You know you're in a bubble when....

[honobob]

Think about that for a nanosecond, honobob. $600K median, and your expectation is for 10%/year going forward?

Well, it has been 11% for 21 years so I thought a 10%ish reduction in appreciation might be appropriate. I am conservative. See you are dampening the market expectations! I already answered who will be buying.

 

[twaddle]

I already answered who will be buying.

You'll be buying! Riiiight. Lesse, assuming 3% inflation, that $4M median translates to $2.3M in today's dollars.

I will happily sell you median-priced homes in SF or hono for $2.3M/each. How many would you like?

 

[cho oyu]

Justin That data is for the SF metropolitan area that probably includes 9 counties in the Bay Area. Some of these sales would be more that 2 hours from SF. It would also include alot of new home sales. I'm on record that subsequent sales in new developments are often lower than the first sales. I reccomend not buying in new developments.

The Case-Shiller data uses information from 5 counties: Alameda, Contra Costa, Marin, San Francisco, and San Mateo.

Only Contra Costa and Marin counties have anything resembling regions outlying the major SF metropolitan center. Note that the data does not include Santa Clara County (which includes San Jose down to Gilroy).

Same-home prices have not necessarily decreased in all areas of the bay; maybe these small pockets are where you own.

In most areas they have decreased. This, oddly enough, is identified by a decrease in the Case-Shiller index for the SF bay.

Rents still cover <60% of carrying costs on most housing purchases in this 5 county region. This situation is simply not sustainable. So you'll eventually see more of an equalization by increased rents or decreased house prices. And rents generally trend quite closely with salary increases...

 

[honobob]

Same-home prices have not necessarily decreased in all areas of the bay; maybe these small pockets are where you own.

In most areas they have decreased. This, oddly enough, is identified by a decrease in the Case-Shiller index for the SF bay.

My small pocket would include about a 30 mile radius from SF. Most resales have NOT decreased (excluding outlying new construction) I posted several resales awhile back showing substantial increases. I have no proof of a decrease. Would you be so kind to supply addresses of properties?

 

[cho oyu]

My small pocket would include about a 30 mile radius from SF. Most resales have NOT decreased (excluding outlying new construction) I posted several resales awhile back showing substantial increases. I have no proof of a decrease. Would you be so kind to supply addresses of properties?

Here is a brief description of the Case-Shiller index taken from Standard and Poor's.

"The S&P/Case-Shiller® Home Price Indices measures the residential housing market, tracking changes in the value of the residential real estate market in 20 metropolitan region across the United States. These indices use the repeat sales pricing technique to measure housing markets. First developed by Karl Case and Robert Shiller, this methodology collects data on single-family home re-sales, capturing re-sold sale prices to form sale pairs. This index family consists of 20 regional indices and two composite indices as aggregates of the regions."

This is the most comprehensive statistical data available for the San Francisco region (and as I noted before, this is the core metropolitan area, not "outlying regions" such as Modesto or Los Banos). Any anecdotal evidence (such as specific street addresses) are a subset of this information and therefore do not give as complete of a picture of price trends.

Again, perhaps your properties are located in still-appreciating pockets of the SF bay area. But they are, in the layman's (although perhaps not mathematical) sense, statistical outliers.

I challenge you to provide any statistical or widespread information (anecdotal information is NOT valid) that suggests housing prices in the overall bay area have increased year-over-year.

 

[tryan]

Quote:
Originally Posted by tryan
My local market (north of Boston) has corrected just about to where it was as of the start of this thread - 8/2004. Spoke to a realtor today (will be listing a SF next month) who seemed pleased/excited about the having pulled some of the excess out of the market.

The zero down buyers (aka speculators) are gone; lots of shady mortgage companies are gone. Buyers have decent credit and are actually putting DEPOSITS into the deal. And low ball offers are acually considered.

The healing has begun.

So would a typical SF property in your market flow cash to an investor, assuming a 30 fixed mortgage and 20 to 25% down? Still a ways to go by me, despite very healthy rents.

Not even close ... wages would have increase - or prices decrease - about 40 % more to make purchasing a rental cash flow. That's why I am still a seller in this market.

FWIW, I've had 11 years of double digit appreciation. BUT the prior 12 years came with ZERO % appreciation (as posted on prior threads).

