Real estate-- calling the top.

[Brat]

It's about 30 miles to Portland, OR where my partner and I both work.

Ah, you must have found the coast range foothills and work on the west side of the metro area. Good choice. That commute wouldn't make me happy, but compared to the NE it is a breeze.

 

[Michael Moore]

Unless you can bear living anywhere else, then you just have to be part of the insane SF prices.

My brother and his wife rent out their SF properties and live now in Mt Shasta.  Apparently a lot of Bay Area types have made the move, too, but it's pickup and chainsaw country, so it won't be a fit for every San Franciscan.  What about Portland?  I doubt you could move into a bigger house anywhere in the Bay Area and save money, though.  Can you add square footage where you are through a remodelling job?

We paid off the house a few years ago, so we're looking good on that front. The market value of our house is mainly an issue if we were looking to sell, which we aren't at this time.

We looked into an expansion of the house in the early 1990s, but at that time it would have been a real stretch to afford it (the estimate was about $120K cutting most every corner possible). At that time the residential code was looking very uncertain, with it not being clear what the requirements would be over the next period of time while they fiddled with them.

Based on what I've seen of some remodeling jobs done by some friends around here I'd expect that if we could get approval for what we'd originally looked at (but even that really didn't add enough space to make us feel like working to make it happen) it would easily be $250K with Bay Area labor prices, and getting saddled with a new mortgage now that we are both FIRE'd isn't something that either of us want to do. Plus, living in a construction zone (or having to live elsewhere more likely) for a year or more isn't very appealing.

The Portland area might be doable, but the coast might fit our climate preferences better. I can see living on the outskirts of a city, but my one experience living in a small town (Ruston, LA) 30 miles from the nearest city in one direction and 60 miles in the other, didn't leave me with any desire for a semi-rural lifestyle.

I suppose much of it is just finding a place that "feels right". But we're not in a hurry at this time, so we aren't going to rush into anything.

cheers,
Michael

 

[cube_rat]

At least until the quake comes.

ha

Yep, we're waiting for the big one. I'm 15 minutes from SF.

 

[LEX]

I enjoyed my eight years in the bay area, but would never move back.  The SF real estate market is but part of a micro-economic anomoly that seems to exist in several places, primarily in New York, DC, SF, and LA-SD.  Its the type of emotion that takes place at auction, when the panic for making the buy kicks in and the 'actioneer" (read real estate agents & their hype) create a sense of false need and urgency. The prices are greed driven and not value driven. The only one who wins is the casino, the acution house, and the real estate cartell of money lenders and fee gatherers.

There is plenty lifestyle friendly real estate to choose from in the US and world wide.  Right now Az works for me, but I can not say what will work in ten years, and I am spending more time each summer in eastern europe. I like the Crimean Black Sea coast. Still full of issues, but so is San Diego, at many  times the price risk.  Anyway, all real property is possesion subject to premptive government policy, and no one really ever owns what they believe they have.  So enjoy, and thats the payback. 

 

[ESRBob]

Anyway, all real property is possesion subject to premptive government policy, and no one really ever owns what they believe they have. So enjoy, and thats the payback.

Lex,
Good point -- I remember the first time this all came clear to me. We owned our house free and clear, and were happily thinking of living there for life and handing it on to our kids, when the local property taxes got re-assessed. I realized what you said, then: owning is just a partial ownership, because the taxing authority where you live has an untramelled right to tax what you 'own' and take it if you don't pay. Not that I object to this system, but it isn't ownership in quite the same sense that we own anything else.

 

[Honkie]

If you think rental property in SF is expensive, check out some of the hot rental properities in Hong Kong:

http://www.sallmannsres.com/hot/

Reference #  23940
Property Name Hillsborough Court
Mid-levels
Bedrooms 3
Bathrooms 2
Size 1369 sq feet
Price Rent: HK$45,000 inclusive (per month) USD = $5,700
An elegant 3-bed apartment in this sought-after and beautiful maintained development in upper Mid-Levels. Peaceful mountain views. Pool & Gym.

