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Shadow Inventories - Can We, Taxpayers, Take Action?


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2011 Aug 17, 5:06am   9,351 views  45 comments

by bmwman91   ➕follow (5)   💰tip   ignore  

As I am sure most readers of Patrick (and Dr. Housing Bubble / Irvine H.B.) know, there are loads of properties out there that banks are silently holding as part of their extend-pretend strategy. While their books contain toxic assets, there will be associated costs. When they sell these toxic assets, they still usually lose some money. Ultimately, it seems like us taxpayers are responsible for footing this bill. Certainly, unwitting investors in MBS trash also pay a price, but given the massive bailouts & behavior of the Fed, it seems like banks are mostly covering losses with money stolen from The People.

In having conversations with coworkers & friends, it seems that the majority of people are largely oblivious to all of this. Folks that bought houses seem the most out of touch with with happenings in the RE world. I cannot say I blame them, particularly since many bought houses in the last decade. When you were a kid and though that there was a monster under the bed, you pulled the covers over your head & pretended it wasn't there. I think that the same psychological mechanism exists for loanowners today, and I certainly cannot blame them. At the same time, a number of potential buyers seem clueless about the reality of things. They "research" purchases through real estate agents and generally seem to trust them. Really, the biggest issue I see with real estate right now is a general lack of informed people. While sites like this obviously attract concerned & impassioned individuals, we are most definitely in the minority. Certainly, in bubble areas like the Bay Area, the uninformed majority has no problem keeping the illogical side of real estate going strong, while we come in here grating our teeth.

So, can we work to spread information to "the masses"? Obviously, that is this site's intent, but we all know that "the masses" get their news from mass media outlets. They want infotainment provided to them passively, and finding this site (or even going to it) is probably too much of an active demand. Many here will cynically remark that major news outlets will never spread the type of information found here because they are servants to the banks. There is probably some truth there. Nevertheless, I think that it might be worthwhile to try to put some information together and to provide it to some of the larger local newspapers. I mentioned the shadow inventory at the beginning. Well, I think that that topic might be the easiest place to start. There seems to be a fair amount of data available regarding it, and it certainly seems to involve a lot less speculation than topics concerning future home values. Ideally, I would like to see a piece published that provides information about the size of the shadow inventory, and just how it is being paid for.

If we were to try to get some information published with a paper, how would we go about doing that? It seems to me that we would provide them with the basis for a story and supporting data, and then their people would verify sources & do whatever further work was necessary to get it "credible" and publish it. I haven't ever tried to do something like this, so I could use some input. There are the obvious hurdles here, like how much the newspaper is owned by the financial industry, and whether or not they are willing to piss off the NAr / entities that buy ad space for RE listings. Anyway, I was hoping that we could brainstorm some ways to disseminate information to the masses. We can piss & moan about the absurdity of the RE market on here all day, and it IS fun, but I think that it would be worthwhile to think about ways to attack the source of the problem. In my opinion, the source of the problem is an uninformed general public that continues to feed the insanity. While groups like the NAr are also huge problems, we all know that we can't do anything about them at the moment. We need to start targeting their targets.

Thoughts? Given the size of Patrick's site & members, it seems like we might be capable of affecting some change in the community.

#housing

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1   bubblesitter   2011 Aug 17, 5:27am  

Yeah, vote out those congressmen/senators that favor giving taxpayer money to the banks. Banks are independent business entities,they don't have any business getting money from people who they screw in the first place. Politicians and Banksters nexus must be broken for the sake of well being of America.

2   bmwman91   2011 Aug 17, 7:22am  

Agreed. The trick is getting people to wake up & stop voting D/R. I am not sure that we can accomplish that right now. That's why I am sort of hoping to try to start by changing people's minds a little at a time.

3   tts   2011 Aug 17, 7:34am  

bmwman91 says

So, can we work to spread information to "the masses"? Obviously, that is this site's intent, but we all know that "the masses" get their news from mass media outlets.

