patrick.net

davidh says

When Lake Mead is dry, there is no water for the CAP

That's the curious thing about Fresno. It's got a healthy chunk of the Sierras runoff all for itself. They're just now putting in water meters, LOL.

How can I know vacancy rates? Any sources, or ideas for deducing it?

The areas you suggest in Oakland, that is the green areas, are in comparatively high crime areas and they are in much too close proximity to the noisy and polluted expressway. I think you do much better with the news letter of items to read than with the list of properties.

Well, that doesn’t apply to us - $215k annual and we rent waaaay under income in order to save perforce. $1700/mo suits us just fine as opposed to paying $4k/mo rent - which is what we can afford.

Mistrial - we are in the same range. 1350 rent for a two bedroom. Nice balcony, nice view, garage. Save the gap between what we can afford and what we spend. I have almost paid my student loans off and have 8 months in emergency savings. I am just fine in our apartment for now. I would like new carpet, but I don't need it. Going to wait on this split market to do its thing for a while.

Patrick,

Thanks for this post. It helps my world make sense. All these 700K boxes in Pacifica and San Bruno just don't make sense to me. The only thing I can figure is that these are families that have lived in these homes for a long, long time. Otherwise I just don't see how they possibly afford them. So many of the homes appear to be very poorly maintained. Three quarters of a million dollars AND it is dumpy. No way.

There are two things that make me wonder about other parts of the county. In the places where prices are more in line with income and with rents, aren't there still a bunch of foreclosures still headed into the market. Couldn't that still drive prices lower? Similarly, people without jobs still can't pay the mortgage. What about the downward pressure on prices that will come when interest rates increase down the road? Aren't these markets still vulnerable to those pressures, even if prices are much more affordable outside the Bay Area?

Love the "What's it really worth?" service. Very cool.

Sulli says

the rents have kept going up since dot-com bubble! ps i just saw on Golden Gate Ave a studio for $1799!!!

You mean the studio that was $3000 in 2000 and now $1799 .. right ?

How can I know vacancy rates? Any sources, or ideas for deducing it?

Apartment Owners Associations?

~Misstrial

pw says

Well, that doesn’t apply to us - $215k annual and we rent waaaay under income in order to save perforce. $1700/mo suits us just fine as opposed to paying $4k/mo rent - which is what we can afford.
Mistrial - we are in the same range. 1350 rent for a two bedroom. Nice balcony, nice view, garage. Save the gap between what we can afford and what we spend. I have almost paid my student loans off and have 8 months in emergency savings. I am just fine in our apartment for now. I would like new carpet, but I don’t need it. Going to wait on this split market to do its thing for a while.

Yeah, I understand. For us, the 2-car enclosed garage w/opener is a must.

The way to save is to under-rent.

Congrats on your savings achievement. :)

~Misstrial

Nomograph says

IF you want to live in Phoenix, THEN it’s probably better to buy. Vegas too.

If I lived in Phoenix or Vegas, the first think I would do is figure out how to get the hell out of there.

lol! :)

With the devaluation of the dollar and subsequent rise in the costs of energy and fossil fuels, I wonder how long these areas are going to remain affordable....Las Vegas & Phoenix - have to run the A/C most of the year 24/7.

We were in Tucson in late January 2009 and it was 91 degrees outside.

~Misstrial

Misstrial, seconded. Areas like Florida and the Southwest were under-populated prior to the era of air conditioning for a reason.

Throw in the soon-to escalate-again costs of gasoline in an automobile-dependent region (you need a 2-car garage, right?), and you've got more trouble ahead. So while heat/nergy-related costs might be on both sides of the rent-versus-buy equation, they're only on one side of the "do you want to be invested in this area for the long term at all" calculation.

toothfairy says

only 1 house in Oakland is a buy?

You mean, "a house in Oakland is a buy?" Isn't Oakland, CA the murder capital of the known universe? Why would you want to live, er, die there?

robertoaribas says

yeah, phoenix is out of water, and its 1000 degrees all the time here… Good grief the nonsense that people use to prove whatever idiotic point they want.
Summer is very hot here, irritatingly so. Payson and Sedona however, are just over an hour away, and are cool enough all summer that you need a jacket at night, so relief is close by. Today it is in the 60’s and nice, the weather will be very good all the way till May now. I remember how freaking cold and rainy northern California was in the winter when I attended Berkeley, though having skiing close by mitigated that somewhat. You can take Chicago winter, I’d much rather put up with Phoenix’s summer.
Our water is MUCH more assured than southern California’s, and my average electric bill on a 2400 square foot home with a large pool is $250 a month; my taxes are $150, so I’ll wager that a similar home ANYWHERE in the bay area would cost me so much more in taxes, that my utilities would be free in comparison…
I was in LA for the last week, the traffic there sucks 10 times worse than Phoenix, ditto the bay area…

Well, I don't know....I was in Sedona for July 4th weekend and the entire town is surrounded, closely, by huge red rock edifices.