Reference #  26303
Property Name Broadwood Road,
Happy Valley
Bedrooms 4
Bathrooms 3.5
Size 4396 sq feet
Price Rent: HK$230,000 exclusive (USD $30,000) per month!!!
Stunning penthouse duplex in this prestigious new complex in Happy Valley. Separate family room, balcony, 2 covered carparks. Amazing views over the racecourse and city. Superb fittings throughout. Great clubhouse.

I wonder how do people afford this kind of rental given the income per capita of $26,810 in Hong Kong, China (it ranks 22nd while US ranks 4th)

http://www.finfacts.com/biz10/globalworldincomepercapita.htm

I wonder how do people afford this kind of rental given the income per capita of $26,810 in Hong Kong, China (it ranks 22nd while US ranks 4th)

http://www.finfacts.com/biz10/globalworldincomepercapita.htm

It's a little like looking at rental prices in high end Manhattan and then asking "How does the average US resident afford it."  It is disengenuous as not all residents live or want to live in the most expensive areas.

The two examples you picked are in the more desirable/exclusive areas of Hong Kong Island. As such, the rental premiums for views, space and location are high.  30 minutes outside of the centre of Hong Kong and you could 2000 sq ft for less the US$1000 a month. Like any real estate it is about location (location, location). Property in Hong KOng is VERY expensive, but it is not reflected by the examples you quote.

Secondly, one factor that most of the income surveys do NOT account for is the statistical mis-match created by Hong Kong's taxation system. Most of the surveys are based upon tax returns and taxable income or the best estimate of that income. Hong Kong only taxes EARNED INCOME (via the Salary Tax). Other income is largely untaxed and therefore not reported on tax returns and not coolated in the income statistics. Rental Income is taxed, but all investment income, interest, dividends etc are not and there is no requirement to declare that income. Thus for a large portion of the population, a significant portion of annual income is not reported. Most business owners do not salary tax at all. They pay themselves only enough to soak up the tax allownaces and then pay all other money in the form of dividends. That is why only a very small band (I think 20% of working people in HK pay Salary Tax), thus the statistics used to compile these surveys is often very far wide of the mark.

Cheers

Honkie.

 

[Mr._johngalt]

I checked the "fishing cabin".  Now, that neighborhood is REALLY
scary!  Way worse than I expected.  There should be a sign by
the entrance.  ABANDON HOPE, ALL YE WHO ENTER HERE 
Location, location, location.............

JG

DW told this story to a nurse where she works. Turns out the nurse
knows the area well and lives within a mile or so. Anyway, she lost her dog a few years ago and by the time she located it, the dog had
wandered into this "no man's land". The "residents" were not helpful
in assisting her. She had to go to work and after her shift she went back to find the dog hanging in a tree with it's throat cut. DW
opined that this story may not be true. Well, I saw the area where
this supposedly took place and I can believe it. Oh, I almost forgot....................the nurse reported this to the police and they
took the attitude that any living creature who wandered in
there was probably doomed anyway. She got the impression the cops
did their best to stay away. Nice huh? BTW, this hell hole is no where
near where we live, but still too close for me. DW said they
should just bulldoze the whole works. That would be a big improvement. It would a great place for a casino. No kidding!

JG

 

[Martha]

I am not ready to call the top yet in the Arizona market, where we are investors in a couple of condo developments. In one of the developments of about 200 units, they are selling at the rate of 9 or 10 a month. This will mean nearly two years to sell them all off, but we already have been repaid nearly all our investment and the rest is profit.

Move to Arizona!

 

[tryan]

Growth in home prices in Arizona continues to accelerate, with a one-year rate of increase of 30 percent — the largest of any state by a wide margin.

Stocks ... schmocks. Who needs'em when you can get 30% per year in Arizona RE!

http://www.msnbc.msn.com/id/10282120/

Enjoy!