The masses also already get tons of info from blogs like this too and their friends. Patricks is quite popular these days I think.

If you want to get some real change going on this situation you have to go after the local, state, and federal regulators and lawmakers who've made the current situation possible. If they seriously believe they can lose their jobs or even get prison time you'll see the situation start to improve.

Otherwise you'll be getting more of the same BS we're currently getting.

4   PockyClipsNow   2011 Aug 17, 8:36am  

I recommend giving up on changing anything. Its a hopeless waste of time. Time is better spent on your own ability to make money. Then once you got a big pile of cash - who cares if a home cost 100k more 'than it should be worth'.

What is more likely, your ability to change the country politically in a short span of time OR maybe you can day trade gold or something and make a killing? First choice is a loser 100% of the time.

I only vote half the time, its pointless. I like the way the country is now - lots of ways to make money, flip houses, trade stocks, commodities, you name it.

Also if you consider that we are in a democracy and people get to vote - then if you dont agree with the election results - that is a fascist/anti democratic attitude. The term 'liberal nazi' comes to mind (they make me crazy, but again a waste of thought power).

I know many, many foreign people come to America and 'Get Rich' by working hard - not by complaining about rich people/the banks/etc. They could care less what people yak about. This country exists for makin $$$$$. From Columbus to now that has not changed.

5   bmwman91   2011 Aug 17, 9:08am  

Pocky,

You may be right. However, the sole pursuit of money isn't my aim in life, and I sort of see it as a waste of my time. I make a lot as it is, and rather than spend my life in the pursuit of more, I prefer to get out & live (by my definitions of course). It happens that social justice type stuff is important to me, and working for some sort of socially beneficial cause is something I enjoy.

Besides, "investing" by your given definitions is no different than gambling. I could just as easily end up broke and a lot less happy than I am now.

6   PockyClipsNow   2011 Aug 17, 9:51am  

I thought you wanted to afford a house, thus the money would be useful, no?.

Social Justice is a meaningless term. I think it means taking shit that isnt yours via the legal system? well good luck with that, sir! I'd rather gamble.

Normally no one replies to my useless comments, thanks! lolz.

7   corntrollio   2011 Aug 17, 10:03am  

PockyClipsNow says

What is more likely, your ability to change the country politically in a short span of time OR maybe you can day trade gold or something and make a killing? First choice is a loser 100% of the time.

But don't these two things have something in common -- in one case, you are identifying what the triggers people's thought so you can change it, and in the other you are figuring out what triggers people's thought so you can make money off it? It's just the end game that's different. You can't trade on people's thought without knowing what it is.

8   Mock Romney   2011 Aug 17, 10:19am  

Corporations are People

9   uomo_senza_nome   2011 Aug 17, 10:43am  

I think there's data out there and I posted this a while back here:
http://patrick.net/?p=930061

I sourced from a link that tracks nation-wide inventory. However this is not categorized by banks (the largest banks probably have a ton of toxic mortgages on their portfolio) or even by state.

You are exactly right about the obliviousness part. I mean, housing might be one of the largest, if not THE largest investment a person might make and I am flummoxed by how quickly these decisions get made.

10   ClaraCoCo   2011 Aug 17, 11:07am  

Yes, we should all stop paying tax or invest in wall street.

11   REpro   2011 Aug 17, 12:38pm  

bmwman91 says

given the massive bailouts & behavior of the Fed, it seems like banks are mostly covering losses with money stolen from The People.

Who got the money?
Let’s look into last $8,000 credit for first time home buyers.
The purpose of this credit was to halt descending trend in home values. Most of this money was spend on foreclosure purchases. Effectively prices of houses went up in many areas for more than $8K just to find out that after credit expired they drop for more than $8K.
• People (buyers) got taxpayers money.
• Banks sold houses for more than $8,000 to reduce loss.
• People (buyers) will have to pay back mortgage interest and principal of that money back to the banks.
• Some buyers will have to return to Fed this money back.
How many times banks were benefiting from this program? Lobbing is a wonderful new term.