In the summer, these rock faces would hold and reflect heat and imo, would be similar to living in a brick oven or at least surrounded by pizza stone.

A significant number of folks who moved to Sedona, upon living there, now regret their choice and are seeking to leave, albeit contingent on their house selling. Obviously, many of these owners must sell in a down market and Sedona is affected just like most places.
Using the Google Real Estate tool, you can see all of the distressed housing.

Best thing about Sedona is New Frontiers Natural Market (about 1/2 the size of Whole Foods in Cupertino), the town is an upscale southwest-territorial style is near a river where people like to go and recreate.

My above-comments on the AZ heat is in no way meant to be a slam on the State, however, IT IS WHAT IT IS, and being a 4th-generation Californian and 6th-generation Westerner, the entire southwest, including AZ, has a reputation for being very hot in the summertime and for most of the year, actually.

I travel to AZ about every 6 weeks throughout the entire year, and so I am posting from personal knowledge. (For those who need to know: 101 > 405 > 5 > 805 > 8 into Tucson; reverse to come back. Midnight to 11 a.m. in the morning and "No" I haven't seen any drug or human smugglers on the 8 near Casa Grande.)

I don't know what is is about other States' residents - on forums and message boards they are unwilling to accept any observations or established facts deemed by them to be critical of their State.

Seems that they can only tolerate "happy talk" which leads me to think that those who are this way are real estate agents.

One last thing: although electric bills may be currently lower in areas of the southwest, these rates will likely increase, due, as I stated above, to Quantitative Easing and the subsequent devaluation of the dollar.

I know this for a fact as many of you know, I rent in two states: CA (legal res) and southern NM and in southern NM, rates for El Paso Electric have doubled since 2006. The gas rates are controlled by a city-owned utility, however, rates have also gone up, by what I guess, about 1/3 since 2006.

AFA L.A. traffic, it has been greatly affected by the loss of about 2M residents since 2003. So traffic there in the Basin is nothing like it used to be, not sure if the poster was in the middle of a sig-alert or what.

In my experience, traffic around PHX is noticeably less than 2007-8 probably due to the hardships of the economy and collapse of real estate and construction-related employment (as in many other areas of the nation - mentioned just so that the poster is not offended by my mention of unemployment in PHX).

Unlike what most Arizonans think, *most* of the people who streamed into Arizona during the past 20 years came from the NE and Rust Belt states and NOT California. These relocated people often lied and made the claim of being a Californian, however, they are/were not.

True example: one Nebraskan young woman moved to Newport Beach, lived there for 9 months, moved to Mesa AZ and told everyone she was a "Californian." Liar. She is a recent arrival from the Midwest to AZ by way of California, however, SHE IS NOT a Californian. Just to make that clear.

And another thing: Patrick lives on the Peninsula (the "real Bay Area") and it seems to me to be of the utmost rudeness to be an out-of-Stater and come on here and rip California. Patrick wants to buy a home in the RBA. Please keep that in mind.

If you feel the need to lay it on, then go to city-dataforum.com and spout off there. Or start your own site for real estate in your own State.

I am tired of California being slammed on account that some newby poster decides that commonly known facts about their own State do not meet their liking.

~Misstrial

I live in south bay near Cupertino area with some great schools and houses that's still too expensive to afford. I've been to some open house lately. I noticed an increasing number of real estate agents selling their own houses. It's not the house they currently live in, but the ones they bought as investment and rent out. They bought the houses long time ago when the price was still low. If this is not just coincident, I wonder why they want to sell it now. I could think of these possible reasons below and I'd like to hear from other what you think.

1) The house price will drop next year, so they want to sell it now.
2) It's tough to find tenant nowadays.
3) There are some other bargains out there somewhere. So they want to take the money out and invest somewhere else.

^ 3 is probably it. Places like Fresno are an absolute steal right now.

This is a chart of the ratio of median home prices in 1980, 1990, 2000, and 2010 for different bay area counties, normalized to San Francisco = 1. 1980, 1990, 2000 are from the national census data. 2010 is the latest median sales prices from dqnews.com (september)

Admittedly not very good methodology, but what do you expect for 20 minutes work?

All counties I looked at have gotten cheaper relative to to San Francisco since 2000 by a good 20% or more. No wonder I think it's still to expensive here.

Interesting to note though that Contra Costa and Alameda seem to have been slumping relative to San Francisco for 30 years.

magnolia2000 says

1) The house price will drop next year, so they want to sell it now.
2) It’s tough to find tenant nowadays.
3) There are some other bargains out there somewhere. So they want to take the money out and invest somewhere else.

