the fastest growing economies the world has ever since, India and China. Even if those countries have a very small percentage of wealthy people, there's still a couple of billion of them, more if you include the overseas Chinese.

Vancouver, Seattle, Bay Area, LA. These wealthy buyers covet the communities in our congested coastal urban areas that have public schools with the highest standardized test scores. It's the reason the median house prices keep going up, even though the rest of us are getting immersed in distressed homes for sale.

M-I-C

Another thing your comparison with stocks is overlooking is the leverage in real estate is usually higher than in stocks.

I think a sign of denial is someone clinging to one stat, and not taking anyone up on their challenge to pick a property. The counter to your point is supported by a RECORD number of homes for sale. I have no stake in SF real estate but I tend to lean with the massive number of newslinks, and reports (many of which come directly from the industry) indicating prices are falling pretty much everywhere. If you want to convince me of rising prices in Oregon I might have a different opinion.

Monkey In Chief

Fair points. Though you are relying a bit on efficient market theory for one of your supporting premises. Behavioral factors may be sufficient to allow someone parroting Buffett's methods, but called something different and adapted to the context of the future market, to succeed in excess of Buffett. I am assuming a continued or increasing free global market. I do lend some credence to the notion that the US equity markets in the 20th Century where anomalous, and the US will revert to global mean over the 21st Century. But somewhere is always anomalous.

eburbed Says:

> Maybe you could pay some senior citizens to adopt
> you. After all, they can transfer the home to kin without
> a reset in tax base.

I (seriously) wonder if this has ever been done…

My parents currently pay about a little over $6K a year in Property Tax, but if they sold their home for the current market value the new owner would pay just under $60K a year.

I’m wondering if you could legally sign a contract where a seller would be paid a fee to “adopt” someone and then “give” them the home (with the low Prop 13 tax basis)…

Uh oh DAQU's skirting the issue again.

House around the corner from our old Belmont place just sold. It was a tad smaller, had a much newer kitchen, a better view and a newer pool. Uh oh! They got less than I sold for in 2005! Whuh? Say it ain't so DAQU. Say it ain't so.

I'm hoping I'm just a cynical eternal pessimist who will never reach my full potential. Oh well, back to work on getting this startup funded :) Have fun selling condos in the Marina.

DAiryQUeen Says:

> It is amazing that even with the Chronicle coming out
> saying prices are up 6.6% YoY in April, you guys
> STILL think prices are actually going down.

The REALTORS don’t want anyone to see ALL the data Dataquick sent to the Chronicle (below is a link)

San Francisco County – Prices Drop YoY in 61% of the Zip codes with YoY Drops as high as 39%
Marin County – Prices Drop YoY in 73% of the Zip codes with YoY Drops as high as 27%
Contra Costa County – Prices Drop YoY in 71% of the Zip codes with YoY Drops as high as 21%
Napa County – Prices Drop YoY in 67% of the Zip codes with YoY Drops as high as 30%

Is the Dataquick data bad, or have prices started to go down?

http://www.dqnews.com/ZIPSFC.shtm

DAQU
I might agree with you that there is a tendency of some to just sit and watch the world go by as they try to demotivate others to join them but I honestly don't see it in this bunch. I sense a long time rivalry here, and the housing debate is more widespread than SF. With no disrespect intended, I can't imagine someone with your point of view trying to claim a win. I believe you are wrong but I'm not asserting it, why don't you go to zillow or whatever site you want and see if you can find some houses to drive your point here. Again, I don't know where you live, but you only need to look out your window in most places to see the disaster unfolding (used to be present tense, I say unfolded now) around you. I found this site a couple of years ago, and tracking the progression gave me a huge edge in the marketplace. You have no idea the amount of money I made selling houses almost perfectly timed to the top, and shorting the right stocks on the way down. There are some genuine success stories here who just aren't sold on repetition.

Randy H,
I'm sure you realize this, but I think it should be spelled out for lurkers and newer posters here that DAiry QUeen posts here merely to try and give the impression to lurkers that the market is indeed still hot. He/she uses selective data points out of context o feebly try and prove his/her point, and he/she refuses to engage in actual debate with others here on this board.

And one more thing to the lurkers/newer posters: DAQU constantly changes names and comes back to post the same crap periodically. Search the archives for his/her prior names/handles: MarinaPrime, FaceReality, Fake P, Confused Renter, and some others.

Just thought this was worth reiterating.