12   corntrollio   2011 Aug 18, 3:43am  

REpro says

Let’s look into last $8,000 credit for first time home buyers.

Yes, that credit was completely flawed when it applied to used houses. In the 1970s, the credit was properly used for new houses because there was a glut of them. It made more economic sense in that case, but in the current form, it was a mostly a handout to banks along with a temporary blip in pricing and sales that was all for show. The used house market is largely about rent-seeking, so it helps the least deserving people.

13   tdeloco   2011 Aug 31, 3:29pm  

ClaraCoCo says

Yes, we should all stop paying tax or invest in wall street.

If you were rich, you'd be there already!

14   FortWayne   2011 Sep 1, 12:34am  

bubblesitter says

Yeah, vote out those congressmen/senators that favor giving taxpayer money to the banks. Banks are independent business entities,they don't have any business getting money from people who they screw in the first place. Politicians and Banksters nexus must be broken for the sake of well being of America.

15   TMAC54   2011 Sep 1, 12:51am  

bmwman91 says

it seems like banks are mostly covering losses with money stolen from The People.

We Love, Rely, and trust our elected officials. WHY would they have us drink the kool aid just to save the entities with deep pockets ?

16   SJ   2011 Sep 1, 1:01am  

@TMAC54,

I love that cutesy photo of the seagull trying to save the folks from diving into the ocean! Anyways, I agree- just live life. I used to dream of owning a home in California but realize its not worth the stress of it all. I rather pay less rent, have more cash, less stress and enjoy life. At least I don't have to fix leaky toilets or broken lights. Maintenance does that for me.

17   bmwman91   2011 Sep 1, 8:06am  

SJ says

@TMAC54,

I love that cutesy photo of the seagull trying to save the folks from diving into the ocean! Anyways, I agree- just live life. I used to dream of owning a home in California but realize its not worth the stress of it all. I rather pay less rent, have more cash, less stress and enjoy life. At least I don't have to fix leaky toilets or broken lights. Maintenance does that for me.

In the past couple of weeks I have really been embracing this. "Owning" makes little sense as far as my wants & desires in life go. Really, paying $120 a month for a storage space to keep woodworking tools & do car maintenance is a far superior option...mainly in that I can be in there at ANY hour & not worry about noise complaints.

Also, now that "my other half" is coming around to seeing things the way I do, there is a good chance that I can actually forget about "ownership" & enjoy my freedom.

18   corntrollio   2011 Sep 1, 9:41am  

bmwman91 says

In the past couple of weeks I have really been embracing this. "Owning" makes little sense as far as my wants & desires in life go. Really, paying $120 a month for a storage space to keep woodworking tools & do car maintenance is a far superior option...

Excellent -- I'm glad this is working out. It would cost you far more than $120/month to hyper-optimize your house for this purpose, and you would probably have some unintended side effects from doing so -- for example, some other aspect of your house would be non-ideal because you got the workshop.

19   bmwman91   2011 Sep 1, 10:46am  

APOCALYPSEFUCK, I wouldn't advise it. The virus that infected them & turned them into vicious rapists of the middle class would most likely infect you & turn you into one of them. It is kind of like those zombie movies, but worse. Truth be told, I am not sure how to handle the infected. A bullet in the skull works well on normal humans, but I suspect that the infected probably have a different location for their central nervous system. It probably formed close to where they were originally bitten. So, for safety sake, we should probably tie them up & burn them to make sure it is taken care of.

Corntrollio, yeah, the ONLY benefit I see to having my own garage is that it takes 5 seconds to get there. Other than that, I have to be careful with noise because of neighbors, and mainly the spouse. Her & I have amassed a large sum of money, and it is basically 5-6 years' worth of living expenses. We are now toying with the idea of quitting our jobs & taking 6-12 months off to live out of a truck in the eastern Sierra, and travel the world. As I lay in my deathbed someday, I think that looking back on that sort of adventure will definitely be a lot more fulfilling than I bought a house and spend every goddamn weekend fixing it."