 

[cho oyu]

Here is some fun anecdotal evidence that might indicate decreasing prices. (Or, of course, all the reduced prices could still be above what the house would have sold for 1 year ago. Is it likely and would anyone in their right mind really believe that? I find that hard to fathom. Is it possible based only on craigslist listings evidence? Yes.)

Two years ago, many properties on craigslist.org could be found with "open for bids" or "bid now" in the title.
s.f. bayarea craigslist > real estate for sale: search for "bid"
Not too many anymore, eh?

At the same time, it was impossible to find property that had been reduced in price. Everything was selling within days - and had multiple bids above offering price. A search for SF bay area properties including the word reduced gives the following:
s.f. bayarea craigslist > > real estate for sale: search for "reduced"

It seems the trends have changed just a bit in the last several years.

 

[honobob]

anecdotal evidence that might indicate decreasing prices. could still be above in their right mind believe I find that hard Is it possible



It seems

Can't argue with this. ??
I know a place to get a good deal. They're having a going out of business sale. It seems their prices should be lower than last year when they had their last going out of business sale.
"if WalMart is always lowering prices how come nothings free yet?"

 

[cho oyu]

Can't argue with this. ??
I know a place to get a good deal. They're having a going out of business sale. It seems their prices should be lower than last year when they had their last going out of business sale.
"if WalMart is always lowering prices how come nothings free yet?"

Note that my post regarding the Case-Shiller index derided the use of anecdotal evidence as an effective data point for prices.

Note also that, when providing anecdotal evidence, I added in the appropriate qualitative disclaimers. Your post is merely highlighting the fact that my arguments are self-consistent.

I'm still waiting for you to provide any statistical or broad-based evidence that year-over-year prices on residential real estate have increased. Good luck.

 

[honobob]

Here is a brief description of the Case-Shiller index taken from Standard and Poor's.

"The S&P/Case-Shiller® Home Price Indices measures the residential housing market, tracking changes in the value of the residential real estate market in 20 metropolitan region across the United States. These indices use the repeat sales pricing technique to measure housing markets. First developed by Karl Case and Robert Shiller, this methodology collects data on single-family home re-sales, capturing re-sold sale prices to form sale pairs. This index family consists of 20 regional indices and two composite indices as aggregates of the regions."

This is the most comprehensive statistical data available for the San Francisco region (and as I noted before, this is the core metropolitan area, not "outlying regions" such as Modesto or Los Banos). Any anecdotal evidence (such as specific street addresses) are a subset of this information and therefore do not give as complete of a picture of price trends.

Again, perhaps your properties are located in still-appreciating pockets of the SF bay area. But they are, in the layman's (although perhaps not mathematical) sense, statistical outliers.

I challenge you to provide any statistical or widespread information (anecdotal information is NOT valid) that suggests housing prices in the overall bay area have increased year-over-year.

366 Lovell Ave (Mill Valley): closed on 8/09/07 for $4,500,000 (2.4% over asking)
∙ 220 Danvers: closed escrow on 8/08/07 for $2,050,000 (3.5% over asking)
∙ 7 Cameo Way: closed escrow on 8/22/07 for $1,550,000 (3.7% over asking)
∙ 801 Teresita Boulevard: closed escrow on 8/29/07 for $950,000 (6.1% over asking)
∙ 741 Noe: closed escrow on 8/20/07 for $1,057,000 (6.9% over asking)
∙ 610 Rhode Island: closed escrow on 8/30/07 for $2,551,000 (10.9% over asking)

 

[cho oyu]

I challenge you to provide any statistical or widespread information (anecdotal information is NOT valid) that suggests housing prices in the overall bay area have increased year-over-year.

366 Lovell Ave (Mill Valley): closed on 8/09/07 for $4,500,000 (2.4% over asking)
∙ 220 Danvers: closed escrow on 8/08/07 for $2,050,000 (3.5% over asking)
∙ 7 Cameo Way: closed escrow on 8/22/07 for $1,550,000 (3.7% over asking)
∙ 801 Teresita Boulevard: closed escrow on 8/29/07 for $950,000 (6.1% over asking)
∙ 741 Noe: closed escrow on 8/20/07 for $1,057,000 (6.9% over asking)
∙ 610 Rhode Island: closed escrow on 8/30/07 for $2,551,000 (10.9% over asking)

an·ec·do·tal

/ˈæn

ɪkˌdoʊt

l, ˌæn

ɪkˈdoʊt

l/ Pronunciation Key - Show Spelled Pronunciation[an-ik-doht-l, an-ik-doht-l] Pronunciation Key - Show IPA Pronunciation –adjective
3.based on personal observation, case study reports, or random investigations rather than systematic scientific evaluation: anecdotal evidence.