Whoever it is sure has an axe to grind. I'm reading it like there is a livelihood at stake.

2511 Steiner St, San Francisco, CA 94115 -- beds, 3.0 baths, 3,198 sq ft
Estimate is 2.9M
Value Range: $2,551,330 - $3,548,401

30-day change: -$409,315 Last updated: 05/16/2007

re Raggy the seaweed monster is really a realtor.

Yeah, and I would of got away with it if it wasn't for you meddling kids.

Are you claiming this is a pending deal? If it is pending you won't know the actual price until it closes. Looks to me like a wishful list price.

What happened to Gunn High? This year's Newsweek best high school ranking is just released, Gunn High is nowhere to be found. It was on the list for the last 3 years.

http://www.msnbc.msn.com/id/18757087/site/newsweek/

Except for Gunn High, Lynbrook, Leland also disappeared. Uh oh, school-addicted parents who just bid into the aforementioned school districts will lose sleep soon :-)

I never realized that Menlo-Atherton High school is that good, I thought everyone in Atherton sent their kids to private prep schools.

in contract at $3.85 million already.

And DAQU knows this place is in contract because ... he/she is a REALTOR (TM)!!!

We have a house in escrow, selling price was 23% less than asking. All closing costs were paid by seller, all items fixed or refunded.

Yeah, it only goes up.

Oh right DAQU,

Your stupid mls link doesn't say whether the place is "in contract," so that's not a fact available to the general public - only to REALTORS (TM).

Besides, let's not deny this - you finally admitted to being a REALTOR (TM) many months ago after much prodding from people on this board. I think that may have been when you were posting as Confused Renter.

Although I'm seeing the comps are strong. Very volatile but holding in my opinion. Why do you guys want to live there anyway? Instead of renting a house for $3000 a month you should do a long term stay at one of the really nice hotels in the area. That's what I'd do if I were moving to LA. You can have granite and stone in a nice sized hotel suite for $100 a night with free maid service, screw buying or renting.

HARM,

never did it myself, but I do have a property investment expert friend, a part-time mortgage broker in SoCal who successfully executed 4 flips. The trick is to establish that you have lived in the home in the past 2 out of 5 to qualify for the 250K/500K capital gains. He did just that, having sold 4 houses entirely free of cap gains.

Now, you may ask, the maths doesn't work out quite right, 4x2, meaning he will have to be pretty efficient in moving around right? Well, well, well, I will leave that to your imagination. But, in practice I know it is doable.

Since I'm not a realtor zillow is pretty much my guide but admittedly flawed.

Just ignore DAQU (aka Marina Prime). Is there an ignore function that I can use to make all posts by a particular poster invisible?

Just ignore DAQU (aka Marina Prime). Is there an ignore function that I can use to make all posts by a particular poster invisible?

OO,
To reiterate, my problem with just ignoring this bozo is that he/she is clearly trying to "sway" lurkers and new posters into thinking the Bay Area real estate market is still "on fire." yippeee blah blah blah. It's a disservice just to let his/her compltetely inaccurate statements go without pointing out the lies.

I'm on the fence still. I imagine it is an interesting market, just like parts of LA specifically Santa Monica, and the Marina that are still surging just because they are very small highly desireable areas. There is still a ton of people with wealth who can buy into these areas and that logically would affect the median. The question is, is there a decrease in the lower end homes selling? The stats say yes but the inventory numbers don't differentiate between lower and higher end homes so that seems inconclusive. For me it is tough to call, but there are a lot of the Patrick guys who have their feet on the street in SF and their observation has to be worth something.

While that particular MLS link was unimpressive either way, a couple of the comps seem to show the trend overall is pretty flat with movements either way being normal fluctuations. My caution is in thinking rents are going to go down in SF. Patrick's charts, and your stories really do paint a picture of a housing shortage there, and even as well as I've done it boggles me how you guys up there trivialize $100K per year salaries. That's a pretty damn good living down here, it almost sounds like exec minimum wage up there. By comparison, I've read that the average salargy of someone living in Rancho Santa Fe (I think God has a place there) is $200K. I found that stunning but a lot of old money and passed down properties slant the stats of affordability.

Well that's just is DairyQ, out of all of this maybe there is consensus that some neighborhoods won't be hurt. I can acknowledge that possibility. I don't picture a 'price reduced' sign on a Kennedy home.

I do know of a Jackson home in RSF that went into foreclosure. My boiz repo'd it.