20   FortWayne   2011 Sep 1, 10:51am  

bmwman91 says

As I lay in my deathbed someday, I think that looking back on that sort of adventure will definitely be a lot more fulfilling than I bought a house and spend every goddamn weekend fixing it."

Warren Buffet would give up all his billions without deliberation if he could trade it all for being 20 something again. I tell you that much.

21   DC real estate for the rich only   2011 Sep 1, 11:11am  

We should all get together in DC and protest. It's criminal that these banks and the government are altering economics by sitting on this inventory and trying to keep house prices inflated while there are still millions of hard working Americans who wake up every day and go to work, pay their taxes and live with dignity. To think that America would become a place that tolerates house squatters baffles me beyond measure. Soldiers continue to die to preserve our great nation and good Americans continue to keep paying the country's bills without even complaining - Thank God there are still Great Americans out there.

22   mdovell   2011 Sep 1, 11:59am  

DC real estate for the rich only says

We should all get together in DC and protest. It's criminal that these banks and the government are altering economics by sitting on this inventory and trying to keep house prices inflated while there are still millions of hard working Americans who wake up every day and go to work, pay their taxes and live with dignity. To think that America would become a place that tolerates house squatters baffles me beyond measure. Soldiers continue to die to preserve our great nation and good Americans continue to keep paying the country's bills without even complaining - Thank God there are still Great Americans out there.

Um... although I can agree with you on house squatters you do have to remember the actual labor participation rate is around the 60% range and more than half don't pay income taxes to start with.

I can't blame banks for technically hording houses to keep prices up. It's not housing but Nintendo a least three times in the past claimed "chip shortages" for higher prices ('88'92 and late 90s)

The only thing going past this would be if homes were outright destroyed. I highly doubt banks would allow that to happen en masse.

23   DC real estate for the rich only   2011 Sep 1, 12:40pm  

I appreciate your comment and the labor statistic you added. I fall into the "pays income taxes" category. Banks can certainly do what they want but when the American people bail them out shouldn't the market be presented with accurate housing values? Holding inventory is another act of deception. I have four kids and we hate renting. I just don't feel right about buying yet knowing that all that shadow inventory is out there. Let me tell you, that hurts the economy in many ways because I am a Home Depot kind of girl. Haven't been there in a few years. Please forgive me. This website is actually my therapy becuase my husband and I took a bath on a home we bought in 2006. We sold our home and took a huge loss. We took responsibility for our bad decision which cost us almost $200,000. Had we had a chance to refinance at 4% we would have never moved. Now I have to sit in my rental and read about losers getting opportunities to refinance at low rates and live in their homes for free. In the meantime, I still don't think housing has dropped enough to be affordable. None of this makes sense to me.

24   bmwman91   2011 Sep 1, 2:26pm  

DC real estate for the rich only says

None of this makes sense to me.

Well, that is a good sign. Anyone that DOES think that current market conditions make sense needs to get their head examined for the presence of a brain.

25   TMAC54   2011 Sep 1, 4:08pm  

bmwman91 says

Anyone that DOES think that current market conditions make sense needs to get their head examined for the presence of a brain.

It all makes perfect sense IF you are a Bank trying to keep your head above water and allotta taxpayer money is there for the taking. BONUS ANYONE ?

26   Independent Thinker 3271   2011 Sep 2, 2:09am  

bmwman91 says

[I]t seems that the majority of people are largely oblivious to all of this.... So, can we work to spread information to "the masses"?

I'm disappointed no one else has suggested this: DONATE TO PATRICK.NET!

Patrick is providing a real service for all of us, helping to get the housing market and the country back on the right track.

Forget about your donation to NPR or your kids' school. Every $100 you donate provides more information to the "market," and helps reduce the price of your next house by at least $100. The more you donate, the more you can save! And, the more money you save, the less money the banks get from their REOs and the politicians get from the banks!

27   mdovell   2011 Sep 2, 3:48am  

"Banks can certainly do what they want but when the American people bail them out shouldn't the market be presented with accurate housing values? Holding inventory is another act of deception."