sta·tis·tics

/stəˈtɪs

tɪks/ Pronunciation Key - Show Spelled Pronunciation[stuh-tis-tiks] Pronunciation Key - Show IPA Pronunciation –noun 1.(used with a singular verb

) the science that deals with the collection, classification, analysis, and interpretation of numerical facts or data, and that, by use of mathematical theories of probability, imposes order and regularity on aggregates of more or less disparate elements.

 

[honobob]

Real estate in the SF Bay Area seems to be holding up.

Sales are down but prices are steady or up slightly from a year ago. According to Zillow my house is up about $20k in the last year. Nearby sales support that.

Some houses (maybe 25% or so) are still selling for more than the asking price. As an example according to some marketing info from one of the local agents a 1450 sq ft., 3bd, 2bath house recently listed for $712k and sold for $792k.

MB

 

[honobob]

San Francisco sale and resale of condominiums

I posted this on 6/25/2007 the above post was made by MB on the same date.


Purchased Resold

5/05 $820K 9/06 $940K +$120K
3/05 $613.5K 10/06 $750K +$136.5
5/05 $765K 12/06 $870K +105K
5/05 $785K 2/07 $880K +95K

These are the resales that I looked up a couple of months ago. The market here and in Honolulu is still very HOT! Not a bad return for buying in 05 when many here were predicting the end of appreciation in California.

Doesn't look very good for anyone that sold in 05 and didn't reinvest. Of course, to many this will support bailing now fer sure! I've had 21 years of 11% yearly appreciation on my purchase price in Ca and 9% in Honolulu for 29 years.

 

[haha]

You have had great results. Congratulations!

Ha

 

[honobob]

You have had great results. Congratulations!

Ha

If that was meant for me then thanks Ha. But I'm not trying to prove I'm a captain of industry with rapier business wit. I much prefer being known for my stunning handsome good looks and sculpted body. I'm just trying to point out that anyone/anytime/maybe not anywhere can do quite well in real estate with a little business sense. And you can't base your decisions on what everyone else is saying and old business cliches. Nothing wrong with listening to both sides but you can't come into the argument with your mind made up.

It's too good a day to be inside. I'm taking the dogs for a walk. Everybody have a great day!!

 

[Martha]

366 Lovell Ave (Mill Valley): closed on 8/09/07 for $4,500,000 (2.4% over asking)
∙ 220 Danvers: closed escrow on 8/08/07 for $2,050,000 (3.5% over asking)
∙ 7 Cameo Way: closed escrow on 8/22/07 for $1,550,000 (3.7% over asking)
∙ 801 Teresita Boulevard: closed escrow on 8/29/07 for $950,000 (6.1% over asking)
∙ 741 Noe: closed escrow on 8/20/07 for $1,057,000 (6.9% over asking)
∙ 610 Rhode Island: closed escrow on 8/30/07 for $2,551,000 (10.9% over asking)

These results are consistent with the info in this article: Home prices rise in July even as sales fall to 12-year low

The protracted waiting game between home buyers and sellers continued in July, as Bay Area real estate sales slowed to a 12-year low while prices edged up, according to a report released on Wednesday.
A total of 4,990 existing single-family homes changed hands in the nine-county Bay Area in July, according to DataQuick Information Systems of La Jolla (San Diego County). That was down 13 percent from 5,721 home sales in July 2006.
The median price was $738,500, up 7 percent from $688,955 a year ago.
The median rose because a greater proportion of expensive homes were sold, said Andrew LePage, an analyst at DataQuick. Tighter lending standards after the subprime loan debacle have knocked many entry-level buyers out of the market because they lack down payments, good credit or solid income proof. "If you yank out a bunch of low-cost sales, then guess what happens to the median?" he said.
"The higher you go up the price ladder, the more stable (the market) appears, with the big caveat that things could change, even if temporarily, in August because of the credit crunch," LePage said


Micromarkets may stay stable or increase, but as a whole there is a popped or popping bubble. And everybody but bob knows it.