I would like to add a possible #4, and that is that with sales so slow they aren't selling as many properties and they need the money to stay afloat. Even once top producers are feeling the pinch.

robertoaribas says

misstrial: except for proving evidence of the obnoxiousness of many southern californians, what was the point of your post? that you are rude?
Patrick runs a real estate blog. you might notice that fact from oh, say the fact that he posts real estate news from boston, seattle heck even china on occasion.
“I am tired of California being slammed on account that some newby poster decides that commonly known facts about their own State do not meet their liking.” First off as to newbie, I wrote Patrick personally from this site in about 2006, back in the days when all anyone talked about was sushi… so there goes newbie, though I did forget my original password.
I post rent/price ratios from Phoenix which I know extremely well, to show how poorly those same metrics compare in the bay area, and get responses like, “nobody wants to live in Phoenix” an oddity considering 3.5 million people have chosen to live here.
Furthermore, unless I am mistaken the summer heat effects renters and buyers kind of equally. So, I’d expect rent to buy to be rather unaffected by days over 100 degrees.
But lets compare some fun facts: California has the very worst state budget deficit of all, and even higher unemployment rates than Arizona. So, once again, if I’m not supposed to be bothered by “commonly known facts about their state” being posted, then pretend you aren’t a raving hypocrite ok then, and don’t get your panties in a twist about commonly known facts about your state? Don’t let limited logic ability hold you back!

^AZ Real estate agent and/or troll.

~Misstrial

magnolia2000 says

I live in south bay near Cupertino area with some great schools and houses that’s still too expensive to afford. I’ve been to some open house lately. I noticed an increasing number of real estate agents selling their own houses. It’s not the house they currently live in, but the ones they bought as investment and rent out. They bought the houses long time ago when the price was still low. If this is not just coincident, I wonder why they want to sell it now. I could think of these possible reasons below and I’d like to hear from other what you think.
1) The house price will drop next year, so they want to sell it now.

2) It’s tough to find tenant nowadays.

3) There are some other bargains out there somewhere. So they want to take the money out and invest somewhere else.

Cupertino res here (Monta Vista).

They are probably selling for all the reasons you listed.

My understanding is that homes are taking much longer to sell as compared to the past, so its probable that they need the income from the property sale, that is, if the property has any equity in it.

(Recent example: a realtor acquaintance recently sold her investment condo at a loss of $220k.)

Could be that they have a funny money loan on the property that has a reset due and that could be another reason. Or a heloc loan that must be paid off and a divesture has to take place in order to make loan payments or pay off the note.

btw, my landlord's Los Altos property went down over $800k in estimated "value" this year alone. All of a sudden earlier this summer she started behaving, well, less than generous relative to rental repairs. Follwoing that, I went on to zillow and that explained the why's...

Whatever the case may be, real estate is not the investment vehicle it used to be - commodities, gold, oil, and certain currencies having supplanted RE. RE is deleveraging while those investments I listed are going up, up, up.

~Misstrial

Misstrial says

^AZ Real estate agent and/or troll.
~Misstrial

So if someone likes Phoenix better than CA then they are a troll? That's pretty funny...

Dan8267 says

toothfairy says

only 1 house in Oakland is a buy?

You mean, “a house in Oakland is a buy?” Isn’t Oakland, CA the murder capital of the known universe? Why would you want to live, er, die there?

it's mostly terrible and you wouldn't want to live there which is why there are so many "deals".

The low in market crashed because half the owners were flippers and decided to walk when prices didn't go up.
high end market will only crash when jobs crash or in the case of most expensive areas people who live there dont really need jobs so may never crash.

I live in Burlingame, in a house my family has owned since the 30s. There is unquestionably a multi-generation wealth effect supporting prices here and I believe that is something that can be relied upon going forward. People are willing to pay an insane premium to live here (for good reason, I might add; it's a fabulous area). If I had $3M cash to invest buying a 25-30X annual rent house here might make excellent sense as long as low-risk investment return is in the toilet. What else can you do with the money if you're not risk-tolerant?

Talk me out of this line of thinking, please. ;-)

You can live here and enjoy everything about the area without paying that insane premium though. Just rent the same thing, or better.

You can hold that $3M and guarantee that you at least don't lose in nominal dollar amounts. If you buy a house with that much money, even a few percent loss is a lot of money. Not to mention property tax, maintenance, etc. A house is a guaranteed cash drain.

Am I talking you out of it yet?

toothfairy says

high end market will only crash when jobs crash or in the case of most expensive areas people who live there dont really need jobs so may never crash.

WHEN jobs crash? Har, stop it, you're killing me.

> Am I talking you out of it yet?

It's a start. I have a lot of thinking to do.

>You can live here and enjoy everything about the area without paying that insane premium though. Just rent the same thing, or better.

That is almost the situation I have now. I pay considerably below market to live in an inadequate house in a terrific area. The intelligent thing to do with this property would be to renovate/expand, but that's off the table for complex and utterly stupid reasons not worth going into here. The money's sitting there earning squat, everybody wants to move WAY up, prices are 35-50% too high and it's hard to see how that is going to change much due to the high net worth of the community. Yet rents ARE depressed here as everywhere else. Your math says it would be better to spend as much $8-10K/month on rent than buy a $3M house and you're almost certainly right, especially as it's hard to build a case for any future appreciation in prices. There is more likely to be a very sloooow downward spiral over a long time. No crash though. Too much old money that isn't going anywhere.