Houses are the largest physical items someone can really buy (and most expensive). They also cost on the level where financing (mortgages) are needed.

On the same level the next most expensive item would be a car. Sales went down due to high gas prices and lack of credit so the government did cash for clunkers and bailed out GM and did a odd dance with Chrysler. Technically speaking the program failed. The median new car only received about 0.4mpg more than what it was traded in with...and yet buying a new car which they didn't really need probably priced them out of buying other things (durable goods for starters).

"I have four kids and we hate renting. I just don't feel right about buying yet knowing that all that shadow inventory is out there. Let me tell you, that hurts the economy in many ways because I am a Home Depot kind of girl. Haven't been there in a few years. Please forgive me. "

It's ok I worked for their competition for a number of years during the bubble. The whole retail related market with housing is on some shakey legs. It's been debated that sears does not have that much longer and they are gradually selling more in other chains (costco, menards and ace so far).
Hd does well, I account that to management and cutting dead weight (hd supply and experimental stuff) years ago.Lowe's has closed stores, laid off a huge chunk of their IT, restructured their top brass and their bonds might be downgraded.

Mitch Hedburg once said the reason why you don't see Apartment Depot is because you would see people in a empty warehouse saying "We ain't got to do *#%@!"

There are so many tricks in retail it is not even that funny.There is a hd near me that was made next to a bus station parking lot. The lot charges for parking but hd won't tow. Therefore the parking lot always has cars and appears to have volume when it is not really true.

"This website is actually my therapy becuase my husband and I took a bath on a home we bought in 2006. We sold our home and took a huge loss. We took responsibility for our bad decision which cost us almost $200,000. Had we had a chance to refinance at 4% we would have never moved. Now I have to sit in my rental and read about losers getting opportunities to refinance at low rates and live in their homes for free. In the meantime, I still don't think housing has dropped enough to be affordable. None of this makes sense to me."

Could be worse. I had a boss who was promoted and the company paid him to move to Phoenix. Moving expenses and a place to live. "Something" happened and he either didn't get along with new people or the position. Tried to move back..couldn't.

Then again technically I could argue that outside of commodities that most things tend to go down in value. If you buy something then it is technically "used" and goes down in value. If a product isn't really bought then there might not be demand and thus no value established.

I know a few that bought in the past few years. For two of them I knew they would be in negative equity...I just didn't want to tell them bluntly. Now one of them travels for work a tad but the other has to move to another region soon.

It will still take awhile for everyone to "get it". I still bump into some `11 years after the dot com crash that think programmers make huge amounts and that outsourcing was a myth.

28   kkge   2011 Sep 2, 5:33am  

I keep running into the same problem with people when I try to wake them up: Total blindness.

When I explain the basics of the fractional reserve system that got us into this mess (It takes about 2 minutes, really), people just write it off as a silly conspiracy theory. They stubbornly stick to the idea that banks simply pass money around as opposed to creating and destroying it, and that poor management of an otherwise good system is to blame.

Oh, and if I hear the question "If banks can create money, why would they every go bankrupt?" again, I'm either gonna go crazy or enter a catatonic state. There is no in-between. There is an answer to that, but it's another conspiracy theory.

Any documentation to bolster my case means nothing - even if written by the Federal Reserve itself such as with "Modern Money Mechanics". (Those authors must be conspiracy theorists, too. After all, one can find written material denying the moon landing, right?)

The alternative response is polite self deprecating apathy. ("Oh well, I don't understand all that banking stuff") It's frustrating. The blatant theft inherent in the system is too brazen to actually believe, apparently. It has to be similar to the denial Germans had about the presence of starving people in concentration camps. "It just can't be true."

Under our monetary system, productive labor does not result in a cumulative increase in wealth. It doesn't matter how well we turn natural resources into things that satisfy human wants as long as debt may be offset ONLY with an asset that is created only by additional debt. It's what engineers call a 'positive feedback loop', and we will be stuck in this system for as long as the Federal Reserve exists.