 

[Spanky]

That's great house (366 Lovell Ave -- Mill Valley) with a beautiful view. I can never afford to live in SF. It's simply too expensive. Price of homes in SF may return to a more reasonable level if mortgage rate escalates or income level falls. It seems that people in the Bay Area are still making above average salary and thus afford the exorbitant cost of housing. Someday this may change.

 

[twaddle]

That's great house (366 Lovell Ave -- Mill Valley) with a beautiful view. I can never afford to live in SF. It's simply too expensive. Price of homes in SF may return to a more reasonable level if mortgage rate escalates or income level falls. It seems that people in the Bay Area are still making above average salary and thus afford the exorbitant cost of housing. Someday this may change.

At $4.5M, I suspect mortgage rates aren't much of a factor. The house is nice, but it's just a house. For $4.5M, I want the Taj Mahal. I don't care if the money came from a Google options windfall -- that value proposition still seems criminally insane to me.

 

[Nords]

For $4.5M, I want the Taj Mahal. I don't care if the money came from a Google options windfall -- that value proposition still seems criminally insane to me.

When we bought our dream house (June 2000) our offer was accepted the day before the realtor listed it on a website. By the end of the week we had to vacate all our contingencies to keep the deal. In retrospect that was the year that Hawaii real estate bottomed out and started screaming back up.

I think an awful lot of Silicon Valley options were converted into Hawaii real estate between 2000-2002. I still see a lot of SV names around here, especially on Maui & Kauai. I'd have a hard time evaluating the value of Google options until they'd been exercised, the stock sold, and the taxes paid.

Of course we could always use the "Ken Lay method": borrow against the company stock and pay back the margin calls with more of it...

 

[honobob]

Micromarkets may stay stable or increase, but as a whole there is a popped or popping bubble. And everybody but bob knows it.

Martha, Maybe only me, MB and the buyers of some 180,000 homes in the last 36 months of said bubble (5000 X 36mo.) You seem to ignore the resale properties that I've posted twice. If it makes you feel better that there is a bubble popping 2,000 miles away from you then fine, POP. Feel better? Equity envy, the new road rage?

 

[laurence]

Martha, Maybe only me, MB and the buyers of some 180,000 homes in the last 36 months of said bubble (5000 X 36mo.) You seem to ignore the resale properties that I've posted twice. If it makes you feel better that there is a bubble popping 2,000 miles away from you then fine, POP. Feel better? Equity envy, the new road rage?

Shouting "11% gains over 20 years!" 10 times - the new male compensation? I think I liked the red sports car better! Maybe you'd get a better reception if you tried a little less smarmy in your face patronizing and sarcasm. I've never noticed this board to be a place for pissing contests, I don't know why your trying. Even your attempt to goad me with your "sorry about your loss plus carrying cost and inflation...." was laughable, my house is my home D00D, it's where my kids grow up, I'm not a speculator like yourself.

Frankly, I'm having trouble figuring out what you are selling. If you want to make the statement that people can profit in a difficult market - fine, totally believable. But right now you are coming across like a late night infomercial telling seniors to cash out their pensions for real estate! Or GOLD! GOLD! GOLD! Follow the green arrows and you can't lose!

I'm also curious as to why you are still at it. If you've made such major moolah for 20 years+, why not cash out and retire? I mean, this is an early retirement board.

Tone down the retorhic and qualify your statements. Nobody here is closed to a new good idea. How do you go about finding gems that are selling for below market value then turn around and sell them for an vast increase over the average?

 

[honobob]

Meanwhile, we poor simpletons are seeing our neighbors sell their houses for 10%+ less than what they were selling for a year ago, both in San Diego and in San Fran (friends there).

Umm....still can't find support for that statement? Maybe just put me on your ignore list. Although from your last post it seems that you really haven't read and/or comprehended my posts anyway. I've always said I buy at market and hold. Tons of people have done the same with the exact same results or better. Guess that makes us all Captains of Industry. Clever of you to try to lump me in with infomercials/seniors/pensions/gold. I'm surprised you didn't blab that I cavort with known homo sapiens, although you did get in the little red corvette image.