 

[NYCGuy]

I can tell you that the peak has passed in Manhattan. Since June, the median apartment is down 16% (through Oct. 31) while the average is down 18%. You wouldn't catch that from reading the typical news story which reports the month-over-month sales counts, but only the year-over-year price, which for most markets are still up while the downturn is in progress.

Those who take comfort in the fact that there has never been a national crash in real estate overlook several facts:

1. The housing bubbles of the 70's and 80's did indeed result in a reversion to mean valuations, but not through crashes in nominal prices. In both cases inflation ate away the gains in a few years. In areas like NY, LA, and Boston, where recessions occurred during the early 90's there were indeed crashes in nominal values.

2. There has never been a national bubble like this one. The runup in RE prices since 1995 is due to a nationwide, indeed global, credit bubble caused by the trade imbalances and cheap money policies of central banks, including the FED, ECB and BOJ. The bubble will end, with a bang like Japan or a whimper like the UZ and Australia. Whether it will be followed by a generation of RE deflation like Japan or in a soft landing like the UK and Oz (so far!) remains to be seen. In one way or another RE valuation will regress to the mean measured by price/rent and price/salary ratios. The question is whether a systemic banking crisis and a depression accompany it.

 

[Martha]

2. There has never been a national bubble like this one. The runup in RE prices since 1995 is due to a nationwide, indeed global, credit bubble caused by the trade imbalances and cheap money policies of central banks, including the FED, ECB and BOJ. The bubble will end, with a bang like Japan or a whimper like the UZ and Australia. Whether it will be followed by a generation of RE deflation like Japan or in a soft landing like the UK and Oz (so far!) remains to be seen. In one way or another RE valuation will regress to the mean measured by price/rent and price/salary ratios. The question is whether a systemic banking crisis and a depression accompany it.

Looks like my husband has found a new friend.

 

[greg]

NYCGuy:

I agree. I've been waiting for the crash for more than three years but instead the gov't just blew the bubble bigger. I think right now, as the Fed is raising short-term rates to stifle the housing market, it is also adding liquidity on the other end to keep the general economy from tanking--all in order to 'manage' the slowing housing market. I'm watching this action as closely as I can. But I don't have any real numbers to look at for this process. If they manage this process, then it may prolong the housing drop and subsequent effect on the (retail?) economy. I can't pinpoint a time for the big drop just yet? You? What's your take on when? If it's a gradual housing price drop, when will it will affect retail?

 

[Mr._johngalt]

NYCGuy: 

I agree.  I've been waiting for the crash for more than three years but instead the gov't just blew the bubble bigger.  I think right now, as the Fed is raising short-term rates to stifle the housing market, it is also adding liquidity on the other end to keep the general economy from tanking--all in order to 'manage' the slowing housing market.  I'm watching this action as closely as I can.  But I don't have any real numbers to look at for this process.  If they manage this process, then it may prolong the housing drop and subsequent effect on the (retail?) economy.  I can't pinpoint a time for the big drop just yet?  You?  What's your take on when?  If it's a gradual housing price drop, when will it will affect retail? 

You give the "government/fed/"them" too much credit. Forget about what they are doing. "They" are clueless. Look into your own heart/head.
That is where the answers reside.

JG

 

[greg]

You give the "government/fed/"them" too much credit. Forget about what they are doing. "They" are clueless. Look into your own heart/head.
That is where the answers reside.

JG

You are right, Obwon , but the force eludes me.

 

[LEX]

Martha...come on down! But, being a member of the AZ Bar, I need to remind you there is no reciprocity. I wonder if Arizona's examiners include material on the Sherman Act these days? (I happen to disagree with the AZ Bars restraint of trade.)

 

[Nords]

Looks like my husband has found a new friend. 

Or an evil twin...

 

[sgeeeee]

I am not ready to call the top yet in the Arizona market, where we are investors in a  couple of condo developments.  In one of the developments of about 200 units, they are selling at the rate of 9 or 10 a month.  This will mean nearly two years to sell them all off, but we already have been repaid nearly all our investment and the rest is profit.

Move to Arizona! 

Time on the market is starting to creep up here, Martha. That could be an indication of a decline.