As far as the political route, forget it. Changing one's vote will do nothing. The real problem for the last 100 years has been the Federal Reserve itself. It cannot be tinkered with to make it acceptable. It has to die before we will ever get out of this mire. As long as Congress will not repeal the Federal Reserve Act they are useless.

29   bmwman91   2011 Sep 2, 7:26am  

I also have to "take it easy" when the RE subject comes up with coworkers. A lot of them just don't "get it" and I just politely thank them for their advice when they tell me how great of a time it is to buy now. I tried to gently bring up the truth on a couple of occasions and I was mostly met with blank stares, or a shocked look like I was kicking puppies. Granted, most of my coworkers are "owners" and I suppose that I too would have to build a mental wall to stay sane at this point.

I can tell that it would make for an awkward work environment if I really laid into them with the reality of the situation. Since I don't want that, I am OK with just avoiding the subject entirely (except with coworkers that read this site).

30   thomas.wong1986   2011 Sep 2, 6:33pm  

bmwman91 says

can tell that it would make for an awkward work environment if I really laid into them with the reality of the situation.

Yes, if your new to the area. However, if you been here for 3-4+ decades, its pretty easy to argue a bubble exists and the reasons many used to justified high prices wont last. Even today one can argue we are not done with the correction. Plenty of local natives will not disagree with that.

31   bmwman91   2011 Sep 3, 6:53am  

The vast majority of my coworkers are from elsewhere, or at most 35 years old.

32   thomas.wong1986   2011 Sep 3, 2:29pm  

bmwman91 says

The vast majority of my coworkers are from elsewhere, or at most 35 years old.

Thats the problem ... they bought into ALL the crap we heard for the past 10 years regarding overpaying in the BA... none of it holds any water.

33   toothfairy   2011 Sep 4, 2:40am  

bmw could it be that youre the one whos a bit nutty?

What are the actual shadow inventory numbers for the bay area? Are these even published? Some people think buyers are crazy because if they only knew how much these houses cost 20 years ago before the internet existed.
If you ask me THATs a little nutty.

And I dont buy the delinquency = eventual shadow inventory argument because many of those who are delinquent because theyre either in the process of a short sale or fishing for a loan mod.

Not saying you should rush out and buy but the housing crash has happened (still ongoing but the bottom is mostly in) i worry about folks like you being left in the dust. Dreaming of a day that will never come.

34   corntrollio   2011 Sep 6, 9:50am  

toothfairy says

Some people think buyers are crazy because if they only knew how much these houses cost 20 years ago before the internet existed.

The internet definitely existed before 20 years ago, you just didn't use it. In any case, is it that implausible to think that 1997 prices made a lot more sense? Even if you make the argument that the dotcom boom changed everything, it's not always clear that Silicon Valley or overall Bay Area housing is back to 2000-2002 prices.

Many people argue that the dotcom era was the first bubble in the Bay Area, particularly for high end properties. In fact, for some high end properties, I have seen some 2010 and 2011 sales below or at 2000-2001 prices. Even if we ignore the fact that many consider that era the first bubble here, are you arguing that 2000-2002 prices are the right ones? If so, I think we still have room to drop for non-high end properties. Are you seeing 2000-2002 prices everywhere?

Let's look at three houses in the so-called Fortress -- Cupertino with Cupertino schools in the general range that is often discussed on these forums:

1) http://www.redfin.com/CA/Cupertino/6127-Shadygrove-Dr-95014/home/1815890

4 BR, 1432 sqft -- really? I've lived in bigger 3 BR houses, and ones that had a better location than this one. Look at the sales history:

Aug 12, 2011 Relisted (Active)
Aug 04, 2011 Pending (Pending Without Release)
Jul 05, 2011 Price Changed $848,800
Jun 01, 2011 Listed (Active) $899,000
Apr 27, 2011 Sold (Public Records) $655,000
Apr 27, 2011 Sold (MLS) (Sold) $655,000
Mar 04, 2011 Pending (Pending Without Release)
Feb 17, 2011 Listed (Active) $599,900
Sep 15, 2010 Sold (Public Records)
This home was foreclosed $737,749
Sep 28, 2006 Sold (Public Records)
This was not an arm's length transaction $425,000
Jun 05, 2006 Sold (Public Records) $850,000
Jan 23, 2003 Sold (Public Records) $665,000
Jan 21, 1994 Sold (Public Records) $270,000

So you're telling me that $848,800 is the right price, even though this sold at a bubbly $850K in 2006 and sold at $665K ($815K adjusted for inflation) in 2003? That's "bottom"?

2) http://www.redfin.com/CA/Cupertino/10335-Moretti-Dr-95014/home/795345

4/3, 1267 sqft. That's tiny for a 4BR. Also, the tax records say 4/2 1267, so that bathroom might be unpermitted. Here's the history:

Aug 24, 2011 Listed (Active) $749,000
Aug 24, 2011 - Delisted (Cancelled)
Aug 21, 2011 - Price Changed
Jul 12, 2011 - Listed (Active)
Apr 11, 2011 Sold (Public Records)
This home was sold at a foreclosure $596,000
Dec 22, 2005 Sold (Public Records) $735,000
Oct 07, 2005 Sold (Public Records) $670,000
Jun 25, 1993 Sold (Public Records) $230,000

Again, you're telling me that 2005 bubble sale #2 should be the low water mark here? That's "bottom"?

3) http://www.redfin.com/CA/Cupertino/18940-Loree-Ave-95014/home/634771

3/2 1078 sqft - okay, at least that's plausible. I've lived in a 3/2 that small once, but it was not a great house and had a tiny 50s kitchen. Let's look at the ticker:

Aug 07, 2011 Pending (Pending With Release)
Aug 02, 2011 Listed (Active) $590,000
Jun 13, 2006 Sold (Public Records) $723,000
Jun 13, 2006 Sold (MLS) $723,000
Jun 02, 2006 Delisted
Mar 09, 2006 Listed $718,000
Dec 23, 2002 Sold (Public Records) $480,000

If you adjust the $480K from 2002 for inflation, you get $603K, which might be close to what this house is pending for. This at least fits under your theory since that sale is post dot-com boom and pre-bubble, but the other two don't.

Let's not forget that a mid-90s price for those top two started with a 2, and even if you adjust those for inflation, you don't get a 7 or an 8, unless you did a hell of a remodel job.

I think the better argument for high housing prices is land use restrictions. The dotcom bubble brought a large amount of one-time money to the local economy, but what has happened since then to sustain it?

35   bmwman91   2011 Sep 6, 11:45am  

toothfairy says

Not saying you should rush out and buy but the housing crash has happened (still ongoing but the bottom is mostly in) i worry about folks like you being left in the dust. Dreaming of a day that will never come.

I understand your point. There is no need to worry about me though. While owning would bring some lifestyle benefits, the financial drawbacks still far outweigh them. Renting allows me to save a lot more money while using storage rentals / private workshops to make up for the fact that I don't have a garage workspace.

Perhaps I am crazy to think that any sort of sanity will ever be seen in the Bay Area again. There are a lot of people that want to live here for a lot of reasons (many of them nonsensical & based solely on emotions). There's no way to compete with crazy without going that way yourself. I would not be able to sleep at night knowing that I "sold out" to own around here. My happiness is derived from going out & doing things, and by partaking in various DIY hobbies (car projects, woodworking, speaker building, etc), and buying in the current climate would decrease my ability to partake in those things compared to renting. My fiancee & family also give happiness, but they are somewhat less entwined with the rent/buy issue for me.

In the end, it is about living your life. Certainly, throwing caution to the wind & never giving a moment's thought to retirement is a bad plan, which is why I make the max (matched) contribution to my 401k/IRA and save another 20%-30% of my income. If I owned, I would be able to save 3%-8% of my income. Equity in a house? I think that the current trend of stagnant / slowly decreasing prices really negates any argument about a house being some sort of viable retirement vehicle unless it is used as a rental property.