You seem so quick to accept the bad news without question and challenge any positive information or ideas. Does that help you accept your own failures or limited way of thinking? Unfortunately your behavior is not uncommon here when there is any challenge to the group think. Weren't you on the OAP and Andy H welcoming committee? My reception is fine, your's seems a little fuzzy.

I state facts and my opinion and am willing to provide support. You resort to attacks and name calling.

 

[laurence]

Umm....still can't find support for that statement? Maybe just put me on your ignore list. Although from your last post it seems that you really haven't read and/or comprehended my posts anyway. I've always said I buy at market and hold. Tons of people have done the same with the exact same results or better. Guess that makes us all Captains of Industry. Clever of you to try to lump me in with infomercials/seniors/pensions/gold. I'm surprised you didn't blab that I cavort with known homo sapiens, although you did get in the little red corvette image.

You seem so quick to accept the bad news without question and challenge any positive information or ideas. Does that help you accept your own failures or limited way of thinking? Unfortunately your behavior is not uncommon here when there is any challenge to the group think. Weren't you on the OAP and Andy H welcoming committee? My reception is fine, your's seems a little fuzzy.

I state facts and my opinion and am willing to provide support. You resort to attacks and name calling.

Funny, my coworkers like to call me bubble boy for being too optimistic about the economy. I have friends that think I'm both too conservative and too liberal. I feel pretty comfortable with that.

So you say you are a buy and hold on real estate. No problem with that. I'm holding my home as well, long term real estate is a winner, no doubt. In fact, hey, despite the recent non-correction, I'm still up 11% per annum over the last six years on my house.

As far as failings, I've got plenty, but they've got nothing to do with my path to FIRE. Fortunately, DW still likes me the way I am.

Good luck with your real estate ventures, I really do hope you make a boatload. I'm just pointing out that your posts come off abrasive, and you seem blind to that though able to pick up on the same in responses to yours.

 

[Nords]

Based on her observations, spouse is working on a few new real-estate-bubble indicators.

Last year the HGTV shows like "My House Is Worth What?!?", "House Hunters", and the "sell my house" bunch were all filled with "Woo hoo!" or "Better put in that offer before it's too late". Today the shows are loaded with phrases like "Well, it's not as much as you'd expect" and "It's been on the market for a few months". There are so many abandoned homes in Hemet, CA that the town is paying an exterminator to treat the swimming pools for mosquito larvae (West Nile fears).

Certain parts of the real estate market are too crowded with amateurs. Remember "Flip This House" with Richard Davis & Trademark Properties? Now his group has moved over to "The Real Estate Pros" (while FTH continues with others). They've all elevated their drama level to talk about how many more candidate homes are out there but how challenging it is to outbid their rivals and turn the homes around before the market drops even further.

One of the best TV indicators of an overheated real estate market is a new show called "Property Ladder"... almost as entertaining a train wreck as the whackos on "[-]Bite[/-] Buy Me". The hostess finds house-flippers who shouldn't even have graduated from high-school math class, let alone tweak Excel spreadsheets or apply for mortgages or buy distressed properties. They make the most unrealistic assumptions, have the worst social & handyman skills, and display zero ability at time management. Each show ends in disarray & despair and I'm not sure that any of them have actually even flipped a house yet. I can't decide which ones are my favorite losers-- the guy who budgeted $300 for an entire kitchen of cabinets, the guy who set his prices & rehab schedules using both feng shui AND numerology, or their spouses & partners.

Finally there's the "garage sale indicator". Last year's sales were hosted by sellers with attitudes like "Just take it with you 'cause we don't want to!" and "We're movin' on up... to the east side!" (Kahala). They were more interested in clearing out their appliances because they were going to buy entire new stainless-steel matching sets for their shiny new kitchens.

Today's attitude is more about the money. The sellers aren't happy about moving, there's not as much quality or selection, and the negotiations aren't very rewarding... almost as if these people are having trouble with their variable-rate mortgages, need the money, and are moving back in with the folks.

 

[Caroline]

FWIW...

I sold my No. Cal. tract house (4/2 SF) in late May for $400. It's located 40 non-rush-hour minutes from San Francisco. The top comparable sold in 2006 for $456.

That doesn't take into account my house being in tip-top shape with new everything and a clear pest report.

There are a lot of very similar houses for sale in that neighborhood -- some folks are still asking for something closer to the $450 number. They've been asking for 9-12 months now...