 

[Martha]

Martha...come on down! But, being a member of the AZ Bar, I need to remind you there is no reciprocity. I wonder if Arizona's examiners include material on the Sherman Act these days? (I happen to disagree with the AZ Bars restraint of trade.)

The wife of one of our lawyers pursuaded him that it was time to move to Arizona for the sunshine. The moved there and he actually took the Arizona bar exam. Yuck. No more bar exams for me. He passed and practiced some law down there. But they decided they disliked Arizona and moved back.

He is a Republican in our firm of mostly Democrats. He said the Democrats in Arizona were more conservative than he is.

 

[LEX]

Oddly enough with the growth the AZ Bars restraint of trade has paid off for those who are in the club. This use to be empty, hostile desert.  Now its just hostile and the old guard are very protectionist.   There is actually a shortage of experienced practioners in Tucson and Phoenix in most of the specialties. I would hope the regulators start doing their job to protect the consuming public.  None of this impacts me as I have always had a closed practice.   I limit my practice to mining and related areas, much of it in now russia and south america, and these days I am only doing personal deals. (I now look back and realize I did more engineering than law anyway.  The law was useful to keep what was there, but the venture still had to get it to market). I still get involved in mining investments, most of them in Peru and Chile, and a few in the CIS (mostly platinum and palladium) but only to make certain my assets are busy keeping me free from having to show up for a day job.  Its amazing that what is going on in real estate is also occuring in the commodity sector.  I wonder if this is part of a bigger trend?

 

[Martha]

Time on the market is starting to creep up here, Martha. That could be an indication of a decline.

Currently I think it is a matter of "location, location, location." The condo developments we own are in desirable areas in Phoenix, so they seem to be moving pretty fast, with prices actually increasing. Fifteen units are set to close in December. At this point, all we can do is cross our fingers.

 

[lets-retire]

It is location. To think something that effects real estate in the northeast will have a strong affect in the vacation/retirement areas is a little simplistic. The same goes for the working, welfare and wealthy areas of a city. Each have their own concerns and problems with real estate. The real estate market is not a national market. There are national things that affect sales, but it is a local and some time very local market.

 

[Spanky]

It is greed -- greed ... greed. Buy now and sell it quick for a profit.

 

[bosco]

The quake already came and went. Mostly little damage as always now days. It is not 1906 anymore.

As a structural engineer, I find this attitude puzzling. The quake has not come and gone in the Bay area. Look at what happened in Kobe, Japan in the 90s. They thought they were prepared--in fact they were more prepared than the Bay area. A lousy 7.0 (Loma Prieta) is peanuts. It's a logarithmic scale. Try an 8.5 and see what happens (or a 9.0 like the Alaska quake). Modern seismic engineering dosen't even attempt to prevent major damage in a design quake. The goal is to prevent major damage in the "operational" (50 year) quake, and catastrophic collapse and loss of life in the "design" (500 year) quake (I'm speaking of bridges, might be a bit different for buildings, probably less strict since federal funding is not involved typically). These codes have only been applied to the stuff built fairly recently. And this assumes a level of knowledge in the field that, frankly, may or may not be there (engineers tend to think they know more than they do, but even if they know a lot, how much do the geologists know that are feeding them the inputs?). The level of knowledge didn't cut it in Kobe, although up to that point Japan was very proud of their seismic engineering.

I've always thought people that live in a big urban center over a fault must have a special psychological gift, or maybe ostrich genes?

What does this have to do with property values? Not much, but it probably should.

 

[Spanky]

Here is a link for those who are still leaving in California:
Next Big Quake in the Bay Area
http://quake.wr.usgs.gov/prepare/future/index.html

 

[cube_rat]

To bosco's point, I was in SF in the 1989 quake (7.0). Houses in the Marina collapsed, part of the bay bridge collapsed and the worst was the 880 freeway where many people in their cars were flattened like pancakes. We take it for granted that modern structural engineering will hold up during a quake of a large magnitude. 1989 showed us otherwise.