Basically, since my initial post, I have come a long way in "not giving a shit" about the house ownership thing. A step back & the application of some simple logic & personal honesty has done more to set me free than not having a shared wall ever will. Patrick.net has also been instrumental in "setting me free".

36   Â¥   2011 Sep 6, 1:07pm  

corntrollio says

So you're telling me that $848,800 is the right price, even though this sold at a bubbly $850K in 2006 and sold at $665K ($815K adjusted for inflation) in 2003? That's "bottom"?

Cupertino is greatly distorted by the Apple Mothership expanding madly since 2007. Anybody who wants to walk to work is going to have to pay the price.

Commuting into Cupertino is just a colossal waste of time. Nobody with Apple Bucks and a family is going to do it, not with the quality communities 5-15 minutes away (the Los Altos -> Los Gatos axis).

$850K in 2006

Also, interest rates are 4% now, compared to 6.5% in 2006.

PITI on $848,000 with 20% down 6.5% fixed was $5300/mo.

Same PITI at 4% fixed buys you a $1.1M home now. Well, it would if jumbos went that high.

37   Â¥   2011 Sep 6, 1:10pm  

corntrollio says

The dotcom bubble brought a large amount of one-time money to the local economy, but what has happened since then to sustain it?

http://www.google.com//finance?NASDAQ:AAPL&cmptdms=0&q=NASDAQ:GOOG&ntsp=0

38   corntrollio   2011 Sep 7, 4:42am  

Bellingham Bob says

http://www.google.com//finance?NASDAQ:AAPL&cmptdms=0&q=NASDAQ:GOOG&ntsp=0

Okay, but that's just two companies for which the vast majority of Bay Areans don't work for.

Bellingham Bob says

$850K in 2006

Also, interest rates are 4% now, compared to 6.5% in 2006.

PITI on $848,000 with 20% down 6.5% fixed was $5300/mo.

Same PITI at 4% fixed buys you a $1.1M home now. Well, it would if jumbos went that high.

4% if you put almost $400K down, but okay, sure.

So the argument is that government stimulus is making housing prices bubbly again, fine, but that still doesn't make it sustainable or suggest that the right price is the 2006 bubble price.

Bellingham Bob says

Cupertino is greatly distorted by the Apple Mothership expanding madly since 2007. Anybody who wants to walk to work is going to have to pay the price.

I picked Cupertino mostly because people talk about it here. We could try another town. It's not that hard to find multiple sales since 2001. I've found a few in various towns that had a sale in 2001, 2003, and 2005 and are currently listed, and have certainly seen a few with 4 sales in the last 10 years.

39   Â¥   2011 Sep 7, 4:58am  

corntrollio says

Okay, but that's just two companies for which the vast majority of Bay Areans don't work for.

Right. But compare the available housing stock in the fortress to the millionaires being created by these two corporations.

There are 60 homes on the market in Los Altos area, and the cheapest is $830.

4% if you put almost $400K down, but okay, sure.

nope, just 20%, which gets you under the current jumbo limit. This limit is falling to $625,000 which will affect prices to some extent tho.

We could try another town.

Sure. The point about the Fortress is that it's very small. All the Successful People want to live there, and there's not enough space for all of them.

40   corntrollio   2011 Sep 7, 7:21am  

Bellingham Bob says

nope, just 20%, which gets you under the current jumbo limit. This limit is falling to $625,000 which will affect prices to some extent tho.

No, I'm talking about $1.1M.

Bellingham Bob says

Right. But compare the available housing stock in the fortress to the millionaires being created by these two corporations.

Let's not use hyperbole. There aren't that many millionaires being created by these two corporations any more. I grant you that some people probably could make $150K these days, but the amounts of yore have been largely spent on housing or other consumption already. How many people held on to the stock for longer than vesting period? Not many.

I don't disagree that housing markets are made at the margin, but they can also drop at the margin if there's no one else left to buy.

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